Agarwal Industrial Corporation Ltd - Profitable Microcap with high growth potential in infrastructure space

they have an immediate price pass-on clause, so in value terms, the topline may decrease (depending upon the percentage points decrease in crude & bitumen) however their profit margins are going to be maintained. Mostly i would like to look at the yearly average price for RM, in the past year there has been a lot of volatility in RM prices so taking a call on it in the short term, is like throwing darts in the dark.


Promoters sold around 2% today. Any idea who picked up or it was open market sell ?

Recently Ashish Kacholia sir invested in this company. He acquired 2,00,000 shares of this business. he may have noticed more growth triggers. @jet_nebula you should not have sold this business so soon


They sold part of what they got in preferential allotment. In my opinion preferential allotment was an opportunistic self fulfilling scheme.

Disclosure: Held stock during 2019-2022


If they don’t produce Bitumen, why they are having multiple manufacturing facilities?

They do produce some amount of value added products from Bitumen. You can easily find them on their website.

What do you think the probable outcome of changes in crude prices, because Bitumen prices go with the crude prices.

New here,First post
1.Company has grown more than 40% in last 4 quaters
2.September quarter is weakest vdue to monsoons,Element of seasonality in the business
3.Element cyclicity comes from prices 0of bitumen and crude oil,Bitumen is trading business margins are at 4-6 % mostly
4.It is the shipping and charting business which is growth mode and have margins around 25 %

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I have recently taken a position in this company after a reasonable amount of research. Sharing the same here in a summary form; forgive me as a lot of this might already be covered in previous comments but I am summarizing everything for the sake of being comprehensive.

The company basically has 2 divisions:

  1. Trading bitumen (some value added products but negligible hence ignored)
  2. Transporting bitumen (ships only; we will ignore trucks as revenue is minor)

Other minor divisions (1 petrol pump, wind power) are being ignored due to irrelevance and no significant plans for future expansion.

Bitumen Division

  • Bitumen Market Size & Growth - Demand
    • The market is estimated at 9 million tones / year in volume terms and growing at 8-9%
      • USD 3.6B market at 0.4 USD / KG price point (assumed based on trends)
    • The demand is 99% from road building alone; rest can be ignored
    • The road construction is at an all time high and budget allocation is increasing further
    • Besides the need for new roads, proper road maintenance also requires bitumen
    • There was some conversation about switching from Tar roads to Cement roads due to longer durability; however, due to safety concerns (cement roads have higher friction and heat up more and can cause tires to burst) the general trend remains towards tar roads (source: industry conversations)

Conclusion 1: Industry is not too large at 3.6B USD but is promising from a growth perspective.

  • Bitumen Market Size & Growth - Supply
    • There are two sources of bitumen for India - local refineries and importing
      • Local Refineries
        • PSU companies like Indian Oil Corporation, HPCL, BPCL are producing about 5-5.5 MTPA with no plans to expand production (Management claim and experts in the industry)
        • In fact, there seems to be a push towards further reduction due to refinery economics (more on that later if interested)
      • Importing
        • The demand supply gap is being full filled via imported bitumen and since the locally produced bitumen is contracting / stable the growth on import segment would imply
          • Market volume growth = 9M x 8% = 0.72M
          • Import growth = 0.72M / 3.5M = 20.6%

Conclusion 2: Volume growth for AIC sub-segment is great at 21%

  • Bitumen Importers - Porter Analysis
    • Rivalry: According to exim data there are 103 entities that import bitumen to India. The largest 3 players control only 20% of the trade. Score: Low
    • Barriers to Entry: Bitumen can be imported in bulk or in drums; While the former is cheaper (was unable to quantify the difference) at scale it requires specialized equipment and scale to handle, however drums are more easily handled and transported. This allows even smaller players to enter. Score: Low
      • However, due to the size of the industry (only 3.6B USD) there is no temptation for a large player to enter and disrupt the market
    • Substitutes: None; required for roads, and roads are required in India. Some talk around Bio-bitumen exists but doesn’t seem like a major threat in the near future Score: High
    • Power of suppliers: Suppliers are large refineries in the middle east and can decide who to sell and who not to; so supply uncertainty exists (one of the reasons for AIC to invest in their own ships); however, like in all industries, large consistent buyers will have an edge in negotiations Score: Low
    • Power of customers: Customers are road building companies (EPCs); While they have a number of people to buy from they require two things: Score: Medium
      • Supply reliability: Economic returns from an infra project is heavily dependent on timely completion and releasing working capital; any delay in getting bitumen can cost the company heavily
      • Payment support: Since EPC companies are either directly or indirectly dependent on the govt. to release payments; delays in such disbursement can cause cash crunch for the EPC and on those occasions they need support from their suppliers

Conclusion 3: The industry is NOT attractive structurally besides the growth rate

  • AIC Bitumen Division Advantages
    • They are the biggest importers to Bitumen into India with a 13% market share (volume) among the importing sub-segment of the market with a volume CAGR of 40%+ over the last 5 years (basis exim data).
    • They have built cost advantages and agility by setting up extensive physical infrastructure in the form of warehouse (across the country), a fleet of trucks. This allows them to process and handle imported bitumen quickly and cheaply to their customers making them reliable partners while still being profitable. (Management claim; cannot quantify)
    • They also have a strong balance sheet and cash position to extend credit to their customers when required while still ensuring reasonable terms (Debtor days have come down from 129 in FY17 to 37 in FY22)
    • To ensure suppliers full fill the orders to them they have also integrated backward to shipping industry where they focus purely on ships that can carry bitumen for them.

Conclusion 4: Major differentiator here is scale, cost and a strong balance sheet

  • AIC Bitumen Division - Thesis:
    • This market is too small for any major large investment; hence while small traders might keep entering and exiting, AIC can continue to capitalize on being the largest.
    • The import segment of the industry is looking to boom with stalled growth in domestic supply and a constant increasing in demand from new roads (India priority)
    • The only differentiator in the industry is scale, cost and reliability; all of which being the biggest player in the Industry, AIC is to benefit from
    • Management has demonstrated a history of performance and the ability to navigate the industry (source Screener segment data)

Shipping Division

I cut some corners in the study of this division.

  • The company entered this segment to ensure suppliers cannot redirect their shipments to others and they have visibility on their supply immediately after dispatch from the suppliers port.
  • But they found that they were often able to utilize their ships more profitably on other routes. Hence although it started as a support business they are trying to set up this an independent revenue center which is contributing significantly to their bottom line.
  • How much can this business grow? I am not sure, however the shipping industry is large and they have only 8 ships so far which they claim only covers ~60% of their own annual demand (Nov 2022 conference call; say they need 13-14 ships to cover full volume)
  • Hence I have assumed that AIC can afford to go up to 14 ships without significant risks to their margins (if they are unable to gather demand for their ships, they can just use it to full fill their own demand and treat it like a cost center).
  • However, since Bitumen demand is rising and these ships are equipped to transport Bitumen in particular, the demand for them should grow as well.
  • The management is very particular about only buying when they get a good deal to ensure good ROI. With their past 10Y ROE averaging at 17%, I tend to believe them.
  • However, if I were to assume even a 5% nominal growth in the shipping EBIT and a 20% growth in Bitumen (industry growth) the company will still comfortable at 15% EPS growth. But I expect this growth to be more.

If someone can come up with a better analysis here, I would love to hear it. Specially from the supply side on how many such ships are there already and if the major players have plans for more.

Concluding Remark

As I mentioned at the start, I am invested so I guess keep that under consideration when you read this. I have stitched this together through both primary and secondar research but if you find any mistakes or inconsistencies, please do point them out (you might end up saving me some money :P)

I think the company is poised for growth in both their divisions and the industry structure will benefit them in particular. Disciplined execution is something these guys have demonstrated with consistent growth and ROE metrics. Thus at a PE of 10-11 and a 10Y growth of 35-40% in both Revenue and Profit seems like a good buy.

PS - Why Local refineries are avoiding Bitumen production?

As promised here is what I understand of the tradeoff:

  • When crude oil goes to fractional distillation a bunch of products are created. The output is decided basis the input crude. Generally ‘heavy’ crude creates Bitumen but it also creates Fuel Oil. This is not very clean for consumption (high sulfur content) and thus does not command a good price.
  • Hence reduce the amount of Fuel Oil they create, they conduct a process call Hydrodesulfurization (HDS) to reduce the sulfur content and make the Fuel Oil sellable. However, the resultant liquid is then too impure to be used for Bitumen production
  • For the refineries however, this trade off is worth it as the overall payoff from selling the excess Fuel Oil more than makes up the loss in revenue from sale of bitumen


  • Number of ships required to full fill their entire demand

Commodity price risk is the biggest issue here.


:dart: Concal (Conference Call) - AGARIND - Q4 FY23

Key Highlights -

Desc. - Invested


I was looking at this thread due to high growth exhibited by this company.
Would some one tracking this comment on why EPS growth as slow compared to Net Profit Growth ? Would that mean that quite a lot of equity delusion happened issuing new shares/warrants etc ? I could see promoters converted warrants procured around 105 in 2021-23 period.

Here is Net profit went 30-40x (46 x ) in the last 10 years, but EPS went up only 10.8 times. Any thoughts? If dilusion by the way of warrants/share allocation cheap is the reason, can we conclude such actions are not very friendly to minority share holders ?


Hi @james_kerala, below you can see that there has been 50% increase in shares ,dilution of equity has been done.

Must be due to conversion of rights/warrant which promoters gave to themself when price were quite low in 2021

disclosure: No holding


FY 23 q4 Concall Summary:
Aggrawal Industrial Corporation functions as an ancillary for the transport & logistics segments because of it’s powerful logistical assets & infrastructure which comprise of:

  1. 650+ Fleet Size Consisting of 350+ Bitumen Tankers and 300+ LPG Tankers.
  2. 4.24L metric ton in FY23 vs 3.85L metric ton in FY22 (10% volume growth)
  3. 20-30% market share in bitumen
  4. Integrated bitumen logistics and ancillary company
  5. procuring bitumen to transporting over ship,to storage and doing value addition and manufacturing and transporting it to the end customers.
  6. onboarding more bitumen vessels for timely securing of bitumen for incremental demand in the industry.
  7. Out of total volume,2L metric ton was done through own vessels.
  8. Own a fleet of 8 large vessels(includes addition of 2 vessels) having total capacity of around 49000 MT
  9. Addition of 20k metric ton vessel at the cost of 150 crores would result in 50 crores at bottomline.
  10. Always on lookout for vessels with more than 20% roce.
  11. India being the country with second largest road network but lowest consumption of bitumen wheras compared with USA and china,requirement would be more 3X for same road construction.
  12. There has been increase of higher EBIDTA i.e. RS 2400/ton from Rs. 1600/ton and is bound to rise on further volume growth as all the costs are already done.
  13. Company will do capex of 150 crores for 20k metric tons using internal accruals.
  14. Chartering business, there will be 20%+ EBIDTA margin but needs to check on the overall margin expansion??
  15. Guided for 10-20% Volume growth.

@pkeday In charting business, there will be 20%+ EBIDTA margin but what would be overall margin improvement? As previous we could see that the margin was in 6-8% range?


  1. Will bitumen be used in the road contruction vs concrete cements?
    Disclaimer: studying, not invested.

2 vessels are added in Q4 and should reflect in their profits as there is a significant gain when they use own vessels to ship raw bitumen as per last concall. This year also increased road construction budget is there, so I took a calculate bet to add a 2.5% of PF position. Technically there is a consolidating traingle. If it breaks down I will exit. Quick review of AR-22 and recent concall are positive, though some of the moves are not retail shareholders friendly.

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Why do you think was not share holder friendly sir ? And why? Can you please elaborate

Continuous allocation of warrants at lower rate than market and conversion of that to shares on a later date will increase the number of outstanding shares, thus reducing (or not increasing) the Earnings Per Share proportionately even when net profits is elevated. The end result is that even when promoters are not suffering, retail or public share holders will not get the return they could have got if there were no dilusion. That way, I believe it is not very retail shareholder friendly move. I may be wrong…

On the other hand, bonus shares or dividends etc everyone gets benefitted not just promoters.


Thank you. Yes, I noticed that. Do you know if share increase in 20105 and 2026 by the way of equity dilusion ? The end result was 4.91 (2012) to 14.96 (now) and depression in EPS corresponds to that.

Now the market cap is 924 crore and if it goes up another 8%, it will cross 1000 crore, more fund houses may look at it.


Hey Sulabh,

I think we need to now start seeing this company as two businesses rather than one which is vertically integrated:

  • Management has claimed that they run it like so; i.e. they will sell their capacity to a 3rd party if the rates they are recieving are better than what their own bitumen trading business can provide
  • Now for some maths: (very very rough with lots of approximations)
    • Lets assume an average ship of 5000 tons (their ppt shows range of 3k to 10.6k tons)
    • According to Google Bard an approximate cost of hiring for a shipment can range from $100k to $200k to the west coast in India (I couldn’t find a better source for getting a quotation)
    • This implies a per ton cost of transportation at 1600 to 3200
    • According to their PPT they have transported 2L MT of bitumen in their ships; this implies their subsidiary should have recieved 32Cr to 64Cr from parent company
    • However, we know that their shipping revenue is 177 Cr in that year which implies they are taking significant outside business
  • We also know that the ship takes 4 to 6 days to travel between UAE to India (West and East coast respectively) - once again the source is Bard
    • With a total ship capacity of 48k tons, and assuming 50% efficiency (accounting for loading and unloading - bard suggests 75% efficiency), this still implies the ships can transport (365/6)*50%*48000 = 14.6L tons / year
    • Once again it implies they have more than adequate capacity to sell to third parties
  • Hence there is a strong case to viewing these businesses independently in which case the companies overall margin is purely a matter of revenue mix from the two segments. If shipping grows faster than bitumen (which has been the case so far) the overall company margins should improve

This maths may be completely useless as there are just TOO many assumptions here. But I suspect they are directionally right.

Bottom line, I think, is that it is now critical the Agarwal Industrial grow their shipping business independently for them to sustain their EPS growth numbers. We should be asking them more questions on how they run their shipping business, size of the market, means of sales, competition etc.

Side Note:

  • I suspect the shipping business margin is overstated
  • If you look at the screener segment wise data you will see that their bitumen business was averaging 5-6% margins till 2019. However, as soon as the shipping business started their margins fell to 3% and then stabalized at 4%. I would conjecture (and this is pure conjecture) that they are utilizing transfer pricing to book greater profits in their shipping subsidiary.
  • Why would they be doing this? If you see their standalone tax rate, it is 26% but their consolidate tax rate is only 16%. The Shipping business is housed in a region in UAE where the corporate tax rate is 0%. Hence it would make sense to book the larger profits here.
  • The best way to prove this would be to look at the transfer payments between them; but embarassingly, I am unable to do so. If someone who is financially more savvy than me can do so it would be a great help (the relevant subsidiary is AICL Overseas).