Anil ltd

ANIL LTD.

Bse code 532910

Market cap 240 crores.

Cmp 245, FV Rs 10 per share.

Book Value 170.

COMPANY DETAILS

Anil Ltd is a leading player in the Indian wet corn milling industry having good manufacturing capacity , adequate infrastructure and excellent R&D facilities.

It is among the top 3 leading players in the domestic starch market. It has overall 20% market share in the starch market and 40-50% market in the value added modified starch market.

Company was established in 1939 and manufactures a variety of products like native starch, chemical starch, modified starch, dextrins, dextrose monohydrate, liquid glucose, cory syrup, sorbitol etc. Its manufacturing facility is located in Ahmedabad at Bapunagar, in an area of around 150000 sq metres. It is coming up with new facilities which will enhance its capacities to around 1000 ton per day in a phased manner. Capacity utilisation was around 60% in 2008 which has gradually increased to around 75% in 2011. The biggest plus for Anil Ltd has been its focus on R&D which has been helping the company in increasing its margins due to value added products.

It has shown strong top line growth at a CAGR of 31% and bottomline growth at 77% CAGR during 2008-2011.

Its products find application in food and pharma industry, paper industry, and textile industry.

STARCH INDUSTRY IN INDIA

Indian starch industry is a 2000 crores industry and is at the cusp of explosive growth as more and more modified starch products find new applications in various industries. Indian starch industry has around 40 different products whereas the international starch industry has around 800 different products which goes to show that Indian starch industry has a long way to go.

USES OF DIFFERENT STARCHES

MALTODEXTRIN â food, baby foods, medical preparations

LIQUID GLUCOSE-- confectionary , bakery, jam, canning and leather inds

LIQUID DEXTROSEâfermentation inds

DEXTROSE MONOHYDRATEâfood and pharma inds

HIGH MALTOSE SYRUPâbrewing industry as malt replacement and candy making.

SORBITOL SYRUPâtoothpaste, pharmaceutical , cosmetic and tobacco industries.

FINANCIALS

EQUITY IS 9.76 CRORES WITH AROUND 98 LAC SHARES OUTSTANDING WITH FACE VALUE OF RS 10. PROMOTER HOLDING IS CLOSE TO 69% WITH NO PLEDGING.

DEBT AS ON ON MARCH 11 AS AROUND 265 CRORES.

COMPANY HAS GOT BOARD APPROVAL TO RAISE 100 CRORES THROUGH SECURED REDEEMABLE NCD OF AROUND 100 CRORES. INCREASING DEBT MIGHT BE CONSIDERED AS A MATTER OF CONCERN.

EPS FOR FY 11 WAS AROUND 41 WHICH IS SLATED TO BE AROUND 45-46 PER SHARE.

LAST FEW YEARS RESULTS

YEAR

07

08

09

10

11

9m FY 12

SALES

202

225

276

374

504

441

OP PROFIT

19

26

30

52

88

84

INTEREST

7

10

10

16

28

31

NP

5.5

7.2

10.5

24

40

35

ROE

13

15

20

32

35

EPS

7.4

9.8

14.22

24.7

41

DEBT (CR)

68

78

102

204

264

RECENT DEVELOPMENTS

Anil group of companies received approval from food ministry to set up Mega Food Park project in Gujarat. Company will form an SPV in which Anil will have 40% stake. The group will bring in 87 acres land worth 25 crores for its 40% stake.Once the project is completed there can be rerating of the stock.

Companyâs manufacturing facility is located at Bapunagar in Ahmedabad in an area of around 1. 5 lac sq metres and is a lucrative parcel of land and can be valued at close to 800-900 crores. If the company can shift its manufacturing at some other location then it can have huge value unlocking.

1 Like

I was also looking at ANIL last weekend. The only thing I couldn’t figure out was what is the immediate trigger. The stock price has been in a range for a long time (over a year, I guess), so need to figure it out. The numbers look good on the whole.

Any idea about the market leaders and competitors?

I think Anil and Sukhjit are the two prominent players. Riddhi Siddhi Gluco Biols is also there, but not sure what is happening on that stock after the subsidiary fiasco.

I had a chat with a senior investor on phoenix stocks who posts under Kukku picks. He is quite bullish on the stock. What he says is that company has around 200 acres of land near Savli near Baroda, which has got good valuation.

I think triggers likely in this stock are starting of the work on Mega Food Park, and last quarter results.

I think one needs to be patient here for a couple of quarters to see some action.

1 Like

Hit Bhai , Is “phoenix stocks” a blog? never heard about it.

Hitesh,

How does Gulshan Polyols stack up against Anil Ltd?

Anil Ltd has posted very good results for q4 fy 12 and FY 12.

Period q4 fy 12 q4 fy 11 fy 12 fy 11

sales 161 147 602 504

NP 11.8 9.82 47.12 40

EPS 48.25 41.1

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Consolidated figures for fy 12

Sales 645 crores

NP 50.4 crores

eps 51.62 per share.

Coming to balance sheet, long term borrowings have come down from 132 cr in fy 11 to 113 crores and short term borrowings have gone up from 111 crores in fy 11 to 152 crores in fy 12.

Total debt accordingly has gone up from 243 crores to 265 crores.

Dividend of Rs 4 declared per share.

The consistency in growth shown by this company seems to have largely gone unnoticed by the markets. Company has market cap of around 237 crores and Enterprise value of 500 crores which is close to the land value of the premises at Bapunagar facility. Plus as discussed in the original synopsis, the growth prospects and additional triggers of food park etc seem to be exciting.

The PEG for this company comes to around 0.25 to 0.3 if one considers growth of around 20% CAGR shown by the company.

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Dividend is Rs: 2 only.very very low compare to earning.

Anil

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share.

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error regretted. dividend Rs 2.

I wont mind low dividend for companies in strong growth phase and having high ROEs.

Hitesh,

first-look questions. please comment. have just read the posts and looked at the numbers. Pls excuse obvious things I may have ignored and educate.

1). If you compare FY2009-11,Isn’t the pace of growth slowing down in FY12?At 9% incremental growth, why is Q4 results considered very good??

2). Debt is also pretty high at 2x equity. This is impacting the results - While EBIT growth was 27% plus fro FY12 PAT growth is only at 17%. Why should I not be concerned about that.

3). Depreciation costs have also risen 50% over FY11 - Has the company completed any major expansion in capacity? What are the prospects of growth for FY13-14, what can it reasonably do

4). The land-bank value unlocking may be far-fetched; the company may be happy manufacturing from current location - enough scope for expansion. Do we know of any intent by Management on this.

5). The high RoE is because of leverage being high. Take that out and returns are middling at 20+%

I am sort of missing the excitement here. What am I missing? Aren’t there scores of better growers, with better balance sheets at similar valuations?

1 Like

Agree with Donald here and would like to add that this industry is highly competitive in nature and volatility in raw material prices does affect them.

donald and ayush,

thanks for the queries.

I will try to answer to the best of my abilities.

**1.**1). If you compare FY2009-11,Isn’t the pace of growth slowing down in FY12?At 9% incremental growth, why is Q4 results considered very good??

Please look at the consolidated fy 12 and consolidated q4 fy 12 numbers.

Sales up from around 505 crores to 645 crores in fy 12 (cons basis)

Net profit up from 40 to 50 crores.

In q4, sales up from around 148 crores in q4 fy 11 to 200 crores and net profit up from 9.82 to 14.1 crores.

I guess that answers the question about excitement about the fy 12 and q4 fy 12 numbers.

**2.**Debt is also pretty high at 2x equity. This is impacting the results - While EBIT growth was 27% plus fro FY12 PAT growth is only at 17%. Why should I not be concerned about that.

Debt is high and that was put up in synopsis also. Thats a matter of concern. But would you have equity dilution or debt for a company in its growth phase given a choice? Plus the PAT growth is close to 25% if one were to look at consolidated numbers.

**3.**Depreciation costs have also risen 50% over FY11 - Has the company completed any major expansion in capacity? What are the prospects of growth for FY13-14, what can it reasonably do

As mentioned in initial synopsis, company is gradually increasing its capacity in a phased manner to 1000 ton per day. That and the establishment of mega Food Park will keep depreciation high.

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**4.**The land-bank value unlocking may be far-fetched; the company may be happy manufacturing from current location - enough scope for expansion. Do we know of any intent by Management on this.

Land bank is not an investment argument. It is only to derive valuation comfort. No intent of management on this to the best of my knowledge.

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**5.**The high RoE is because of leverage being high. Take that out and returns are middling at 20+%

Debt if considered from fy 10 to fy 12 has increased from around 200 crores to 265 crores and sales has increased from 374 crores to 645 crores whereas profits have increased from 24 to 51 crores.

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Agree with Donald here and would like to add that this industry is highly competitive in nature and volatility in raw material prices does affect them.

Agree with both of you that it is a quasi commodity play. But value added starch is increasing in revenue share and it carries high margins. That explains the overall margin expansion with sales growth over the years.

npm over fy 07 to fy 12 have been 2.72, 3.2, 3.8, 6.41, 7.93, 7.8

Now it needs to be seen whether company maintains/improves net margins going forward.

I guess we are carrying the baggage of Riddhi Siddhi while looking at Anil Ltd which is a company of the same sector. Anil management might also do same thing who knows, but one has to be optimistic about the future while looking at investment options.

regards

hitesh.

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2 Likes

Thanks Hitesh for your pointed replies. And will have a look again:) and revert.

-Donald

The stock has been hitting UC for quite some time.

One company which never picked up in-spite of having good topline as well as bottomline numbers to such an extent that it is now available at a PE of 5 now. What is the reason investors are so bearish on this company or should I say starch industry as a whole ?

hitesh can you please compare anil ltd with sukhjit starch chemicals ltd i found the latter to be slighty better because of the lower debt and gross block equal to anil and operating cash is good and interest burden is less in sukhjit i am noty able to understand why the working capital of anil is around 400 cr and sukjit around 120 cr and qoq and yoy sukjit and anil both are performing at the same level and i k sardana of sukjit is the president of starch manufactures association and they are coming up with a fod park in punjab.
request your feed back as regards to comparsion of this two companies will be highly helpful thank u in advance

The August 2017 Order of NCLT can be accessed at http://nclt.gov.in/Publication/Ahmedabad_Bench/2017/Others/319.pdf