They had first mentioned the proposed capex in 2017-2018. Back then it was supposed to be a Greenfield expansion. 6 years later that has not only turned into a Brownfield capex but it isn’t even complete. The company does not conduct conference calls or give adequate quarterly updates. It’s a father-son run company with the Bhansali family closely holding ~55% of equity. Dividends too are a fraction of retained earnings. Even during the AGM, which is the only opportunity to ask questions they only take questions from relatives who thank them profusely for Re. 1/- dividend. This company has previously been taken to court for abuse of minority shareholders. Governance score 0/5.
Now let’s come to the actual business. This is a single product cyclical commodity business. They import Acrylonitrile and HRG which they convert to SAN and then ABS. Since most of their raw materials are imported you would think management would hedge their forex risks, right? Wrong, management to this day is happy to take the hit of forex losses rather than hedging. Majority of their business is still commodity ABS even though they have been trying (unsuccessfully) to secure speciality ABS contracts for 8 years. So the company basically has no negotiating leverage with its customers or suppliers. The reason the company says capex is “need of the hour” is because it truly is for BEPL. Operating Leverage is the only way this company can grow and those plans have been delayed for years with no end in sight. During that time competitors have rebranded and restructured their operations and taken market share away from them. The only thing the company can control is its own cost structure which they do very strictly, often to the detriment of the business. Refusal to take on any debt to fund capex is a glaring example. Business score 1/5.
In my opinion this company does not warrant long term investment. I use it to track the wider commodity chemicals cycle.
Disc: Was invested in the 2017-18 & 2020-21 commodity chemicals cycles. Please don’t construe my opinion as investment advice.
Yes they are. Styrenix has undergone major corporate restructuring since 2018. Now the company seems more focused in their strategy. They also have concalls and quarterly presentations so investors can actually understand what the company’s plans are.
Disc: no investment in any of the companies mentioned.
With regard to enhancement of ABS production capacity from 75000 TPA to 200000 TPA at Company’s existing plants at Abu Road (Rajasthan) and Satnoor (Madhya Pradesh), the Company had appointed Toyo Engineering India Private Limited (‘TOYO’) as Engineering consultant for Front End Engineering Design (FEED) and CAPEX Cost Estimation.
The realistic project cost for 200000 TPA ABS capacity will be arrived based on TOYO’s report, detailing the project cost of increase in SAN, HRG and Compounding capacities at Company’s plants.
The expansion will be funded through internal accruals and the Company will continue maintaining its “Zero Debt Status” in future as well. As capacity expansion is the “Need of the Hour”, the Management shall endeavor to implement the project likely by March, 2026
Supreme Petrochemicals is ready to launch 70,000 TPA ABS plant in Q1FY26. Styrenix is also expanding and will be ready soon. BEPL is being left behind again. Plans to expand have been in the works since 2017 but concrete results yet.
Considered and approved the project for enhancement of production capacity
of ABS from 75000 TPA to 100000 TPA at Company’s existing plants at Abu
Road (Rajasthan) and Satnoor (Madhya Pradesh) at an estimated cost of
Rs.200 crores, to be completed by September, 2026.
AR 2025 lists CAPEX estimation at 1700 Crores (for 75 to 200 KTPA) as against 500 Crs suggested in last AGM. In fact this number is much higher than estimation for port based expansion.
Company has shelved the plans and is doing expansion from 75 KTPA to 100 KTPA by doing CAPEX of 200 Crs. by debottlenecking. Is this reasonable or high? Anyone has any insight?
Company has never been consistent w.r.t. their expansion plans (capacity and cost). Although, they have been consistent in being debt averse.
Company started in 1990 with 6000 tons plant with Japanese technology. First 25 years company struggled and did not see any profits (Mr. B. M. Bhansali was very candid in sharing his struggles). Kept expanding with takeovers (Polychem, Rajasthan Polymers, Tharpars).
Management never thought they could do 180-200 cr profits on existing capacity. Have been profitable in last few years only. Stopped Bulk polymerization i.e. selling natural grade due to lower margins. JV with Japanese since 2013 for marketing and development. JV with Nippon has been instrumental in company’s success by developing new grades. Pays 2.5% commission to the JV and after expenses 50% of the profits is received by the company as Dividends (Shown in Other Income)
Need based R&D and marketing, Understands customer specific requirement and develops the grade which results in higher profit and customer retention.
Presently 40-45% is special grade (300 grades, 1200 colours, sells at 150-300/Kg.). Aspire to do 75-100% in next 3-4 years which will boost profitability. Company can do 500 cr profit on 100,000 tons capacity in next 3-4 years with higher contribution from special grades. Management does not be believe in putting 200000 TPA plant and selling 100000 T as bulk commodity (sells at ~130/Kg.) with lower margins. CAPEX announcement should be viewed w.r.t. natural vs. special grade production when compared with peers.
Operating at 100% capacity since last 3 years.
GST rate reduction does not have any direct impact. Indirectly automotive, household appliance sales will increase which will improve demand for company’s products.
All Supply is to OEM (Yamaha, Maruti, Mahindra, LG, Samsung, Whirlpool etc.). Billing is through Moulders - Dixon and PG are customers.
Unsecured loans - they will continue to give to earn better interest. They see minimal risk and easily callable.
Will continue to give dividends as company does not need funds. (Dividend Yield is ~ 4%)
Mr. Jayesh Bhansali has taken over all operations since past few years and he did come across as very capable.
Number of shareholders ~ 120,000
I may have misunderstood / misinterpreted something. Kindly do your own due diligence.
