Hi
ToR, in this issue is the concerns mitigated by the local community while preparing the report.
This is basically the pros and cons as per the public view in approving the project.
This is prepared by an on site public hearing by the EAC ( Expert Appraisal Community).
Hope I’ve answered your question.
1 Like
@karanthharsha999 Thanks very much for reply. I have one further question.
When does the ToR order comes in the EC approval cycle. Does it come in the beginning of the process or during the final stages?
The application from the pollution board had been taken up and during lockdown has been given to note any terms of reference points which forms the final report of approval or rejection based on whether the company’s expansion plans does
- Not violate the rules and regulations of the board
- Not harm the local community in any way by means of water pollution, air pollution or in any other way.
- if so, measures taken by the company to compensate it. Keeping this in preview, the board makes sure to keep deposits worth lakhs from the company before approving the EC.
These form the terms of reference.
2 Likes
I have a question and made some assumptions with respect to the process driven products of the company.
How much does the process driven products of the company based on demand, attract new customers with respect to time?
Time - clients- profitability- future competition.
1 Like
I had sent my queries to the company few weeks ago. Got the replies today. I quote directly:
" Dear Mr. Sahil,
Hope you are keeping well. With reference to your queries, I am advised to answer as below :
- Could the company please share specific examples of their process-driven culture? Would it be possible to share examples of specific production transitions from lower value-added to higher value-added which resulted in company sales to increase even when capacity utilization was near 100% in the past?
Answer: The Company’s production is organised around certain chemical processes. Due to all in house developed processes, process change over in the same chemistry is easy. As an example, suppose we are making para nitro benzoic acid, and ortho chloro benzoic acid is going well, it is easy to reduce production of one and increase the other.
- Ankleshwar in specific and Bharuch district in specific have been at the center of a tug of war between the NGT and GPCB on one side and the industrial bodies on the other side. Given the highly polluted nature of Ankleshwar (CEPI of 80+ as per NGT), the EC for the new capex management is seeking to do in Ankleshwar looks uncertain. Is it possible for the management to do the capex in some other location instead (where pollution concerns are not that high)?
Answer: We are hopeful of getting clearance at our existing site this year. However, as abundant caution, we have looked for other sites.
- On a related note, what is the status of the planned capex? From the balance sheet in the Annual Report for FY20, it appears that the land and buildings have already been acquired (Going through note 12 of the balance sheet in AR 2019-20). Is this correct?
Answer: A 1000 sq m plot was acquired for warehouse and R&D centre. Warehouse from the current site has been moved to the new site. This is to free up space at existing site for the planned capex.
- Could the management please talk about some of their largest clients? This information does not appear to be on the company website.
Answer: We have large domestic and MNC pharma companies as clients, and a few dye companies. We would not like to reveal the names.
- Would the new capex being done preserve the process-oriented nature of the company’s operations?
Answer: Yes, the new plant will be built with the same philosophy.
- Regarding the manufacture of some of the specific molecules like Lasamide, it appears that at least some processes are patented by chinese innovators. Does the company pay royalties to the said patent holders or does the company follow a process for manufacturing which is not patented by anyone?
Answer: We are not paying royalties to any company & company follows its in-house process."
I found the answers to be quite satisfactory. I’m glad the management is looking at alternate sites for the capex.
36 Likes
Thanks Sahil.
Appreciate your effort in getting these answers for the investor community.
On their EC approval, they seem to be very confident from their answer. Yes, good that management is keeping all the options open just in case.
As regards to their Clients, if i am not mistaken, one name that i came across in some reports is Sanofi.
Yes that is correct.
As posted by saurabh in the very first post, these are the clients. IIRC saurabh and others found these names by talking to some of the employees face-to-face.
2 Likes
Useful insights, thanks for sharing. Given the tailwind for API sector, the cash flows and return ratios this company generates, it makes sense for them to go for one more site and undertake larger capex. Look forward to attend AGM.
2 Likes
Even I had posted few questions couple of weeks back. Following are the responses:
With reference to your queries and as suggested by management, please take note :
Regarding expansion plan
We already have received TOR & EC approval application is under process by Ministry of Environment, New Delhi, and we are hopeful to get the EC approval in the current FY.
Procurement of raw material
There are no impediments in procurement of raw materials whether domestic or imports.
Outlook for this year
There would definitely be impact of shutdown / partial resumption of operations , due to the pandemic on the production, turnover and profitability of the Company, but not with material / drastic effect. We are hopeful to mitigate the impact mostly in this FY as the demand in pharma sector is likely to improve in domestic and global markets.
Backward integration plans
There are no such Plans as of now.
Growth Plans
Yes, once we get the EC approval, shall work on strategy, in view of the current situation, as international scenarios are fast changing. Achieving 3 digits in this year is not likely, however, management is striving & working towards achieving in next FY.
Disclaimer: Exited with some good ST profits last week. Since I am not the shareholder now, request you all to attend the AGM and put up your observations. Very optimistic and interested in this, might re enter later.
14 Likes
Hi Saurabh…
Many thanks for sharing with us the detailed response…just one query my side…when you said achieving 3 digits this year…you meant the turnover…is that correct?
Best regards
Hello All,
Is anyone attending the Co’s AGM next week? If so, appreciate your updates post the event. Thanks.
Did anyone get a chance to attend the AGM yesterday ?
If yes, please share your observations.
1 Like
Hi, I did a quick look up on this company earlier. Lassamide seems to be a key ingredient in the drug furosemide , which data shows is on a declining trend of prescriptions in the US and has just over $70 mm in sales there. I’m unsure what the input market value for a drug with that small a market cap will be. Additionally, if that is the market cap in the US , it’s likely to be much lower elsewhere. Company seems to be a SME which has found a v tight niche to exist in profitably, but scale looks doubtful.
3 Likes
I was hoping Ayush to post first as he had asked many questions to the chairman.
Thank you Ayush Mittal and Shlok Dave for very valuable and reasonable questions at the AGM on behalf of us.
Questions asked by Ayush
-
With the remunaration on the board how feasible is it to expand the board with more knowledgable and experienced persons?
Ans. The company need not require experienced and knowledgable people throughout the year. Whenever we require expertise, we consult the right people and it is hardly for two months period. When required to the board we would look forward to it. -
Migration towards NSE and to the BSE mainboard.
Ans. The migration towards NSE board will be taken up by the board and would do the best suitable when the time comes. The migration towards BSE mainboard is done by the BSE and not by the company.
As the company matures, the BSE would review it and reduce the lot size when necessary.
BSE reviews these issues every six months. The next review is due in September. -
Company’s sustainability and scalability
Ans. The sustainability of the company is positive as it has endeavored for the last three decades with no major problems. With reduced competition from Chinese markets and limited or no significant competition in India, with very few companies manufacturing our products.
Our processes is mainly chlorosulfonation and oxidations catering to pharma companies for API and dyes. -
Future products in the pipeline.
Ans. 13 products as of now with no new products in the expansion line. -
What if the EC is delayed further?
Ans. The company has already acquired land for expansion and a warehouse has been built with a small R&D coming up simultaneously. If the EC is delayed, the company is open for acquiring alternate sites for expansion, but the company is hopeful of getting the EC for the ankleshwar plant as it makes it comfortable for all logistics, support, etc.
if the EC is approved the capacity would be 1.75x to 2x.
The capex for brown field expansion wold be 150 million to 200 million, whereas if the EC is delayed and the company goes for a green field expansion the capex would be around 200million to 300million.
The company is hopeful of getting the EC this FY and the new plant would be built in six months of EC approval. Hopefully the company can realise the capacity in FY 21-22 or little before that. -
Abolition of dividend and declaring of bonus instead.
Ans. The company will take up the issue with the boards and auditors and would take an action on it.
The chairman was saying that they have alternatives in Europe.
If i have missed a few points, it is due to technical glitches.
E. & O.E.
Thank you
I would request Ayush to review and comment / add to the above
24 Likes
It was good to attend the AGM of the company and interaction was good. Management seemed honest and transparent and answered all the questions. Few points:
On sustainability of margins - Co has 13-14 products and they are mentioned on the website. In many of the products they have leadership and limited competition and have market share of more than 50%. Many products are 1st time in India. Yes, there has been some benefit of price increase but it seems sustainable as the China competition has reduced.
More than the products, their focus remains on process and improving the same.
On Scalability - There have been delays on EC approval. However, the company has got TOR and is hopeful of getting approval soon. Will kickstart expansion asap post approval and can complete the same in about 6 months. So hopefully the fruits of long due expansion should accrue in 2021-22. Based on this planned expansion they can increase capacity to 1.7-2 times the current capacity and they don’t see issue in scaling up as the company is very small currently. So scalability is not a problem, infact promoters are looking at other options too for acquiring land for future growth but current brownfield expansion is preferred.
Covid impact - yet, for the period of intial lockdown the business was impacted and they would have lost some volumes but things have been back and they are currently at optimum capacity. No issue with supply chain or RM.
Other points have been well covered by @karanthharsha999
Ayush
Disc: Invested in family accounts and PMS.
27 Likes
Thank you for valuable comments.
If management discussed anything about succession plans ? Company future seems person dependent, if they have any plans for process driven management similar to their products.
Disc. Invested from 80s level.
2 Likes
Dividend is taxable in the hands of shareholders.For amounts greater than Rs. 5,000 in a fiscal year, it will be subject to TDS@ 7.5%.
4 Likes
Why is the director remuneration so high at 2.1 cr against net profits of 10 crores? We know that celeing is 11%. The two directors take home a salary of 7 lakhs monthly or 84 lakhs annually. But, additionally why is there a need for such a hefty performance bonus for such a small company?
Such a high director remuneration for a 10 crore profit company could indicate that the promoter-director sees better reinvestment opportunities than in his own company. Remember, during growing days, Netflix CEO/promoter preferred compensation 100% in stock. This high remuneration makes this company an ‘avoid’ in my book
3 Likes
Date : 02/09/2020
To,
Corporate Relations Department,
BSE LIMITED,
Phiroze Jeejeebhoy Towers,
Dalal Street, Mumbai- 400 001
Dear Sir/Madam,
Subject : Shutdown of Production operations at Ankleshwar Plant
Ref; CHEMCRUX ENTERPRISES LIMITED BSE Scrip code - 540395
Pursuant to Regulation 30 of SEBI ( Listing Obligation and Disclosure Requirements) Regulation,
2015 it is hereby informed that vide our intimation letter dated 01/09/2020 submitted to
Gujarat Pollution Control Board (GPCB), we have shutdown our production activities at
Ankleshwar Plant, as a self compliance to the Closure Order of GPCB.
Company has already made Revocation application after complying all points of GPCB order and
shall resume production activities after Revocation order, which is awaited.
Kindly take the intimation in your records.
Yours faithfully,
For, CHEMCRUX ENTERPRISES LIMITED
3 Likes