ValuePickr Forum

Ganesh Benzoplast - Cash rich chemical storage/tank king

Shareholding Pattern by GBL has released …
New Shareholder - Nirmal Bang Securities Pvt Limited can bring new major shareholders in the company as it is one major Broking houses in India.
Vishanji Dedha and Nirmal Bang securities Pvt Ltd has purchase shares in the April - June Qtr.

Name Jun-20 % Holding Mar-20 % Holding
Vishanji Shamji Dedhia 14,15,000 2.73% 13,90,000 2.68%
Anil Vishanji Dedhia 5,95,996 1.15% - 0.00%
Nirmalbang Securities Pvt Ltd. 6,28,200 1.21% - 0.00%
26,39,196 5.09% 13,90,000 2.68%

For the Quarter ended 31st March 2020, Profit before Exceptional Item is Rs.13.85 crores as compared to Rs.8.80 crores in quarter ended 31st Mach 2019. There is substantial increase of 57% in Profit before exceptional item. Results attached herewith Limited Report March 2020.pdf (4.1 MB)

Key Statements from Management
1.Chemical Segment of the Company is showing better performance in terms of increase in revenue
as well as profitability as compared to the past years. PBIT (before Exceptional item) of chemical
division for the current year is Rs. 6.1 crores as compared to loss of Rs.2.89 crores of previous year.

2.In view of Outbreak of Coronavirus pandemic (COVID-19) globally and the business operations of Chemical Division of the Company was temporarily distruped for about six weeks, due to the Initial lockdown imposed by the Government of India and after that the operations are running at its normal capacity levels. There was no impact on LST division of the Company.

Current Quarter
Chemical Division
For the quarter ended 31st March 2020, Revenue from chemical division is Rs.35.3 crores and EBIT is 5.86 crores. The EBIT margin is 16.7%. In previous quarters the margins were negligible whereas now this division is also started adding to the bottom line. It is an good sign for stock to get rerated .

From Six weeks of disruption in chemical division due to Covid 19, 1-2 weeks have already been factored in current quarter and rest 3-4 weeks impact will be there in coming quarter.
LST Division
For the quarter ended 31st March 2020, Revenue from LST division is Rs.31.5 crores and EBIT is 10.30 crores. The EBIT margin is 33 %.In Previous quarters the EBIT margin was 46% .
The Reason for decrease may be Fabrication work. In AGM we can expect some highlights on Fabrication work performance.

Further there is no impact of Covid 2019 on LST division .We can expect some good results in June 2020 quarter .

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Thank you for summarizing and helping through the details! @Pranshinv
As you mentioned, the chemical division is showing promise which complements the LST division perfectly.
I had a couple of questions regarding the contingent liabilities. I understand that the exceptional losses reported is due to the payment towards STC and Avron. Do you know as to how much of the Liabilities is still pending as of June 2020?

We have to wait for the Annual Report to get more clarity on Contingent Liabilities as on 31st March 2020.It should be below 20 cr mostly.

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For total or remaining contingent liability u can refer AR and as per last year AR it was total 523 million. Very well explained by @Pranshinv
My take on financial results is:

  1. This trading thing have become regular. Management should let us know what is this new trading thing is happening and how it is affecting balance sheet.
  2. Job Work segment is very old segment they have mentioned it few times in their AR but nothing more on it except it’s mention in AR and now suddenly it crops up as significant revenue stream.
  3. Now its looks that Chemical division will be responsible for future growth in bottom-line at-least for time being.
  4. No news on expansion or acquisition of LST biz is disappointing.
  5. Their should be some management commentary on biz segments it gives confidence to normal retail investors like us.
  6. No growth in pure LST as most of the incremental revenue is of trading and job work and if we compare YOY and remove trading and job work the profit has gone down in LST.
  7. No significant reduction in borrowing as compare to last year.
  8. In this hard times if company is trying to do something different from their core competency and blocking capital is not good in my opinion.
  9. One more thing we have to consider that company is still not paying taxes once it will start bottom line will be significantly low.
    Disc: Holding

Infomerics Rating Press release dated July 06,2020 on Ganesh Benzoplast Ltd has given the shape of Strong Buzz into Reality .Long term Debt from 40 cr stands to Rs.25 cr as per press release.PR_Ganesh_Benzoplast_06_07_2020.pdf (467.9 KB)

Forward Looking Statement to justify Growth.
The company’s topline, although increased from INR 170.40 crore in FY18 to INR 212.60 crore in FY19 due to an increase in the manufacturing division, continues to remain modest. The company has achieved INR 179.80 crore in 9MFY20, owing to the increase in demand for storage containers arising from the oil production crisis which saw an overproduction of oil due to disputes between Russia and Saudi Arabia as neither of the countries could come to a common standing on pricing of oil which lead to over-production as demand was cut due to the coronavirus pandemic leading to excess supply and a drastic decline in oil prices.

It is an indicator that LST division profits should be better than earlier.

Press Release also clearly states that Crude Oil Prices is directly related to the Raw Material prices of chemical division of GBL . We all are aware that crude oil prices were lowest which should further improve profitability.

It is strange that the Rating agency does not consider to take note of other two revenue verticals Trading and Steel tank manufacturing, is strange. Manufacturing of any type would create pressure on working capital and will affect profits if it is of low margin and no growth in cash producing LST.

The Co. came out with a superb set of Q4 numbers. The chemical segment has turned around & how! The heartening part is that this turnaround looks sustainable. The raw materials, Magnesium Oxide & Toluene, are linked to crude & its prices have come down. The finished products were priced based on the landed price of imports, mainly from China. This is where the Co. has benefited enormously. With uncertainty around Chinese supplies in the forseeable future, the importing firms will never fully depend on them. The net result is that the chemical segment which was a laggard not so long ago, has also started contributing handsomely to the bottom line.

The LST division continues to do well on the whole. The trading income was more of a one time thing spread over two quarters. Q4 of 18-19 & Q1 of 19-20. The margins in this are negligible & perhaps this was done more to accommodate an old client. The Works contract (largely Steel fabrication) business is only now gaining momentum & perhaps the Co. could treat is as a separate segment going forward. Perhaps it is better not focus too much over the nitty gritty as it could lead to a missed opportunity.

The LST division will continue to be the main money spinner for the Co., but currently its capacity is fully utilized, & any top line growth is linked to rate increase. I believe that is something that is currently playing out due to limited Port storage space & high demand. The capacity increase is limited to increasing the height of the existing tanks. What the current year will do is to improve the quality of the balance sheet with largely reduced debt levels. In addition, the Co. could increase earnings decently in 2020-21. Frankly, it looks like an attractive investment opportunity at current levels.

Disc: Holding & added after recent Q4 results.

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Most awaited Information - Release of Pledge Shares

Extract of Disclosure to BSE
We hereby inform that the Union Bank of India has released 1,42,85,418 (99% of total pledged Shares of Promoters i.e 1,44,85,418) Equity shares of Ganesh Benzoplast Limited held by Promoters and Promoter group Companies, pledged towards collateral security, for the secured term loan availed by the Company. Release of Pledge Shares 04.08.2020.pdf (872.6 KB)

Promotor Pledge and Huge Contingent Liability - Two major concerns seems to be getting resolved.

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With the release of the pledged shares, another legacy issue has been resolved. So now the contingent liabilities have been reduced by more than 50% & the issue of pledged shares has been settled. This also means that the debt has been substantially reduced in the current year to enable the Bank to release the pledge. It further means that cash flows in the Covid period have been more than robust, enabling the Co. to not only prepay part of the loan but also settle the STC liability.

With the legacy issues out of the way, the financials alone will determine how the stock performs on the bourses. With the change in fortunes of the Chemical unit & the lease rentals going up appreciably, the Co. could do profits in excess of 50 crs on a conservative basis in the current year 2020-21. The total market cap of the Co. is under 235 crs!

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The Co. came out with another wonderful set of numbers for the June qtr, despite being affected by the lock down.

The heartening news is the performance of the Chemical division. It continued from where it left off in the March qtr. The division alone could generate an EBIT in excess of 20 crs for the full year.

The other notable bit of news is that the Co. has reduced its interest bearing debt appreciably. The interest outgo for the year could halve to 5 crs in the current year. With the LST division continuing to do well, the Co. could easily generate profits in the vicinity of 60-65 Crs in 20-21 with cash profits of about 75 Crs.

There is a strong buzz that the Co. is in the final stages of getting the piece of land adjacent to its existing operations at the JNPT. As & when that happens, the capacity at JNPT would more than double over the next couple of years. With strong cash flows, the Co. could well develop a new tank farm from internal accruals.

Clearly the next 12-24 months could take this Co. into a different orbit.

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Definitely 60 cr PAT looks doable ( 40 cr from LST + 20 Cr from chemical )
Even if the PE expands to 10 then we can look at a price of 120 within an year.
Any idea when they need to start paying taxes .

Super bullish on Ganesh Benzoplast …Stock price and volume action confirms good times ahead for this company …
Here are fundamental reasons for my bullish views
1)Chemicals have turned around …I read somewhere that co is operating chemicals manufacturing at 45 % capacity utilisation and had problems with getting working capital from Banks . Now that they have repaid loans and are out of BIFR …Working capital should not be an issue …Also if they are able to increase capacity utilisation …Imagine the kind of profits chem unit will give (no capex needed as capacity is ready)
2) Scope of expansion in Chemicals may present a huge opportunity going fwd.
3)As regards LST …Last year in OCT 19 co got permission to expand capacity (height) at Jnpt at the cost of Rs 21 cr and when completed this would increase the capacity by 10 %(as per attached pdf)
4) Rentals have gone up and should add directly to Bottom line
Growth in the next 2- 3 years

  1. lpg terminal at Goa( need more information)
  2. adjacent land at Jnpt (need more information)
  3. 9 crore to be received by company from PAN Asia after court order(no updates)
    4)Morgan credits case because of which de merger is stuck.(no updates)
    5)More information on exceptional items
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PE of 10 is very conservative given that small caps are in bull market…Also LST division should command very high pe (25-30) because rentals are assured and once costs normalise ebiyda should be 70% in LST (as in the case of Aegis Logistics)

Also chemicals is the bull charge so chemicals division could be valued at PE of 15 - 20 .

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Any body has any information about Rs 20 Cr unsecured and no interest bearing loan exteneded to GBL by promoter entity …I mean what could happen going fwd ? paid back , converted to equity resulting in equity dilution ( and increase in promoter stake) etc

Also has the company settled with Avron and what amt has been paid?

Also GBL was part of BSE Small Cap index till few days back but its not in Index constitution list now…what could be the reason for exclusion ( normally punitive for not complying to listing rules ) but sometimes could be very well thought out to drive out passive Index ETF selling and acquire quantity by more serious and knowledgeable investor. This point does not change fundamentals at all.

Ganesh Benzoplast touched a new 52 week high of Rs. 60.45 today. The story has just begun & it is still early days. The stock is still available at very low valuations & with all the legacy issues behind it, it will gradually go from strength to strength. The Co. is virtually debt free now if one accounts for the Bank deposits. With annual cash generation in the vicinity of 65-70 crs, exciting days lie ahead for the Co. & its shareholders.

The Co. has a somewhat chequered past, so most investors are still reluctant to come aboard, not without reason. First it was the issue of pledged shares, then it was about high contingent liabilities. These have been addressed. The Co. is still not paying taxes or dividends so some may even doubt the numbers, but then the Co. has repaid loans of about 30 crs in the last year or so.

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A main concern about this company is the past losses from the chemical division. Are there any plans to close, trim or sell the low-margin chemical division? The company will become a lot more interesting if that happens.

Otherwise, is there a possibility of a long-lasting turnaround of the division?

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zeo dividend and zero tax rate, first. is concern and second just tell me that earning profit will be not in proportional to revenue growth/

The Co. went into BIFR sometime in 2015 & should be coming out of it this year. This would enable it to give a dividend this year, though the mgt. is more inclined to go for a share buy back is my understanding.

Once its carried forward losses are wiped out, then it will start paying taxes. Probably next year.

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Pursuant to the Regulation 29 of the SEBI (LODR) Regulations, 2015, we would like to inform
you that a meeting of the Board of Directors of the Company will be held on Wednesday,
October 07, 2020 to, inter alia, consider and approve the issue of Equity shares on
Preferential/Private placement basis amongst other matters. Private Placement Intimation.pdf (480.6 KB)

Price at which Private Placement happens will be key trigger. Procedure of Private Placement by law .Private Placement of Securities under Company Law.pdf (150.1 KB)