Gulshan Polyols(GPL) - Business by FMCG and Valuation by Commodity

Great work, fluctuating PAT margin, and EPS dilution, raises concern, your views.

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With 200klpd coming live in this quarter from mp and 250klpd coming live from Assam (April) will boost up top line and the recent increase in price by omc’s will start reflecting in bottom line from this quarter only… so we have to wait and watch atleast for next 5-6 months…

I agree with your view

Once the total 775KLLD commissioned then the variation in the margins will stabilize.

They have done QIP to fund the capex requirement, so there is some dilution in the equity, going forward there may not be any further dilution.

I think they will add only 100KLPD from MP this quarter.
Q2FY25 is the quarter in which all capacities will be on full swing, this quarter will show jump in revenues.

It could be a game changer if implemented…

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Thanks for the information.

I am sure it will be implemented across all grain based ethanol industries. This quarter we should see improvement in the margins.

BCL mentioned that last quarter maize avg procurement price/kg is around 24.30/-. I hope gulshans RM price could be higher than this. This move not only secure the RM but also decrease the RM cost as well.

Gulshan Polyols Ltd

Gulshan Polyols Ltd, with over 30 years of expertise, specializes in Ethanol/Bio-fuel, Grain, and Mineral-based products, and is expanding its operations, especially in the Indian bio-ethanol sector, under its commitment to sustainable growth themed "Expanding Potential”.

MCap: Rs 1,308
Sales (TTM): Rs 1,234 Cr
Sales:MCap 0.95 times
CMP: Rs 210
PE: 39.60 times
PB: 2.26 times
BV: Rs 92.80
EPS: 5.29
ROCE: 8.68%
ROE: 7.81%
Sales Growth 3 yrs CAGR: 23.90 %
Profit Growth 3 yrs CAGR: 28.20 %
Borrowings: Rs 358 Cr & Reserve and Capital : Rs 579 Cr.

Financial Performance:

:small_orange_diamond:Q2 FY23 income from operations was ₹277.38 crores, stable due to high capacity utilization and strong product demand.

:small_orange_diamond:Input costs increased by 13.2% YoY, mainly due to higher raw material and power costs.

:small_orange_diamond:EBITDA for the quarter was ₹20 crores (7.3%), net profit ₹9 crores with a PAT margin of 3.3%.

:small_orange_diamond:H1 FY23 revenue was ₹548 crores, up 6% YoY.

:small_orange_diamond:The company targets a sustainable margin of 10-12%.

Expansion Plans:

Grain Processing Segment:
:small_orange_diamond:Products: This segment includes sorbitol, maize starch, liquid glucose, fructose syrup, and other starch derivatives such as Malto Dextrine and Dextrose Monohydrate, along with agro-based animal feed.

:small_orange_diamond:Facilities and Capacities: The company has production facilities in Muzaffarnagar, Uttar Pradesh, and Bharuch, Gujarat. Muzaffarnagar specializes in producing maize starch (70,000 metric tons per annum) and fructose syrup (36,000 metric tons per annum), while the Bharuch facility focuses on sorbitol production (72,000 metric tons per annum).

:small_orange_diamond:Capacity Utilization and Expansion: The combined capacities in this segment are about 150,000 metric tons per annum. Currently operating at full capacity, the company plans a 20% capacity expansion to meet growing domestic and export demand.

:small_orange_diamond:Customer Base: The segment serves a strong customer base, including FMCG companies like Lever, Dabur, Asian Paint, and Patanjali. The products are also exported to over 35 countries. Starch, particularly, sees robust demand from the semi-craft paper industry, driven by e-commerce growth.

Ethanol and Distillery Segment:

:small_orange_diamond:Current Operations: The company operates a 60 KLPD grain-based ethanol plant and distillery in Chhindwara, Madhya Pradesh, running at 110% capacity utilization. This facility was set up in 2020.

:small_orange_diamond:Expansion Plans: As part of the government’s Ethanol Blended Petrol Program (EBPP), the company plans to enhance capacity from 60KLPD to 500 KLPD by Quarter 4 of the current financial year. Additionally, a new 250 KLPD grain-based ethanol plant is being set up in Goalpara, Assam, expected to be operational by FY25.

Mineral Processing Segment:

:small_orange_diamond:Products: This segment produces various grades of calcium carbonate, including precipitated and brown calcium carbonate.

:small_orange_diamond:Applications: The calcium carbonate products are primarily used in the paper and PVC industries.

:small_orange_diamond:Contribution: Though smaller compared to the other segments, this segment makes a significant contribution to the business.

CAPEX and Funding:

:small_orange_diamond:Spent INR 250 crore of a total INR 600 crore CAPEX, with INR 350 crore pending.

:small_orange_diamond:Ethanol expansion funded through term loans, QIP, and internal accruals.

:small_orange_diamond:Eligible for Production Linked Fiscal Assistance for Greenfield ethanol plants in Madhya Pradesh and Assam.

:small_orange_diamond:ISS approval from DFPD for bank funding reduces funding costs.

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I think all ethanol capacities will be on stream by Q1FY25 itself.

Yes… Assam plant will start from q1… , if raw material part is sorted then we can see higher profit…

Challenge is Raw Materials price… if it is available at cheap they will make big profit. Their sale price almost fixed for in hand order for next 10 years. I think they already have order to supply ethanol for next 10 years and yearly topline addition from that order is 600 crore

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I think Ethanol contracts are usually released yearly. New price will be applicable to the existing contracts also. BCL confirmed that new price benefits will reflect in Q4 numbers.

Industry is expecting some softening in RM prices due to new crops, Govt also introducing standard mechanism for procuring maize at reasonable price (slightly higher than MSP), all these developments may improve margins slowly.

My focus is only on ethanol biz, I think improvement in bottom line can be seen without much improvement in the margins due to uptick in ethanol sales (~2000 Cr). BCL is making 15% EBIT margins in ethanol biz, in GPL case we can expect at least 10%, this can translate to at least 100-150Cr bottom line in addition to other segments.


Country alcohol liquor order

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One more order from omc…(78cr) to be completed in 6 months


Assam facility consent to operate

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Soon top line will grow. Interesting to see bottom line. Company valuation is good

Invested at 160 range with plan to see ethanol business for next 5 years


Finallyy!! Assam plant will start contributing to business. Once the old business margin is back we will see good bottom line.(Depend on raw material prices)

Eaisly gulpoly will see top line of 1800-2100cr.

New to the story here. I had one query regarding the capex, if anyone has insights please do correct me.

GPL has almost 13-14% dep rate (on its Fixed Assets) historically. According to what I have read, the MP capacity has come online which had a capex of 300cr. So this should create an additional depreciation of atleast 300X13-14% = 40cr.

I don’t really see this increase in any of the reported results. The depreciation line item should have jumped. So has the capacity not come online yet or is it that they have changed the dep method to unit production or what is happening.

Thank you so much.

Company will start depreciating the assets only once assets is put to use. That might be reason.

As per the June 23 filling, the MP plant was supposed to be put to use at 45 days after June 23 which would around H2FY24 end