Great points.
Can big virgin carbon black manufacturers easily get into RCB, when environmental norms hit them. Or is too small for them to get incentivised. Also since raw material is Elt tyres, does small scale mfg which is spread geographically act as a moat for hi green to operate at lower logistic costs in procurement and distribution.
Basically was evaluating risks of competition from vcb players.
hi
GRP in a recent interview mentioned that the rCB market was about Rs. 3500cr and growing in double digits. And they are planning to enter this segment.
Compared to that, just PCBLs VCB turnover for FY24 was Rs. 6000cr. And they have made a lot of investments in this already.
However it is possible that such companies may look at making rCB as part of their ESG commitments.
Regarding raw material - transportation cost of tyres within India is not a major factor for setting up the plants. As much as being closer to their customers is. Plus state govts give incentives to set up plants in certain locations, which also becomes a deciding factor.
100 TPD is Higreen’s sweet spot (as mentioned earlier). However they can even set up 2 100TPD plants in the same location if they are able to sell their products easily.
Is there any update on the Dhule plant? It was expected to begin by SEP 2024.
This is the last update to the exchange on 31 Aug.
Did anyone attend the AGM, if yes can you please share some of the key takeaways from the meet? Thanks.
HI-GREEN CARBON LIMITED has informed the Exchange about Board Meeting to be held on 13-Nov-2024 to inter-alia consider and approve the Unaudited Financial results of the Company for the Half Yearly ended September 2024 .
Gone through the company’s Annual Report ~ FY 2023-24 and found below red flags :
Number of employees decreased compared to last year.
The Company has not filed form MGT-14 related to filing of resolution for issue of
securities pursuant to section 179 (3) of the Companies Act, 2013 and Form MSME, till
completion of financial year ended on 31.03.2024.
The Company has not given advance notice of Five days under regulation 29 of SEBI
(LODR) Regulations, 2015 for one Board meeting held on 04th November 2023, in which
there was an agenda of financial result
The Financial result for the Half year need on 30th September 2023 was filed on 15th
April 2024.
Dear Debashish, thank you for the detailed explanation. I know you have mentioned that HI-Green’s differentiator is their process expertise rather than their product. However, Mr. Amit Bhalodi had mentioned in a video that the company is working on a higher grade of RCB that can match virgin carbon upto an extent of 99% from the current 80%. Is my understanding correct? If so, will this be a patented/ non-replicable technology which can be sold at similar prices as virgin carbon? How close are they to achieving it? Would be obliged if you can throw some light on these queries. Thanks.
company has released its product life cycle assessment report…report is in the link…have summarised few key points from it…
Customer Concentration- Top ten customers of the company for FY2022-23, FY 2021-22 and FY 2020-21 contributed for 63.87%, 57.91% and 53.63% respectively of their sales. While they typically have long term relationships with the customers, they have not entered into long term agreements with the customers.
Geographical concentration-They derive a large portion of domestic revenue from the state of Rajasthan. State of Rajasthan contribute 79.73%, 68.09% and 70.84% of total domestic revenue for financial year ended on March 31, 2023, 2022 and 2021, respectively.However now they are diversifying into Maharashtra and M.P.
Working capital heavy -The business requires significant working capital (mostly for the procurement of raw materials), part of which would be met through additional borrowings in the future.
Competition- They operate in a highly competitive market and there are mainly unorganized players. Price is the main factor in most cases for client making decision to have their products.There more than 600 Pyrolysis players in India but more than 90% of them operates on Batch PyrolysisTechnology and are focused on extracting Steel Wire from the tires
● Fire Hazards: The highly flammable nature of tires poses a risk to HGCL’s property and stock, which is mitigated by insurance, fire safety equipment, and regular employee training programs.
● Government Policies: Changes in government policies could impact the demand and profitability of HGCL’s products.
● Dependence on Key Customers: HGCL is reliant on a few key customers, which could negatively affect revenue if relationships are disrupted or demand decreases.
● Fluctuations in Raw Material Prices: The prices of raw materials, primarily waste tires, can fluctuate, affecting HGCL’s profitability.
● Non-filing of Form MGT-14: The Secretarial Auditor notes that HGCL failed to file Form MGT-14 related to the resolution for the issue of securities, which was required under Section 179(3) of the Companies Act, 2013. Though the company later submitted the form, the initial non-compliance indicates a lapse in corporate governance.
● Discrepancies in Quarterly Returns to Bank: The auditors observed that quarterly returns or statements filed by HGCL with banks regarding working capital limits secured against current assets were not in agreement with the company’s books of account. This discrepancy, attributed to delays in invoice recognition, raises concerns about the accuracy of financial reporting.
The company is involved in tyre recycling and that is a highly regulated space because of environmental and health concerns so any mis compliance on company’s part can become detrimental in the past there has been such case but company was given clearance by the state pollution control board as emission were under permissible limit and the allegations were dismissed -
The company needs to ensure that it is able to procure required quality of end of life tyres in a secured way because the company’s plant will be operated continuously so if it is not able to procure required qualities end of life tires than it will increase the fixed cost for the company and will also impact the quality of rCB produced.
Tax Liabilities:
● Contingent Liability for Income Tax: HGCL has a contingent liability related to income tax demands amounting to ₹ 4,11,32,440 pertaining to the assessment year 2013-14. The company has appealed this demand to the Commissioner of Income Tax .
Current auditor report states that ,now they don’t have any litigation case pending.
Made 3cr provision for IT(Income tax) cases-
Not complined certain provisions-
Does anyone have any update on the Hatod, MP plant? They bought the land in FEB 2024. It’s been more than a year. Have they started the construction?
Went through the whole thread. Thank you for the valuable inputs Debu sir and Vinay sir. GRP after the RCB plan is now planning to enter into the continuous pyrolysis segment that they hinted upon last quarter.
One of the thing i realised was that their uniqueness of continuous pyrolysis. But also the question that how easy is it to crack this segment (have read about the r&d curve and gestation period as well) but is there any barriers to set up these capacities ? And GRP is probably coming up with a much higher capacity (crumb rubber
I believe the first part of our thesis has started to play out — the Dhule plant appears to be operational, as reflected in the 66% sales growth over September.
However, there are some concerning developments. The cost of material consumed has risen significantly — from 64% of sales to 78%, which has impacted profitability. In addition, the higher investments have resulted in increased depreciation and employee expenses, and there’s a noticeable rise in long-term debt.
The key question now is:
Is this a temporary phase where the plant is ramping up and waiting for operating leverage to kick in, or is the company struggling to pass on increased raw material costs to customers?
Would appreciate if seniors could share their thoughts on this.
One thing to note is that the capex cost for continuous pyrolysis plant of GRP is much higher as compared to Higreen and when we look at global player in continuous pyrolysis from Europe and US we notice that none of them is profitably running there plant except higreen and pyrolysis is not a new technique it is been done since quite some time yet no major player entered here:
There are few reasons for that:
The plant is quite difficult to run and the industry is highly unorganised where small players dominates the market and they mainly sell crumb rubbers like india alone has around 600 pyrolysis plant but are all partial pyrolysis plant CPCB survey notes this.
The capex cost for a continuous pyrolysis plant of this capacity which higreen has 100 TPD cost around 200/220 crores in china, europe and US where as higreen build this plan on its own at a capex of 40/50 crores so ROE of running a plant will be much better in case of Hi-green.
And any manufacturer putting additional capacity will except an ROE of around 15% as he takes the risk of running and all but due to being capex high capex that has been quite unsustainable so no major capacity came in this industry.
In a commodity based industry the right to win is to have high capacity and low cost which allows you to compete on price as it is mostly same for all players hence having low capex cost allows higreen to have better margins and sustainable ROE giving adequate cashflows to expand visible in this result where they generated CFO of around 12 crores and in H1 they generated CFO of around 10 crores as per revised fillings on exchange.
As far as this results are concerned they are pretty decent:
Few things I understand is that the new plant at dhule got delayed by around 4 months but employees were increased right from June as seem from EPFO fillings which led to increased cost.
Second, depreciation got almost doubled because new plant came but revenue will be recognised from this year.
Also, the prices for rCB this H2 were lower which may have led to lower realisation through tonnage increased as the prices of rCB are pegged to virgin carbon black being a substitute for it and vCB prices gets affected by crude prices.
But I think realisation will improve with increased tonnage from second plant as it has better technology leading to higher quality rCB yield and normalisation of one off expenses and legal cost to get approval for second plant.
The Margins are expected to improve as capacity utilization at the second plant, commissioned in November
2025, increases. The initial phase of operations incurred higher depreciation charges and one-off expenses,
which are expected to normalize over time, thereby contributing to improved profitability and margin expansion
going forward.
