Narmada Gelatine

India does have one of the largest bovine population which is free from mad cow disease hence exports were allowed since dec 2011. The plant being located in Jabalpur is having advantage of all RM access.

Further due to supply constraints the price of gelatin is anyway increasing.but the issue is of promoter who though expanded the capacity in 2009 are now sitting idle. Chaabaria family who bought into Shaw Wallace Gelatines are now left only with this co rest everything they have sold off.So FIB the main ingredient present in promoter of Mayur n other cos might be missing from them.

Nittta gel is present in Kerala which is a big negative.

Has the capacity now been already increased to 3000 TOnned per day as PE flattest AR???

Given the shortage of gelatine in the country and the higher cost of import due to custom duties, do we know what the substitute of gelatine is and what is the acceptance of that substitute in India?

Hi Sachin and Dhwanil,

I somehow missed this thread :frowning:

Excellent pick from Sachin in June at Rs 95 and very good analysis by Dhwanil. This one looks good for more.

Thank You


Hi Vivek,

As you very rightly put, it is FIB that is missing. Rest all seems to be in place. Gelatine demand islikely to increase as there is no real susbtitute for gelatine. this is mainly due to gelatine offering number of properties in one product which is hard to find in any single product. Though people areworking on gelatine substitute for some time now, no material success is observed.

In terms of capacity expansion,as I mentioned earlier too, RM availabilityis surely not easy and hencescalability is moderate. Morever, getting environmental clearance forincremental capacity is becoming difficult. Moreoevr promoters seems to be passive as business is too small to garner their attention. In all, a key differentiator between mayur and Narmada is that mayur is expanding margin while increase volume at breckneck pacewhile for narmadagrowth is an outcome ofmoderate capacity expansion and moderate margin expansion.

I think itcan be re-rated to 7-8 P/E inreasonablly good market . However, if there is management change (i.e. sale of company), my guess is that it will be bought by one of the MNC and in that case, market will value narmada very differently.

So if we take base case scenario, of 7-8 P/E on earning of 32-36 we can safely assume price in the range of 225-290. Downside is very limited.

Best Regards

Dhwanil Desai

Yes, capacity has increased to 3000 TPD from January 2012.

Hi Dhwanil,

Did you have a look at the other players in the gelatine business? Capacity constraint might be across the board, but FIB may not be. If other players more keen in expanding wouldn’t they overcome the constraints faster.



Few questions:

  1. I know currently ASP is rising. But how long is it sustainable. Except for the recent increase in capacity from 2,400 to 3,000, company never increased capacity in the last decade, that means we are betting only on ASP increase.

  2. Isnat it possible that due to steep increase in prices additional supply comes up. May be Chinese plants improve their quality and fresh supply comes from them.

  3. In the last one decade, company never traded above book value and there were repeated increase and crash in prices. (see the chart below, source capitaline database)

reviously Dhwanil Desai wrote:

Has the capacity now been already increased to 3000 TOnned per day as PE flattest AR???

ASP chart

chart.docx (16 KB)

Had a word in the co .All RM is being supplied from UP & bihar itself n there is no problem of shortage.capacity has been recently expanded n there is no furtehr plan of expansion.

There is no plan of selling out also.The prospects as per them are very bright for the co.the main competitor is Nitta n Sterling Bio.The latter it seems is going thru a bad patch.

Hi Anil,

Few questions:

Company expanded capacity from 2100 mt to 2400 Mt in 2007 ( Pl refer Ar 08 ).When ever the capacity utilisation hits 95 percent ,the company is expanding capacities.

  1. Isnat

Yes it’s possible that additional capacities will come.In India too Apart from Narmada , India gelatine & chemicals, nitta also adding capacities.But Raw material availability and pollution norms are key factors.

The rise in gelatine prices has lot of reasons apart from quality issues in chinese players.

-First one is animal welfare reforms in Eu going to start in 2013 will reduce the availability of raw materials and increase the costs. Link:


-Demand for certified quality gelatine by CAPEXIL is going to increase strong.In India all three players are certified.There is continued global demand for gelatine globally.

-Global prices of soya meal and meat & bone meal have soared upward to unprecedented levels.As a result demand from bones increased.In parallel bone supplies are depressed hence bone prices are increased.So due to these factors raw material prices increased and Big companies like Rousselot increased prices in all four Qy this year and finally announced another ten percent hike in prices from January 2013.


-Due to this Prices lately catching up domestically that benefits Narmada. In china too prices are appreciated and ruling at global level.

-Global gelatine prices chart

** Link:


-Rousselot announces price hikes for 2013 Link:

Hi Om,

Thank you for the articles and your analysis of the gelatin demand situation, it was very helpful.

Will the margins of Narmada improve to give higher earnings? Most of the articles focus on hike in prices due to hike in RM price. Agree that most of their customers would be price takers, still what is your opinion on this.

I too feel there are fairly strong entry barriers and Narmada will increase the capacity if required as they have sanction for a higher capacity. Their AR mentions that competitors have lower capacity utilisation, will that mean competitors will have better chance of exploiting the current situation?

Why is Narmada better than others according to you? And what is you FY 13 projected EPS?



Thanks a lot Om

Hi Anil,

Hi Vinod,

Hi Om,

With rise in international prices , domestic prices will catch up soon. That’s my hope. Nitta and India Gelatine (fifty per of total revenues are exports) already started exports to exploit the higher prices in those markets.So there is shortage for quality gelatine in domestic markets and anti dumping duties on imports make them unviable. So my guess is domestic prices should increase and that will help Narmada which exclusively caters to domestic companies.

Please note that capacity utilisation is low for competitor’s due to two factors.One is non compliance to environment norm’s and second is raw material issues. Link:

Consistency,valuation,catering to domestic markets hence no forex issues,good chance of unloading stake by Chhabria’s at good valuation make this company attractive.I hope they will post 35 eps.

# Invested at 90 levels.

Thank You Om!

Disc: Taken starter position, will add more

Could anyone please share the latest annual report?

Their website looks pretty outdated.

And, thanks much for all those who contributed to this thread!

The gelatine users are facing high import duty of 20 per cent compared to 7.5 per cent on most of the raw materials, and this makes it unviable to import gelatine. These factors have led to gelatine prices to shoot up by almost 28 per cent in last two months alone. For instance hard capsule grade of gelatine, which was available at about Rs.280/- per kg in month of October, 2011, is now being sold at Rs.350-360/- per kg, it is likely to increase 5%-15% in FY14 stated industry sources.

Source: (Pharmabiz (Allied Sector) & Rousselot)

There are 5 listed gelatine companies: Sterling Biotech, C J Gelatine, India Gelatine, Nitta Gelatine, and Narmada Gelatine. I prefer Narmada gelatine over all other 4 players as it has had a consistently better performance with good dividend payouts.

Massive gelatine shortage hits capsule makers, may affect formulation production

Nandita Vijay, Bengaluru
Tuesday, May 15, 2012, 08:00 Hrs[IST]

Indian pharma industry is facing an acute shortage of gelatine, used for the manufacture of hard capsules, soft gels, coated tablets, mini, micro capsules. The shortfall is because gelatine makers have either faced closure of units due to labour unrest, effluent issues and cyclone in December which damaged the plant and material.

With the rising global prices, domestic gelatine manufacturers are working to maximise the export orders. Now with the depreciating rupee they will be able to earn substantial increase in revenue by exporting the same. This is further aggravating the problem of availability of gelatine in domestic market. The gelatine users are facing high import duty of 20 per cent compared to 7.5 per cent on most of the raw materials, and this makes it unviable to import gelatine. These factors have led to gelatine prices to shoot up by almost 25 per cent in last two months alone. For instance hard capsule grade of gelatine, which was available at about Rs.280/- per kg in month of October, 2011, is now being sold at Rs.350-360/- per kg, stated industry souces.

Gelatine is mainly used by pharma industry for manufacture of hard and soft capsules. Hard capsule manufacturers resell their product to pharma industry for further processing and marketing of the finished formulations. Soft capsule industry manufacture their own formulations using the gelatine.

Hard capsule manufacturers have been affected badly due to this sudden increase in the cost of gelatine, as this is the only major raw material for their product.

There are 15 units engaged in the manufacture of capsule manufacturing using hard gelatine and all of them are in serious trouble. The government can only help them by way of reducing the import duty on gelatine.

For the manufacture of a number of popular pharma products also, gelatine is being used. These products are likely to be costly in view of severe shortage of Gelatine in the country in recent months, stated experts.

Apart from pharma industry wherein gelatine is used in the form of capsules, or as a tablet binding material, it is also used in manufacture of X-ray films, food industry (for jelly making), or as glue by many other industries. It is manufactured by processing of animal bones.

Indiaâs total installed gelatine production capacity of its nine units is around 20,000 tonnes per year. Currently domestic consumption is estimated at 10,000 tonnes of which 8,000 tonnes is used for the production of hard gelatines and remaining 2,000 tomes for soft gel. The country exports about 12,000 tonnes annually. Many of the users also import about 1,500 tonnes of the same per year.

There are nine manufacturers of Gelatine in India: Sterling Biotech, Baroda, Sterling Biotech-Ooty, Narmada Gelatine Ltd, Jabalpur, Nitta Geltines Ltd, Kochi, Raymon Gelatines Ltd, Baroda, India Gelatines Ltd, Vapi, Pioneer Jellaice Ltd, Cuddalore, Rama Gelatines Ltd, Punjab, C J Gelatines Ltd., Bhopal.

In the production of soft gel, the use of gelatine is lower compared to 50 percent of its content in hard capsules. Gelatine users have drastically reduced the production by almost 50 per cent in last three months thereby causing a severe shortage.

Users who were importing gelatine have been forced to cut down their imports due to drastic increase in international prices, and depreciation of Indian Rupee since last few months. To fulfil their requirement they are picking up the available material in the domestic market at higher prices

Source: Pharmabiz

EPS (Rs)
Company Name FY10 FY11 FY12
Narmada Gelatines 20.3 23.5 27.4
Nitta Gelatines 17.8 2.25 6
India Gelatine 6.6 3.1 7.6

Half-Yearly Performance-FY13

Narmada Gelatines India Gelatine Nitta Gelatine
Net Sales(Crs) 58 56.5 149
PAT(Crs) 6.3 6.17 11
EPS (Rs) 15.6 6.5 13.2