National Peroxide

National Peroxide Annual Report 2018 Notes:

  • The gross sales and other income for the year under review were Rs. 32,056.69 lacs as against Rs. 26,776.20 lacs for the previous year, registering increase of 19.72%. The profit before tax was Rs. 14,622.61 lacs (after interest and depreciation charges of Rs. 969.75 lacs) and the profit after tax was Rs. 9,511.67 lacs for the year under review as against Rs. 5,704.47 lacs and Rs. 3,788.26 lacs respectively, for the previous year, registering increase of 156.34% and 151.08% respectively.
  • The Company produced 1,03,059 MT of Hydrogen Peroxide, during the year under review, as compared to 93,564 MT during the previous year. The production was higher during the year due to improved plant efficiency. The Company sold 1,00,365 MT of Hydrogen Peroxide during the year under review, as against 96,195 MT during the previous year. The Company continues to maintain its prime position in the market and held 39% market share during the year as compared to 38% during the previous year. 1.16 Million Cubic Meters (MCM) of Hydrogen Gas were also sold during the year as against 1.26 MCM during the previous year.
  • During the financial year, the Company’s management has identified instances of embezzlement of its funds by certain employees of the Company, including senior management employees, whose services have since been terminated. Based on the management’s scrutiny and the forensic investigation, the Company has initiated criminal proceedings against these employees including filing of FIR and application for other appropriate action with the Joint Commissioner of Police, Economic Offences Wing. In view of embezzlement that has occurred, systems and controls have been further strengthened.
  • National Peroxide Limited (NPL) is the largest producer of Hydrogen Peroxide in the country. There are two other producers in the country. During the financial year ended 31st March, 2018, total production of all the three producers in India is estimated at 2,00,000 MT. NPL is a pioneer in Hydrogen Peroxide industry in India and has been at the forefront in development of technology, brand image and market share in the country.
  • Due to the eco-friendly nature of product, growing awareness of public towards the environment and increase in stringent environmental regulations, the domestic market has significantly developed over the years. The domestic demand is expected to grow by 5-6% during 2018-19. NPL has a market share of 39% in the domestic market. Due to mismatch in demand/supply within the country and surplus in other Asian countries, there has been continuing import of significant volume.
  • Both the key players in the domestic market (including NPL) are in the process of setting up additional capacities totaling to 78,000 MTPA, both of which are expected to be commissioned during the FY 2018-19. Two new producers have announced setting up new plants adding up to 80,000 MTPA. These capacities are also expected to be operational during the year 2018-19. This would lead to surplus capacity within the country in 2019-20 and restrict imports.
  • Growth in Paper industry and textile industry is positive for the company as they are user industries of Hydrogen Peroxide. Demand for Hydrogen Peroxide from oil refineries for effluent treatment has been developing and will continue to grow with growth in the volume of crude oil being processed by existing and upcoming refineries in the country.
  • One of the key inputs in production of Hydrogen Peroxide is Hydrogen Gas. NPL produces this by steam reforming of Natural Gas, which becomes a key raw material for production of Hydrogen Peroxide. India imports close to 50% of its requirement of Natural Gas. Price of Natural Gas to a very great extent depends on the crude oil price and US$ exchange rate versus Indian Rupee. This makes the price of Natural Gas subject to increased volatility. Also, Natural Gas does not fall under GST regime and input credit is not available for VAT paid. NPL procures its Natural Gas requirement under a long-term contract with GAIL (India) Limited and therefore, continuity of supply is fairly assured.
  • The outlook for industry in the near term can only be viewed with cautious optimism. Significant imports continued to take place from Thailand, Bangladesh and South Korea during the FY 2017-18. These imports have been at low prices due to surplus capacities in originating countries. Government of India has imposed Anti-dumping Duty on imports from Bangladesh, Taiwan, Korea RP, Pakistan and Thailand. Imposition of these duties combined with increasing production for expansion and new capacities in the country bodes well for the outlook for Hydrogen Peroxide industry in the near to medium term.
  • The additional capacities being built by competitors along with the proposed capacity expansion of NPL will alter the demand- supply situation in the country significantly. The custom duty on imports of Hydrogen Peroxide being Zero from some of ASEAN countries distorts the market dynamics. As a result, the margin may come under pressure particularly during periods of higher Gas prices.
  • The employee strength on the permanent rolls of the Company was 113, as on 31st March, 2018.

Originally posted on National Peroxide: Annual Report 2018 Notes You can find other Annual Report Summaries here too.

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Hydrogen Peroxide Market in Asia pacific to grow at 6% CAGR till 2024.
https://www.marketwatch.com/press-release/hydrogen-peroxide-market-in-asia-pacific-to-grow-at-6-cagr-till-2024-2018-09-12

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Company has recently(Feb 2,2020) completed expansion in production capacity of H2O2 from 95,000 MT per annum to 150,000 MT per annum.

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Any thoughts on the demerger announced?

Well some of the important pieces I found about hydrogen peroxide from concalls presentation of other players, these are self explanatory:
chemplast sanmar nov22 concall
Source: Chemplast Sanmar concall nov 22

meghmani finechem nov22 concall
Source: Meghmani Finechem concall nov 22

meghmani finechem nov22 concall capacity
Source: Meghmani Finechem concall nov 22


Source: Meghmani Finechem concall nov 22


Source: DCM Shriram nov 22 concall

meghmani finechem july 2022 concall capacity utilization
Source: Meghmani Finechem july 22 concall


Source: Gujarat Alkali nov 22 presentation


Source: Chemplast Sanmar may 22 concall

Disclosure:Invested

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Source: Meghmani Finechem concall Jan 23


Source: Meghmani Finechem concall Jan 23

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Finally the scheme of Arrangement of demerger of NPL chemicals from Natperox is out.
The company has done well in last one year. Margins have doubled from 8 percent to 15 percent. And results of the recent quarter seems good. I have posted about the company in the other thread too.

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Hydrogen peroxide prices have gone up around 150% over last three months

Can you please give a link for this? WPI data suggests very muted prices in domestic market until August.

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Steep raise of >50% in this month.

Also 3 months chart is present here

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On the National Peroxide demerger, today is the record date and can see that Market cap is still 955 odd crores, which is more than sum of the holdings of BBTC and bombay dyeing,which adds upto 800 crores. Are we missing something please.

Thanks

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Just sharing the latest announcement

Can someone clarify this in detail?
Can this be the reason for the contiuous lower circuits in the stock price for 5 days?
dr.vikas

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Does this mean that one would get 3 shares of NPL & 1 share of NP for each share held of National Peroxide before 25 Sept. 23?

Please throw some light on this.

No, the ratio is 1:1 ,so if you are holding 100 shares on or before record date you will receive 100 shares of NPL Chem. Regarding cost, suppose you had purchased at Rs :1000, the cost of Nat Peroxide will be 256.70 & cost of NPL Chem will be 743.30.

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Thanks for the clarification. So by this method, the price of current National peroxide should stabilize only around 25% of what the price was before the demerger ( before 25 Sept)
Am I correct?

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Well can’t say anything on valuation, but yes you are right theoretically .

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Hi,

I had one query. Would appreciate your answer

In theory to become eligible to get the stock of NPL chemicals what would be the last day to buy the stock? And after that date can we sell the main entity stock even though NPL chemicals is not listed yet?

23rd Sep would be the last date of purchase, making a buyer eligible to get the demerged NPL Chemical Ltd shares. One can sell the holdco National Peroxide on or any date from 26th Sep and selling will not affect one’s chances of getting shares of the demerged entity.

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The spin off EX date was 25th Sept, hence one can sell on 25th on Ex basis ,as settlements are T+1 ,hence shares will be debited from account on 26th.

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With such low ROIĆ, this is not a business worth owning.