AR22 notes
Quick summary:
- UPL dependence seem to have increased to 54% of sales vs 43% in FY21
- The contingent liabilities problem that showed up last year has come down significantly and company has also appealed against it.
- The high fixed rate loans taken earlier are running down. With lower leverage, they should get a rating upgrade and lower their borrowing cost. It makes no sense for this kind of a business to borrow at 10%+
Miscellaneous
- Revenue grew by 38% on back of growth in existing products + commercialization of 2 new contracts for international clients, each of which can potentially generate 100 cr. revenues in FY23
- Industrial chemical division doubled in revenues
- 2/3rd revenues come from agrochemicals and 1/3rd from performance chemicals (including intermediates and industrial chemicals)
- Portfolio of 10+ products in contract manufacturing for MNCs and Indian companies. Expect growth in existing molecules as customers get registrations in additional geographies
- Developing intermediates which should be commercialized over next 2-years
- Target: reach 1’500 cr. in next-2 years with 2-3% increase in margins
- Expect 7-8 products with long-term contracts and registrations that will include 5-6 agrochemical products, and rest from specialty intermediates over next 2-3 years
- Intermediates will be supplied to leading Indian and MNCs - two molecules are expected to commercialize in FY23. We have a contract with a Japanese client that start contributing from FY 2023
- Has approved Effluent Treatment Plants with incinerators to treat the waste materials in Derabassi and Lalru. For disposal of solid waste, it has a tie-up with Common Effluent Treatment Plants close to manufacturing sites
- Plans to manufacture agrochemicals in Lalru which is currently used for chemicals, separate agrochemical site has been initiated
- CSR: Spent 75.94 lakhs (vs 49.9 lakh in FY21). It was slightly above requirement of 75.67 lakhs to fill last year’s gap
- Order book: 1’500 cr.
- Capacity utilization: Derabassi (85%), Lalru (70%), Pune (95%)
- Identified local producers for some basic raw materials
- Number of employees: 1213 (vs 1176 in FY21) + 867 (vs 597 in FY21) on contractual basis
- Share price (low): 839.75, (high): 1933.7
- Number of shareholders: 19’419 (vs 14’451 in FY21)
- Average percentile increase in employee salaries (ex-managerial) was 10.34% and managerial remuneration increased by 43.65%
- Management remuneration: 6.04 cr. (vs 4.13 cr. in FY21) (2.26 cr. was commission vs 1.05 cr. in FY21)
- R&D: 3.3 cr. (vs 1.97 cr. in FY21). Out of this, 1.45 cr. was capitalized (vs 0.24 cr.in FY21)
- Implemented SAP B1 Hana Ver 10 and G-suite cloud backup
- Customer advances: 18.6 cr. (vs 33.48 cr. in FY21)
- Revenue from top 2 customers was 503.71 cr. (vs 288.32 cr. in FY21) and 75.83 cr. (vs 58.43 cr. in FY21)
- Contingent liabilities: 13.41 cr. (vs 76.84 cr. in FY21). Out of this, 13.25 cr. (vs 76.68 cr. in FY21) was in relation to income tax matters
- Auditor remuneration: 34 lakh (vs 25 lakh in FY21)
Revenue breakup:
- Agrochemical division Derabassi: 664 cr. (vs 513 cr. in FY21)
- Specialty chemical division Lalru: 156 cr. (vs 111 cr. in FY21)
- Industrial chemical division Pune: 111 cr. (vs 52 cr. in FY21)
Geographical revenue breakup:
- India: 426.96 cr. (vs 242.26 cr. in FY21). In domestic revenues, sale of services was 126.11 cr. (vs 45.87 cr. in FY21). What could this be related to?
- EU (including UK): 360.71 cr. (vs 219.1 cr. in FY21)
- Japan: 89.8 cr. (vs 73.48 cr. in FY21)
- Others: 39.59 cr. (vs 130 cr. in FY21)
Banking relationships
- RBL bank + SVC Cooperative bank + Bank of Baroda (new one)
- Term loan from RBL bank is at 11.25% interest rate (4.96 cr. vs 9.91 cr. in FY21)
- Term loan from SVC Cooperative bank is at 9.7% interest rate (44.58 cr. vs 49.66 cr. in FY21)
- Vehicle loan is from Indostar Capital Finance at 11.03% (7 lakhs vs 49 lakhs in FY21)
- ICDs were 15.85 cr. (same in FY21) at 12.75-16.50% interest rate
Total income of SD Agchem (Europe) NV was 12.58 cr. (vs 11.36 cr. in FY21) with profit after tax of 2.89 cr. (vs (-1.55 cr.) in FY21)
Disclosure: Invested (position size here, no transactions in last-30 days)