i have just attended TGV SRAAC EGM and following are points to keep in mind for the company …
i am not that good in narration so will keep it point wise
caustic soda …
- they increased capacity from 171658 mt to 259150 mt.and now they are planning to increase from 650 ton per day to 800 ton by sept 2019 and 1000 ton by march 2020. total approx capex is around 200 cr.
- they are upgrading caustic memberane tech to zero gap tech wich increases production and efficiency…
( i checked guj flouro annual report for refrence and they have done it ). it will reduce cost of production.
they are third largest producer of caustic in india.caustic runnung at nearly 90 % capacity.
Methylene Chloride & chloroform
- they have installed capacity of 51890 M ton wich they are planning to increase to 103780 M ton. and it will have capex of around 140 cr. it will be operational by april 2020.the GUJ FLUORO are the largest producer of chloro with installed capacity of around 105000 MT and production of around 65000 MT.
- the main game is here in chloro market. its one of the material is chlorine, wich is a bye product of caustic.
their was a time when they had to pay reverse money to dispose of the chlorine which wa negative 7000 rs and now its around negative 1000 rs.
so they have as good as free raw material and they have good value addition. their full current chlorine and future production of chlorine due to expansion of caustic will be used in expanded capacity of chloromethene.they are running at 100% capacity at present.
here the margin are far better then caustic. It seems guj fluro is unable to take full advantage is due to is only around 100000 mt. so chlorine is only for 65000 mt and capacity they have is 105000 mt.
the chloromethene is used in pharma ind and they have plenty of pharma co around Hyderabad. they have already replaced Guj Fluro around Hyderabad pharma co.
- power cost…
the main culprit in TGV profitability is power cost. its around 480 cr . and they can gain immense by reducing it . so they have taken many steps like their sister concern Rayalseema hypo is importing coal for capative consumption and balance they sale in market.
also upgradation of membrene tech to zero gap
but main step is they are in process of setting up solar power plant. they are in consultation for setting solar plant. they are saying they want to use min 40 % to 50 % solar power by april 2020., which is 30% min cheaper . so cost saving is immense on even present 480 cr total power bill.they said here around factory plenty of waste land available at very cheap rate.
based on current 6 month performance expected to clock turnover of around 1300 cr in full year and out of that 30% will be chloromethene products.
they expect profitability to be maintained even if caustic price goes down as profit will be maintained by chloro sales.
they dont have anything big contingent liability to provide now as the remaining liability are the case wich they have already won in high court and now state elec board has files in supreme court. but they still may write down around 3 cr balance of bellary plant .
they have around 58 acre of land in bellary power.
they had proposed to infuse 56 cr in company by way of equity at 37 rs. and out of 340 cr total capex they are planning to take 200 cr loan and balance internal accrual…
- their fatty acid and soap plant they are scalling down the operation as their they have to buy castor in cash and sell finished product in credit. so its big work in capital guzzler which increses finance cost , also they are importing raw material and it has wide fluctuation so loss due to derivative and exchange fluctuation. they says loss will be reduced to minimum from april 19.
about caustic import and price
price is fluctuating and had gone to 35000 but recently it has again shot up to 40000.as the fear of import has come down. as per new norm every import of caustic needs BIS certificate. and many shipments are stuck at port due to low quality . and they are emphasising on forward value addition of chloro products so profitability is not impacted.
disclaimer : my views are may be biased as i am invested in this company