TGV SRAAC erstwhile Sree Rayalseema Alkali

Capacity in Solar has recently moved up from around 23 MW to now 35 MW. Brings down cost of power due to substitution of electricity purchase from the Andhra SEB (Rate of Power will be Rs 7+ per unit from the SEB)

The capacity increase in CMS is 250 TPD moving to 380 TPD. Forward integration of Chlorine will be hugely beneficial. Other caustic companies in their recent concalls have mentioned negative realizations of Rs 9000 to Rs 10000 per tonne of Chlorine. Even if CMS sells at breakeven price, the negative realization of chlorine will be absorbed by forward integration efforts.

With commissioning of both the abovementioned investments the company will claim additional depreciation on assets and defer its tax payout thus positively impacting cash flows.

(This shows up as deferred tax liability in the P&L but actually is a non cash expense representing taxes that need to be paid in the future. Historically this deferred tax shows when they commission some capex). One needs to look at PBT or EBIDTA growth to get a better perspective of financial performance.

These structural changes will benefit future quarterly profits and cash flows. Basically ROCE profile of the company is improving which will help in better profitability across cycles.

Disclosure: Biased, Invested, Post for educational purpose only and I am not a SEBI registered analyst.

3 Likes

Good results YoY, but not sure why profit dipped QoQ even when caustic prices were better in Q3, could be because of power cost which increased by 30% QoQ for 6% increase in revenue:

  • Revenue up by 13% YoY
  • EBITDA up by 27% YoY
  • PAT up by 57% YoY

Other announcements:

  • Company will decommission 4.8 MW wind mill unit at Ramgiri as the cost of running it more than the revenue. In latest annual report, they reported that this unit haven’t generated any income from this unit in FY24, hence not much impact in my view.
  • To add 450 MT Caustic Soda and 400 MT of Chlorine at an approximate cost of Rs. 350 Crores

From Notes to results

Power Expenses were inflated by Rs 36.5 crore on account of some imposition of earlier dues for FY23 by APERC which the company has already contested against in the Appellate Tribunal for Electricity in New Delhi.

Dues of another Rs 40 crores for FY24 have also been levied which will also get expensed some time in the future.

The company has had a history of litigation esp with APERC. When they win the case they write back the amount like in FY24.

If you adjust for this pre emptive writeoff the adjusted PBT would have been Rs 68 crores and adjusted EBIDTA would have been Rs 92 cr for the quarter.

5 Likes

This they are quoting from last 2 years in annual report, I guess its impact has already come in FY24 financials.

How they plan to mitigate this as this is recurring thing? Will their recent additions of solar capacity will make them self sufficient in terms of procuring power?

I think 12MW plant could generate 150 lakh units. Assuming rate of power is 7 per unit, this could bring saving of 10-12cr, right?

1 Like

The impact of additional CMS capacity will be seen during FY26 as the new facilities get ramped up.

One can only be reactive to retrospective charges by the regulator. Not much the company can do other than take legal route to protest unfair demands.

The dependence on SEB, either thru direct purchase or wheeling of grid power, will continue to remain high in the foreseeable future. The savings from Solar will just keep trickling in incrementally.

12 MW plant will generate (12 X 24 X365 X1000 X.2) >> assuming 20% efficiency so approx 2.1 crore units of power. Assuming some operational cost saving will be around Rs 12 crores annually. But depreciation and deferred tax will increase.

2 Likes

…A bit of buying from promoters

2 Likes

Adding link to call with Lords Chloro management for some perspectives around
A. Capacity being put up by Reliance and Adani
B. Pricing outlook

3 Likes

Yes. very insightful. Give confidence to invest in this company.

How TGV is geared up to increase their power plats is to be seen? if any idea will be useful.

Thank you