Valiant Organic to trade on NSE with effect from 5th October 2020.
CML45904.pdf (188.7 KB)
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Can you help me with the source or link of above info
From the listing ceremony video found on youtube, at time 20 min.
Disc: invested today 
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I see a lot of people don’t understand sales potential for capex done by Valiant given somewhat complicated chemical terminology and inability to understand end use cases.
I tried to dig deeper to access the total addressable market for PAP which is an import substitute and used as an KSM for API manufacturing of paracetamol and also comes under PLI scheme announced by GOI. Below are my findings.
- Paracetamol can be prepared from benzene (key starting material) which is first converted to PNCB (para nitro chloro benzene). Then PNCB is converted into PAP (para amino phenol). PAP is widely imported from China by Indian formulation units because of a wide price margin. It is then used to make the paracetamol API and finally the tablet. (source). (Also see 4th line item in the below chart from Valiant’s AR)
- Currently India imports all 21,000 TPA of its PAP requirement from China. Although based on paracetamol’s capacity, India’s installed base is ~38,500 TPA.(link)
- July PAP pricing remained slightly high at about Rs 227 per KG. On sustainable basis we can assume it to ~Rs180-200 per KG. (see below chart)
- That arrives to about Rs. 400 crore of TAM for PAP (21,000 tons * Rs 190 per KG)
Now there are some important points to consider and take the discussion forward. I would request fellow VP’ians to add their viewpoints:
a. How many other such chemical/pharma companies have ability and chemical knowhow to produce PAP from Benzene derivatives? To my understanding Aarti group is one of the leading producers of Benzene derivatives in India but request other VP’ians to please correct me if I am wrong. If Valiant is the sole player here (which is highly likely, given Aarti’s Benzene dominance in India), we can see entire Rs 400 crore of sales flowing to Valiant. That would imply asset turnover of 4x (on Rs 100 crore of capex done) which seems very high. Maybe they capture 30-50% of PAP market initially and then ramp up from there. This is all an assumption.
b. We need to understand economics of these PAP and Paracetamol API products. Given PLI incentives involved, I have my doubts regarding 30+% EBITDA margin on these products (Valiant’s existing margin structure can come down if these are lower margin products and so can return ratios).
PS: PAP looks like a very decent opportunity and can scale upto 60% of their FY20 sales. We need to be mindful of margins and working capital terms for this new business.
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Looks like Vinati organics has tried to manufacture PAP using a different chemistry since 1998 (really!!) but has been unsuccessful till date.
Importantly for Valiant, for PAP - looks like margins, wc terms are much lower vs. existing business.
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Acquisition of 712,282 shares by Promoters on dated 19/10/2020. https://www.bseindia.com/corporates/Insider_Trading_new.aspx
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This is not open mkt acquisition. It is conversion to Equity by way of exercise of option of OCPS in accordance with Scheme of merger with Amarjyot Chemicals. Accordingly the share capital has increased from Rs 12.15 Cr to Rs 13.58 Cr.
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Last quarter they have sold some shares.
Last qtr sell was to facilitate entry of Institutional investors.
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Speciality chemicals player Promoters -Hemchand gala(original promoter),now Gogris of Aarti industries Manufactures & markets Chlorophenols Facility -fully integrated Raw material - for Chlorophenol( Chlorine gas & phenol) Chlorine easily available, phenol import Industrial use for products in agrochemicals, dyes, pigments, pharma, veterinary, cosmetics First SME IPO where MF took stake ,Reliance MF Initially listed on SME platform, got listed on @bse in Sep 20 & @NSEIndia on 5th Oct 20. Paying dividends since 2017. In 2017 company merged Abhilasha Tex chemicals into itself. Merger with Amarjyot chemicals expanded product portfolio to dues, pigments, pharma, agrochemicals Drawbacks - Chinese players, top 10 clients contribute 75% business, sourcing of raw Material 80% from top 10 suppliers. valiant organics top clients BASF Coromandel Laxness Bayer Gujarat insecticides Increased Chlorophenol capacity from 4800 to 18000 Mtpa at Sarigam plantAdded Ortho Nitro Anisole & Para Nitro anisole Capacity expansion at Jhagadia plant for hydrogenation from 18000 to 26000. Backward integration at jhagadia, key raw materials to be manufactured inhouse Ammonolysis capacity at Tarapur & Vapi plant increased 13000 to 16000 mtpa. Para amino phenol intermediates- pharma products, likely to be incentivized under PLI scheme Jhagadia plant to be automated along with Tarapur, Vapi to bring cost efficiency, safety, decrease human intervention Para Anisidine capacity installed by Valiant Organics Limited, mainly imported in India, VOL will be major producer Ortho amino phenol 1000mtpa capacity, complete by Q4fy21,mainly imported Para amino phenol widely imported from China, used to make paracetamol API Promoters acquired 7,12,282 shares by conversion into equity of option of OCPS related to scheme of merger with Amarjyot chemicals VOL products used in various industries
- agrochemicals- parachlorophenol ( PCP),Orthochlorophenol(OCP),2,4DCP ,2,4,6TCP, IPPCA,MCA,PFA
- Dyes - Para nitro aniline(PNA), OCPNA,Ortho Anisidine(OA) ,Para anisidine (PA),MCA,OTS,OAP
- Pigments - OCPNA,OA,PA,ONA-PSA
- Cosmetic PCP
- Pharma - OCPNA,PA MCA,PFA,PAP
- Specialty chemicals- PFA
- Polymer - PAP ( para amino phenol)
- Veterinary- PCP , 2,4 Dichloro Phenol
Goldman sachs India fund added 1,06,502 shares at 2749 in September 20
Malabar fund added 1,41,450 shares
Reliance capital holds 3,30,150 shares
Sundaram MF bought 36,500 shares at 2751
Aarti promoters know speciality chemical business like back of their hand
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Following is the Ashika Research Report referenced by the blog article.
Ashika Research _ Insight _ Oct 2020.pdf (326.7 KB)
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VOL is meeting on 13.11.2020 to consider Half yearly result, and to issue Bonus shares and Interim Dividend.
https://www.bseindia.com/corporates/anndet_new.aspx?newsid=063b95a5-f706-4bc5-ac8e-209eadc1f0d6
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Bonus shares explains the exuberence in the stock price
Valiant Organics Ltd
Total shares 1,35,76,744
Promoters held 58,67,440 (43.22%)
Institutional investors held 6,57,533 (4.84%)
Public held 77,09,304 (56.78%)
Out of these public holding 42 individuals held 57,21,253 shares (42.14%)
free float shares are ~13.57Lac (~10%) only.
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Most of these individuals who hold substantial quantities are promoters of the companies that have been merged with Valiant in the recent past.
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Quarterly and half yearly Results and bonus 1:1 7c0b09a8-3fc5-4298-95db-35852926c7f0.pdf (206.1 KB) d34bc2be-1474-4579-8ba9-42229ce81ce9.pdf (4.0 MB)
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CRISIL report
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Can you provide any material in support of your statement(made by management). I haven’t come across any such / maybe missed . I believe @jaman_valuepickr had quoted this (from screener):
If you compare the SHP of March 31st and Sep 30, 2020 (Being SME scrip -SHP is half yearly release), you can see that MF share has increased from 0.32 to 3.28% and Alternate fund and FII have opened the account with 2.13% increase. During the same period Individual investors have increased from 49.71 to 49.96%. So the promoter holding reduction is directly correlated to increase in MF and FII as the individual holding is almost flat. This is only deduction on the percentages. I do not have any explicit evidence on this .
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Health impact of chlorophenols? Is there anything adverse that you have found?