India Glycols Limited (IGL) BSE Code: 500201 NSE Id: INDIAGLYCO

Technology that sustains the Earth - GREEN Technology

CMP (BSE): Rs. 132.20

CMP (NSE): Rs.132.15

Industry: Commodity Chemicals

India Glycols Limited (IGL) holds the distinction of being the only green petrochemical company of its kind. It is the first and only company in the world to have commercialised the production of ethylene oxide, its derivatives and glycols from renewable agricultural resources, namely molasses or sugar cane. IGL has adopted several green technologies, and it continuously works to evolve new green methods, materials, innovative technologies and systems to meet the specific requirements of global clients. Their aim is to be at the forefront of efforts against global threats such as global warming, stratospheric ozone depletion, resource depletion, bioaccumulation and persistent chemicals.

IGL is one of the leading manufacturers of Glycols, Ethylene Oxide Derivatives, Ethyl Alcohol (Potable), Natural Gums & Derivatives and Industrial Gases. Its product range spans the chemicals, spirits, herbal and other phytochemical extracts and guar gums, industrial gases and realty sectors, IGL's portfolio of more than 250 products finds its application across a large number of industries such as agrochemicals, automotives, detergents, healthcare, food processing, mining, oil & gas, paints, paper, personal care, pharmaceuticals and textiles.

Almost 69. 2% of IGL's revenues come from the chemicals business. Ethyl Alcohol business contributes almost 28.78% to the total revenues and other businesses contribute merely 2%.

The various divisions of IGL are as follows:

(A) Chemicals

• Ethylene Glycols: IGL has a capacity of manufacturing 175,000MTPA of Ethylene glycols. IGL is the only manufacturer in the world to produce bio-ethylene glycols using methylene glycols (MEG, DEG and TEG) molasses. Glycols are used for the manufacture of polyester yarn, fibre, film and resin and as an automobile coolant. Bio-glycols cater to the beverage and food industry's packaging requirement of PET bottles and polyester film. IGL is promoting its gylcols as BIO/GREEN MEG to potential customers interested in meeting their objectives of using environment friendly chemicals made from natural renewable sources. IGL is hopeful in converting this concept further into a good business opportunity in future.
• Ethoxylates and Polyethylene Glycols: IGL is the largest manufacturer of ethoxylates in India, with a production capacity of 70,000MTPA. It produces wide range of Ethoxylates to meet the diversified needs of various end-use industries such as textile, pharmaceutical, personal care, emulsion polymerisation, paint, detergent, automotive, agrochemical and other industries.
• Glycol Ethers and Acetates: IGL has the capacity to manufacture 70,000MTPA of glycol ethers and acetates.
• Performance Chemicals: IGL has the capacity to manufacture 35,000MTPA of performance chemicals.

(B) Industrial Gases:

India Glycols manufactures 24,000MTPA of liquid oxygen including medical oxygen, 1,600MTPA of liquid nitrogen and 3,300 MTPA of liquid argon. The cryogenic gases are produced using pioneering air separation technology and are supplied to customers in India in the private and public sectors.

(C) Natural Gums:

IGL's Natural Gums Division (NGD) was started way back in 2001. It has a manufacturing capacity is 10,000MTPA of guar products for varied applications such as food, oilfield / petroleum, textile printing, paper, feed and pharma, mining and explosives. It is highly specialised in making textile-printing thickeners based on guar and tamarind kernel powder. The facilities for the manufacturing of textile-printing thickeners have been expanded to a production capacity of 2,500MT per year. From the beginning of 2008, improved facilities for manufacturing high- viscosity, fast-hydrating slurriable guar gum for the oilfield industry have been added with a capacity of 5,000MT. IGL specializes in manufacturing very special products for the oilfield industry.The products are marketed globally, especially, in the US, Europe (food, oilfield, etc) and South East Asia (food, textile, paper, etc).

(D) Spirits:

The spirits division of IGL commenced operations in 2002. In a short span, it has successfully achieved market penetration across the northern and southern parts of India. IGL has a strong presence in the semi premium, regular and prestige segments within the whisky, rum, brandy, vodka and gin product categories. IGL has three distilleries in Kashipur (Uttarakhand), Gorakhpur (Uttar Pradesh) and Todarpur (Saharanpur, Uttar Pradesh) with a total distillery capacity of 280,000KLPA for the production of ethyl alcohol, out of which, 80,000KLPA is for potable alcohol. The Kashipur facility is considered one of the most efficient distilleries in the country. At present, the distillery is working on the 'smart distillery concept' capable of producing alcohol from different raw materials, ie, molasses, grain and sugarcane. Apart from producing industrial alcohol for its captive consumption, IGL is also one of the biggest exporters of international quality ENA (neutral spirit).

Raw Material Availability:

IGL manufactures various products using molasses as the feedstock. Molasses is the waste product of sugar mills. Sugarcane production is dependent on adequacy of rain. Thus availability of feedstock is affected by climatic conditions. To protect against this risk, IGL has created large storage for feedstock so that adequate quantities can be produced during the season and also the inventories can be built up during the period of good monsoon. IGL also has a subsidiary Shakumbari Sugar and Allied Industries (SSAIL) in which it hasacquired a 96.6 per cent stake in 2007, a strategic investment that helped IGL not only gain a sizeable share of the domestic sugar market, but also bolster its ethanol and molasses production. SSAIL's sugar manufacturing unit was initially set up with a licensed capacity of 2,500 tonnes of cane per day (TCD), and was later expanded to 5,500TCD in 2008 as a part of its first phase of expansion plan. In the second phase of expansion the capacity of sugar manufacturing plant will be enhanced to 7500 TCD from 5500 TCD. Apart from the sugar facility, SSAIL has a distillery plant, which was set up in 2004. Expansion work is currently underway to bring the capacity up from 40KLPD to 240KLPD.

Opportunities for IGL:

• There is a substantial increase in the polyester manufacturing capacities in India due to major expansion undertaken at Reliance, Indo Rama, JBF and Garden Mills. The polyester industry is expected to grow at 11% during 2010-2011. Overall demand of MEG in India is 14 lakh MTPA as compared to 7.5 lakh MTPA, where the balance is being met by imports. Thus despite the recessionary trends in the international market, there is a high demand of MEG in India.

IGL's PE is 18.44 at the current market price but it is still quoting at a mere discount i.e 0.93 times the book value at the current market price. Its market capitalization is just Rs. 368.61 crores compared to its sales of Rs. 1345.55 crores. Thus its sales is almost 3.65 times its market cap. This makes it even more attractive because you get a business worth Rs.1345.55 crore by investing just Rs. 368.61crore. In FY 09, IGL made a net loss of Rs. 91.89 crore mainly due to the global meltdown. However with the revival of the global economy in FY 10, IGL made a net profit of Rs. 20 crore.

IGL appears to be a VALUE pick. Even at the CMP it is quoting at a discount but buying it at futher dips would make it even more attractive.

Happy Investing.