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Monday, January 9, 2012

Balaji Amines Limited BSE Code: 530999 NSE Code: BALAMINES

CMP (BSE): Rs. 34

CMP (NSE): Rs. 34

Industry: Commodity Chemicals

Balaji Amines Limited (BAL) was established in 1988. It is an ISO 9001:2008 certified company, specialized in manufacturing Methylamines, Ethylamines, Derivatives of Speciality Chemicals and Natural Products whose products are accepted in the international markets and have gained the distinct export quality status. These are the main products, but they also manufacture derivatives, which are the downstream products for various Pharma/Pesticide industries apart from user specific requirements. It is one of the leading manufacturer of Aliphatic Amines in India. Since 1988, BAL has been consistently adding capacities and fine tuning its processes to provide quality products at lowest cost to the customer.

BAL has three full-fledged manufacturing facilities - two in Maharastra and one in Andhra Pradesh. BAL`s state-of-the-art manufacturing facility is located at Tamalwadi Village, near Solapur (Maharashtra State, India) The facility is fully equipped with latest technology. In addition to this, BAL possesses an excellent R&D facilities and laboratory, which helps in conducting basic research and also to fine tune the process.

It is the first Indian company that has set up dedicated plants for the manufacture of specialty chemicals like N-Methyl 2 Pyrrolidone (NMP), Morpholine, 2 Pyrrolidone (2-P), Gamma Butyrolactone (GBL), Poly Vinyl Pyrrolidone (PVPK 30), N-Ethyl-2-Pyrrolidone (NEP), MMAE, DEAE, DMU and DMAE, which are widely accepted by clients the world over.


BAL's growth story:

Over the last decade, India has emerged as one of the world leaders in the discovery, development and manufacture of pharmaceuticals, chemicals and specialty products. BAL is among the frontrunners in this impressive growth story, providing high-quality inputs to a host of well-known global brands. Through a series of sustained and systematic process refinements in its indigenous facilities, BAL has been consistently adding capacities to meet the ever-growing demand for its world-class products, from both the domestic and overseas markets.

BAL has come a long way since its inception in 1988, from being a single product company to one whose products find their application in diverse industrial segments such as:
  • Active Pharmaceutical Ingredients (APL)
  • Agro- chemicals and pesticide formulations
  • Refineries
  • Water treatment chemicals
  • Rubber chemicals
  • Electronics
  • Photographic chemicals
  • Dye stuff and paints
Its clientele is quite impressive. It includes some big names like Reliance, Ranbaxy, Piramal Healthcare, Sanofi Aventis, Stan Chem, Syntex, Sun Pharmaceuticals, Thermax, Venkys, Wockhardt, Aurobindo, Bharat Petroleum, Aceto Group,Clariant, SF Chem, DSM Group, Whyte Chemicals, BASF, Cipla, Bayer Cropscience, Dr. Reddys, Godrej, Hindustan Petroleum, Indian Oil, GAIL, Kores, Lupin, and many more.


BAL's upper edge:
  • BAL is India's largest manufacturer of methylamines and their derivatives, with a market share of over 60%.
  • It is the world's largest producer of Di- Methyl Amine Hydrochloride (DMA-HCl), commanding nearly 90% of the global market share.
  • BAL is the only producer of NMP.
  • Through judicious and far-sighted backward/ forward integration, BAL consumes over 70%of its methyl amines production capacity internally, which significantly enhances its margins and value chain.
  • BAL also has a dedicated state-of-the-art R&D facilities that are constantly striving to increase efficiency in its processes, further improving the quality of its products by improving operational parameters, achieve backward and forward integration of its products and develop new amines and derivatives as downstream products in pharmaceutical, pesticide and other industries.
  • Due to its inhouse R&D and captive power generation , BAL is one of the lowest cost producer of Methylamines in the world.

BAL's Diversification Plans:

A 100 room hotel property is being developed at Solapur. It is supposed to be operational by mid 2012. BAL has entered into a formal agreement with the Sarovar Group of Hotels has been entered into for operating and managing the hotel property in the name of 'Balaji Sarovar Portico'.


BAL's Expansion plans:
  • In Feb 2011, BAL commissioned a new plant for manufacture of GBL/ NMP/ 2P with an installed capacity of 50 MT/day. This capacity expansion is expected to add both to the topline and the exports in the coming financial years.
  • A new plant for the manufacture of Methylamines is under implementation with an installed capacity of 30000 MT per annum at MIDC, Chincholi, which will be commissioned in the current financial year.
  • BAL has even planned to invest Rs. 70 crores in its Solapur unit expansion. It has been planning to implement a hotel project worth Rs. 40 crore in Solapur currently. It is planning to expand the current capacity of Methyl Amines from the existing 22,000 TPA to 55,000 TPA. This required fund will be raised partly by debt and partly through internal accruals.
  • The production of Methyl Amines is scheduled to be steamlined by January 2012. Another product Di- Methyl Amine Hydrochloride would come into production by April 2012. The third product Dimethyl Formamide will come into stream by July, 2012.


BAL has a very small equity of just 6.48 crores. This is quite attractive because small base has its own advantage. Even if there is a small rise in the profits, there is an exponential rise in its price mainly because the profits are distributed among a smaller base.

Its market capitalization at the CMP stands at Rs. 108.22 crore. Compared to this its sales stand at Rs. 405.65 crore (TTM), which is 3.74 times its market cap, which puts BAL in a very attractive zone. However, its debt (Rs. 165.47 crore) level may be a dampner for many. However due to its good earnings, its capability to service the debt is very much in the comfortable zone, with its interest coverage being 4.14. So the debt concerns can be done away with.

Its EPS stands at Rs. 8.70 (TTM) which brings the PE to just 4.23. Compared to this, the industry PE stands at 17.65, thus BAL looks to be very attractive at the current valuations. It has been constantly paying dividends since the last 9 years.

Its topline has shown continuous growth and has grown at a CAGR of 18.2% over the past 5 years. Moreover, its bottomline has shown an impressive CAGR of 26.75% over the past 5 years. This kind of growth is quite impressive. Looking at the current developments in BAL, this kind of growth is set to grow further.

The promoter and promoter group holding is about 53.97% of the total share capital as per the September quater. The promoters however have pledged about 38.5% of their total holding (38.5% of 53.97%) in favor of banks to secure various credit facilities for the smooth progress of their expansion/diversification plans. This might be the biggest dampener for most of the investors. But in my view, a company that has been showing constant growth over the years and is expanding the way BAL is, is capable enough of servicing its debt, isn't a bad deal.

BAL is a good bet amidst all the uncertainites mainly because of its superior product range catering to a very well diversified range of industries from pharmaceuticals to agrochemicals to FMCG. Almost all pharmaceutical companies, be it Indian or international, all are the customers of BAL. Definitely a good deal.

Happy Investing,
Purvi P. Shah

2 comments:

  1. How you search companies/stocks which are not common to retail investors,but I say very helpful in long-term.

    ReplyDelete
  2. I am a research analyst and a value investor. Constant research helps me to find the value buys. and the basic definition of value buy is to find an underpriced security which has not yet caught the eyes of the giants.

    Thank you,
    Purvi P. Shah

    ReplyDelete