Key highlights

• Latex market in India excluding paint and rubber is around 85000 tons. For rubber it is around 7000 tons and for paints alone it is around 100000 tons.

• Company's products are very critical to user industry in essence they are performance or specialty chemicals which are unavoidable like for tyre industry the overall latex costs is less than 1% of tyre costs but forms a critical requirement for tyre.

• Some of the user industries include Paper and Paperboards, tyre, carpets, FMCG, automobiles, footwear, construction, textiles paints etc.

• Except rubber, which is predominately, used in Hawai chappals, rest all are doing well.

• FY'13, sales growth was lower and stood at around 9% due to lower realization of about 8%, largely due to sharp fall in raw material prices and lower sale of synthetic rubber, as the demand from Hawai chappal was lower.

• About 90% of total sales is from India and rests are from international markets including Middle East and EU. Over the next 3 years, the international sales contribution should increase and some of the new markets will be Africa, South East Asia. Alone carpet market is around 100000 ton market in Middle East which is currently predominately catered by EU.

• Any company can never pass on Ruppee depreication at such a fast phase. Normally, on monthly basis both rupee and raw material effect gets passed on.

• For Q1 FY'14, things are moving slowly due to higher monsoon on y.o.y basis. This along with sharp rupee depreciation will impact margins in Q1. However the management is confident that good monsoon will actually result in higher demand in coming quarters and the operating leverage will come in from Q2 onwards, so margins should actually improve on y.o.y basis, if not remain stable for FY'14.

• Company also has plans to introduce few more products in FY'14, which will be predominately for exports.

• Overall, management expects gross sales of Rs 354 crore for FY'14, up by 17% on y.o.y basis as compared to gross sales of Rs 303 crore in FY'13. As per the management, they have factored in all the slow down in India and except for some unavoidable circumstances, the target is very much feasible. Also from earlier expectation of about Rs 500 crore of gross sale for FY'15, management has scaled down it to around Rs 430 crore, given the uncertainty in raw material and economy.

• The company has taken a ECB loan of Rs 25 crore and working capital would be around Rs 20 crore p.a. At capex of about Rs 25 crore, the company expanded the latex facility from 40000 tons to about 55000 tons. In next couple of years time, management has planned to increase it to 70000 tons p.a, which would require capex of only Rs 5 crore as the company has ready made infrastructure, which reduces the incremental capex costs. For any other company, total capex would be about Rs 200 crore, excluding the land costs.