Despite the strong performance posted by the chemicals division the fertilizer business continued to perform un-impressively. However additional availability of natural gas through Dahej-Uran pipeline and the anticipated new fertilizer policy and also the estimated additional subsidy outgo and the payment of these subsidies in cash instead of bonds are expected to revive the sector.

Performance for the quarter ended March 2008

During the quarter ended March 2008 the Company posted excellent revenue growth of 59% to Rs 337.13 crore as compared to the corresponding quarter of the previous year primarily driven by the excellent growth of the industrial chemicals business. The company is a market leader in Iso Propyl Alcohol, which is the major chemical business revenue generator for the company.

However increase in various raw material cost during the period has significantly impacted the profitability during the quarter. Various raw materials like rock phosphate and sulphur has been continuously spiraling up in the international market during the previous few quarters.

Though the total raw material cost as a percentage of net adjusted sales fell significantly by 980 bps to 28% of sales the quantum of purchase for trade increased considerably by 1450 bps to 49% of adjusted sales. Thus the operating profit margin went down by 110 basic points during the quarter to 18.9%. The absolute operating profit thus increased by 50% to Rs 63.76 crore as compared to the same period last year.

The other income of the company during the quarter on the other hand fell by 86% to just Rs 1.62 crore, thus impacting the overall earnings, which hence increased by 22% as compared to the corresponding previous year. The interest cost increased by 12% to Rs 4.14 crore whereas the depreciation allowance increased by a benign 6% to Rs 11.91 crore, as a result the profit before tax and extraordinary gain increased by 27% to Rs 49.33 crore as compared to the same period last year. The company incurred an extraordinary expense of Rs 57 lakh, which includes brand launching expenses of Rs 40.90 lakh and amortization of VRS expenses paid to the tune of Rs 16.49 lakh. Thus the profit before tax after EO increased by 26% to Rs 48.76 crore during the quarter ended March 2008. The effective tax rate increased significantly during the quarter to 36% as compared to 28% during the same period last year, hence the company posted a net profit of Rs 31.34 crore, which was 13% higher compared to the same period last year.

Performance for the year ended March 2008

Revenue for the full year ended March 2008 increased by 26% to Rs 1,059.91 crore as compared to the previous year.

The operating profit margin fell by nearly 300 bps during the period as a result of the company posted an operating profit of Rs 193.53 crore which was just 24% higher compared to the previous year. The fall in OPM margin was mainly due to significant increase in raw material cost during the full year. The total raw material cost as a percentage of net adjusted sales increased by 340 bps to 32.1%. The employee cost went up by 20 bps whereas the other operating cost fell by 40 bps during the full year. The traded goods cost for the full year however fell by more than 870 bps during the full year.

Other income though fell by 14% to Rs 21.40 crore. The interest cost of the company increased by 39% to Rs 15.95 crore whereas the depreciation allowance of the company increased by 14% to Rs 44.741 crore during the full year. Thus the profit before tax before EO increased by 19% to Rs 154.27 crore as compared to the previous year.

The was an extraordinary expense of Rs 2.76 crore during the year, which included brand launching expenses of Rs 2.10 crore and amortization of VRS expenses paid to the tune of Rs 66 lakh. Thus the profit before tax after EO increased by 18% to Rs 151.51 crore as compared to the previous year.

The tax expenses more than doubled during the year to Rs 54.08 crore, hence the net profit increased by a benign 8% to Rs 100.27 crore as compared to the same period last year.

Consolidated performance for the year ended March 2008

Consolidated revenue for the full year ended March 2008 increased by 29% to Rs 1,144.48 crore as compared to the previous year. The consolidated operating profit margin fell by nearly 300 bps during the period due to significant increase in various input cost. Thus the company posted an operating profit of Rs 212.19 crore, which was 30% higher compared to the previous year.

Consolidated other income increased by 2% to Rs 26.14 crore. The interest cost of the company increased by 47% to Rs 17.06 crore whereas the depreciation allowance of the company increased by 12% to Rs 51.54 crore during the full year. Thus the profit before tax before EO increased by 29% to Rs 169.73 crore as compared to the previous year.

The was an extraordinary expense of Rs 2.76 crore during the year, which included brand launching expenses of Rs 2.10 crore and amortization of VRS expenses paid to the tune of Rs 66 lakh. Thus the profit before tax after EO increased by 29% to Rs 166.97 crore as compared to the previous year.

Effective tax rate increased by 600 bps thus the net profit increased by 18% to Rs 108.95 crore as compared to the same period last year.

Chemicals:

The Chemicals business constitutes a major 72% of the total revenue of the company during the quarter ended March 2008. The revenue from the chemicals business grew by 48% to Rs 241.50 crore during the quarter as compared to the same period last year.

The sales of the chemicals manufactured by the company grew by 35% whereas the traded chemicals business grew by 184% during the quarter. The profit from the segment during the quarter also improved significantly by 42% to Rs 62.35 crore as compared to the corresponding quarter of the previous year.

For the full year ended March 2008 the Chemicals segment business grew by 36% to Rs 760.92 crore.

Fertilizers:

The fertilizers segment of the business constituted 27% of the total revenue during the quarter ended March 2008. The revenue from this segment increased by 72% to Rs 90.56 crore mainly constituting traded fertilizers whose revenue increased by 128% to Rs 87.65 crore during the quarter.

The price of the major input required by the company for manufacturing nitro phosphate fertilizers has been increasing steadily during the past several months, which has in turn put a lot of pressure on the operating margins. Added to this the delay in getting subsidy payment has been the bane for the company for its fertilizer business. Thus the segment posted a gross loss of Rs 29 lakh during the quarter under review.

Realty:

The retail business, Ishanya, commenced commercial operation to the extent operationalised thus registering revenue of Rs 2.67 crore during the quarter as compared to the same period last year. The profitability from the division during the quarter was Rs 97 lakh.

 The Dahej-Uran pipeline has been commissioned and the company has bought small quantity of LNG from Shell to test the pipeline. The company is looking for long-term gas supply contract with major players to increase production capacity utilization.

Presently the company gets gas from Gail under the administered price mechanism to the tune of 0.6-0.7 million British thermal unit (mBtu) as against its total requirement of one mBtu. Adequately availability of gas will increase the production of both the chemicals and the fertilizer units.

The promoters’ stake stands at 42% as at the end of March 2008.

The company has declared a dividend at the rate of 35% for the year ended 31 March 2008.

The scrip is currently trading at around Rs 106 per equity share on the BSE.