Capitaline

Analyst Meet / AGM 30-May-08

Conference Call

India Glycols

Capex of Rs 350 crore in FY ‘09

India Glycols held a conference call on May 29 2008 to discuss the financial results for the quarter ended March 2008 and future prospects of the company.
Highlights of the Concall

For the quarter ended March 2008 the company reported 62% increase in net sales at Rs 338.66 crore compared to corresponding previous year period. The operating margins of the company improved a massive 1640 bps to 19.9% leading a 812% rise in operating profits at Rs 67.25 crore. The bottomline of the company stood at Rs 27.13 crore compared to a loss of Rs 1.89 crore in corresponding previous quarter.

For the year ended March 2008 the company reported 48% increase in net sales at Rs 1303.92 crore compared to corresponding previous year period. The operating margins of the company improved a massive 1180 bps to 23.2% leading to 201% rise in operating profits at Rs 302.33 crore. The bottomline of the company improved 335% at Rs 178.53 crore compared corresponding previous quarter.

India Glycols (IGL) is engaged in the manufacture of glycols, ethoxylates and performance chemicals, glycol ethers and acetates, ethyl alcohol (potable), and guar gum powder, and derivatives and industrial gases. The company's principal activity is the manufacture and sale of chemicals and it operates in three segments: Chemicals, Liquor and Others. Liquor segment includes ethyl alcohol potable and extra natural alcohol. Other segment includes high sulphur alcohol, hydro choleric acid, guar gum, industrial gases etc. The Group is in the process of further diversifying in the field of manufacturing and marketing of carbon di-oxide (CO2).

During the quarter, the company acquired a controlling stake in Shakumbari Sugar & Allied Industries at a consolidated price of Rs.47 Crore. Shakumbari Sugar & Allied Industries at present has a crushing capacity of 3200 Tonnes per Day (TCD) along with a modern distillery of 40 kilo litre per day (KLPD). India Glycols is the largest producer of ethanol in the country, with this acquisition; the company would be vertically integrated to captively produce additional ethanol requirements. India Glycols would be going to further enhance the capacity of this unit from 3200 TCD to 8000 TCD whereas the distillery’s capacity would be expanded to 300 KLPD from the present 40 KLPD for making ethanol from molasses /sugarcane juice.

The company is de-bottlenecking its MEG capacity by 20% with an estimated investment of Rs.25 crore. With the proposed de-bottlenecking the overall production of MEG will be increased by 20%. The expansion is being done at an extremely attractive payback period given the brownfield nature of the project. The Company is also proposing to change the catalyst in May 2008.

The company has recently diversified into the field of Herbal Extraction through 100% Export Oriented Unit (EOU) at Dehradun, Uttarakhand to meet the requirement of growing international market for high value Nutraceutical Herbal Extracts having utility in the pharmaceuticals, food and food supplements. This initiative would bring in significant increase in the margins of the company going forward. The Nutraceutical Herbal Extraction Plant will be commissioned in May, 2008.

The company is also purifying Carbon Di-oxide (CO2) a by-product produced in the distillery, both at its Kashipur and Gorakhpur units which has application in food, beverage and other industrial usage. CO2 plants at both distilleries will be commissioned in March, 2008.

The company has also established its subsidiary in Singapore to augment its activities in South Eastern Asian region and other related areas.

India Glycols is building 270000 sq ft of commercial space in Noida for which nit is planning to lease nearly 200,000 sq ft and keep the remaining for its own corporate office. The company expects a income of Rs 16-18 crore every year from rental income. It is expected to start coming in next six months.

The total debt position stands at Rs 550 crore including working capital loan of Rs 165 crore as on 31 March 2008.

The current domestic demand of MEG stands around 11.6 million tonne with total domestic supplies of around 9 million tonne and the rest being imported.

The domestic prices of MEG in India are generally 8-10% higher than the landed import cost of MEG.

MEG formed 49% of the total revenues of India Glycols for FY’08, EOD (Ethylene Oxide derivatives) formed 33%, portable alcohol formed 12% and 6% formed others. In volume terms total glycol production (inclusive of MEG, DEG, TEG) was 130 thousand tonne, EOD was 74 thousand tonne and portable alcohol 3400 tonne.

1.4 Kilo litre of alcohol is required to produce 1 tonne of MEG while 1.85 KL of alcohol is required to produce 1 tonne of ethylene oxide.

The company did a capex of Rs 125 crore in FY ’08 and plans to do capex of Rs 350 crore in FY ’09. For FY ’09 capex Rs 200 crore shall go in expansion of production capacity of sugar mill for which 40% shall be financed from HDL ( a sugar development fund which gives loans at lower interest rate), 40% from institution and the rest being from internal accruals.

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