Balaji Amines

Balaji Amines Ltd (BAL) is one of the largest Amines & Amine derivatives player in India. This field is limited to a handful of players as the technology is not freely available. Over the years, BAL has been developing newer products and technologies to maintain its leadership position, through its in-house R&D department. As of now, BAL is one of the lowest cost producer in the industry.

Methlyamine (20,000 MTPA) and Ethylamine (6,000 MTPA) are their core products and with leadership position, the earnings from these products remain stable. Over the last 4-5 years, the co has been doing a lot of R&D to develop new high potential products. Here is a snapshot of the R&D expenses:

R&D Expenditure (Cr.) 2005 2006 2007 2008 2009 2010
Capital Exp 0.00 5.90 2.97 4.19 16.03 6.22
Revenue Exp 0.14 1.12 1.37 0.54 0.00 2.78
Total 0.14 7.02 4.34 4.73 16.03 9.00

New Products are – NMP, Morpholine, PVP etc. Among these, NMP & Morpholine have started doing well and BAL has plans to triple the capacity (in phases) of NMP by the end of this year. PVP is a high potential, high margin product and the company has been able to break into the monopoly of international players like BASF, Huntsman etc. BAL is waiting for regulatory approvals like EU – GMP, USFDA etc to market the product and scale up production. If successful, it can be a big trigger as the margins will be very high in this segment.

BAL caters majorly to the Pharma industry and has relationship with some of the leading players like – Sun Pharma, Ranbaxy, Matrix etc. It also supplies to Agro Chemicals, Refineries, Rubber etc industries.

Good Past track record:

  • From a modest beginning, the company has come a long way. The turnover has grown consistently at CAGR of 27.61% over last 11 years from 23 Cr turnover in 2000 to 262 Cr turnover in 2010.
  • The profitability has had a similar strong growth.
  • Over the years company has become backward integrated by way of in-house R&D.

Future Growth triggers:

  • Major expansion in the capacity of NMP is coming up by the year end. BAL is expanding the capacity from 6000 MT to 22000 MT.
  • Company has a good land parcel in centre of Solapur. Company is in process of setting up a 4 Star hotel with 100 rooms and use the additional land for corporate office purpose.
  • BAL is trying to get mandatory approvals for commercial exploitation of its new product – PVP which has high potential.
  • BAL has also planned a major expansion of its core product – Methyl & Ethyl amine.

Valuations:

  • After going through consolidation phase during 2008-2009, the company is back to growth phase and is expecting to @ 35% to 350 Cr turnover.
  • BAL may be able to do an EPS of over 40 this year and stock is available at 6 times expected earning.
  • The company has a BV of 140.
  • For FY 2012, BAL may very well do a turnover of over 500 Cr.
  • The company has announced stock split from Rs 10 to 2.

Risks:

  • The company has a high debt and as the company has announced a hotel project, the debt may increase further and put pressure on earnings.
  • Chemical industry can have volatile phases hence giving lumpy earnings.

Valuation Sheets:

Complete Financials and analysis

Company Website

22 thoughts on “Balaji Amines”

    1. Hi Rajan,

      As the quarterly nos of the both the cos are below expectations, the bullishness goes away for short term.

      Fundamentally both are good cos for medium to long term.

      Regards,

  1. Hi Ayush,
    Is there a website from which I can get the last 10 years annual reports? I only see the last 4-5 years annual report on their website. Can you please help.

    I also searched for last few years annual reports for Pondy oxide’s on their website but could not find it. How do I research a company’s history and get their financial statements for the last 5-10 years.

    Is there a single website from which you get your reports? I find it difficult to get annual reports and I am even willing to pay if there is a paid service for such reports. Please let me know.

    Thanks

  2. In the valuation Image you had attached you had given; the date behind the ‘CMP’ is showing (10-Aug-07). Is this valuation was done in August. At that time the CMP is around 180 (as shown in valuation sheet) but its current CMP is around 240. Can we buy this stock now?

    1. Hi sir,
      Happy Diwali . I am big fan of your value picks . Can you please give me advise on HB Portfolio Ltd .

      At current price of around Rs. 42 market cap of HB Portfolio Ltd. is around 50 crores. As per annual report 2010 company has Cash & Bank Balances more that 14 crores(Precisely Rs 140643338) on consolidated balance sheet . You can access annual report from company’s website.So effective market cap after reducing cash is 36 cr. Company does not have any debt .Can you imaging how much stocks and mutual fund unit this company hold ? As on 31st march 2010 value of stock portfolio is 185 cr (Rs 185,13,13,967) and mutual fund units of 10 crores (Rs 9,98,89,044) . Company is also having unquoted investment worth 39.29 crores (Rs 392897303) in associates companies at book value. For more details refer blog http://value2wealth.blogspot.com/ .

      1. Hi Mahendra,

        Thanks for your appreciation. Yes, we have tracked HB group stocks and they do hold value….had invested in some of them earlier.

        Have a look at BNK Capital also…it also has value if investments at almost 5 times its current M Cap.

        All the best for your blog.

        Regards,

        1. Dear Ayush,
          I found HB portfolio very interesting investment case. I would like to know from you…what is your general opinion on such investment holding companies.And What is the experience of either you or general investors investing in such companies/opportunities. Are they considered reliable investment opportunities? Can common lay investor like me look at these.

          Regards,
          Girish

    2. Hi Praveen,

      I have been tracking this company from about 150-160 levels and had prepared the sheet at 180 levels hence that price is mentioned. The date is irrelevant.

      There is scope over long term at current prices also.

      Regards,

  3. Hi Ayush …On Balaji Amines….company had PAT of Rs20cr in FY10 and had capitalized Rs14cr of R&D expense….If this R&D had been expensed PAT would have been Rs6cr only..Does this sort of accounting trick inspire confidence in management? and does the company still remain cheap after adjusting for R&D expense capitalization?….Atul

    1. Hi Atul,

      As per accounting standards and practices, none of the cos expense their R&D expense at one go…its better to spread the expenditure over next 5 years.

      Yes, i would be happier if the co is aggressive in charging off the R&D expenses.

      Regards,

  4. Hi Ayush,

    Could you please let me know from where did you get the below information:

    1. Major expansion in the capacity of NMP is coming up by the year end. BAL is expanding the capacity from 6000 MT to 22000 MT.
    2. BAL has also planned a major expansion of its core product – Methyl & Ethyl amine.

    Are these expansion on track?

    Please advise.

    Regards,
    Manmohan

      1. Thanks for the reply.

        During your interaction with Management, did u find any reason for diversifying into hotel business given the below facts:
        a. Core business is doing well and they have plans of really huge expansion
        b. Already have a high debt on their book
        c. Experience in Chemical business may not be handy in hospitality business

        Regards,
        Manmohan

        1. Hi,

          The hotel project is not a diversification move. They had a land bank at a good location in Solapur….the city has developed well and lots of industries are coming up in the area hence there is a need for good corporate budget hotels. Hence they are going into Hotel.

          Yes, debt will remain a concern.

          They won’t be operating the hotel themselves. They have tied up with Sarovar group to manage the same. Yes, there might be a negative impact in the initial few months due to the starting of the hotel but the same shouldn’t be a major drag. Lets see how things shape up.

          Regards,

  5. Hi Ayush,

    Great work like always, I picked up ABC BEARING and BALAJI AMINES at 130 and 41. Planning to hold for at least a year and depending on the updates may be even more may be for 5 + years. depending on the dividend and growth.

    One small query would you update us when you think its right time to book profits?

    Thanks
    Vikrant

    1. Hi Vikrant,

      Yeah, thats the way. but and hold for long term gains. In between monitor the performances and prices to take actions, if needed.

      We try giving an update if there is a major change.

      Regards,

      1. Hi Ayush,

        If you have any specific questions on Balaji Anines, plz let me know. Will try and find out as i belong to the near by region.

        Regards,
        Manmohan.

  6. Hello Ayush and Pratyush,

    I have come to know about this blog some 3 weeks back and I am impressed with your work.

    just would like to highlight with regards to Balaji Amines

    key raw material Methanol prices are up
    margins could fall going forward

    I don’t know much about the company but
    capacity utilization and capacity addition could help bridge the gap at net profit level

    Regards,
    Excel

      1. Updates10-Apr-2012

        Balaji Amines Limited has
        informed the Exchange that the Company have fully commissioned its
        Chemical Plant on March 15, 2012 for the manufacture of Methyl Amines
        (Mono-Di-Tri) with the capacity of 100 M.T. per day.

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