Trading and Distribution Companies November 9, 2012 CMP Rs. 7.0 BSE Code 524614 BSE ID INDXTRA High/Low 1Y (Rs.) 11.4/ 5.6 Average Volume (3M) 452 Market Cap (Rs. Cr.) 2 Shareholding % Sept-12 Jun-12 Promoters 65.57 65.57 DIIs # 0.49 0.49 FIIs # - - Public & Others 33.94 33.94 Stock Chart ( Relative to Sensex) 115 90 65 40 15-Nov-11 13-May-12 09-Nov-12 Indian Extractions Ltd. Sensex Stock Performance (%) 1M 6M 1Yr Indian Extractions Ltd. - 7.1-39.0 Sensex - 8.0 10.7 Financials FY10 FY11 FY12 Revenue 80.7 83.2 9.8 Y-o-Y 15.5% 3.0% -88.2% EBITDA -0.6-0.9-0.9 Y-o-Y PL NA NA Net Profit -3.1 0.5 0.0 Y-o-Y 124.1% LP -91.1% EPS (Dil.) -9.19 1.47 0.13 EBITDA Margin - - - Net Profit Margin - 0.6% 0.4% P/E(x) - 4.7x 53.6x Financial year ends at March 31. All figures in Rs. crore except for per share data # FIIs- Foreign Institutional Investors Indian Extractions Ltd. Company Overview Incorporated in February 1956 as a private limited company, Indian Extractions Ltd. is the flagship company of well diversified and established Nanavati Group. The company was promoted by Late R. M. Nanavati and Shri Shantilal B. Jhaveri. The company started with the business of manufacturing edible oils and de-oiled cakes. Initially, it set up a solvent extraction plant at Jamnagar, Gujarat with an installed capacity to process 50 MT of de-oiled cakes per day. Subsequently, the capacity was expanded to 300 MT per day and has also been upgraded to become a multi-crop extraction facility, capable of using inputs of groundnut, rapeseed and soyabean. The company enjoyed a well-established domestic market for refined solvent extracted groundnut and rapeseed oil. However in FY12, the company decided permanently to exit from its core business of solvent extraction and refinery, given the challenging business scenario. It has now decided to focus completely on the business of chemicals export, trading in commodities, warehousing, trading in deoiled cakes and groundnut seeds. Company Fundamentals Revenue impacted During FY12, the revenue of the company witnessed a sharp fall of 88.2% Year-on-Year (Y-o-Y) at Rs. 9.8 crore. The solvent extraction industry has faced another difficult year in FY12 and the company was not an exception. During the year, the company was not able to process any solvent extractions and edible oil due to non-availability of feedstock and nonviability of business compared to 5,557 MT of solvent extractions and 6,106 MT of edible oil, processed in the previous year. The company has also sold its stock and carried out chemical exports, which supported the company to continue operations. Operating margin in red The EBITDA margin sunk deeper in FY12 due to insignificant plant utilization of extraction plant, which was the core business of the company, thin margins in the edible oil refining business and adverse market conditions. Positive net profit margin sustained Despite the operating losses suffered by the company in FY11 and FY12, the company recorded net profit against the net loss posted in the earlier two financial years. This can be attributed to the exceptional item on sale of land of Rs. 3.8 crore in FY11 and Rs. 2.5 crore in FY12. Key Strengths Made effort to sustain the top-line through trading # DIIs- Domestic Institutional Investors PL-Profit to loss LP-Loss to Profit NA-De-growth due to loss in both the years Initiative of the BSE Investors Protection Fund -1-
Company Business Incorporated in 1956, Indian Extractions Ltd. (IEL) commenced with serving the needs of people through branded solvent extracted refined groundnut oils and refined edible oils. Till FY11 it also catered to cattle feed industry by supplying de-oiled cakes. The company use to process groundnut/rapeseed oil cakes and derives deoiled cakes and refined edible oils. It expanded and upgraded its solvent extraction plant in to a multi crop extraction facility. The company later on enhanced it s refinery capacity. During the year 1999-2000, the company sold its chemical division at Vapi, which it had setup for venturing into the field of organic chemicals and dye intermediates. It was set up for manufacturing nitrochloro anilines with an installed capacity of 100 MT p.a. and subsequently increased to 180 tpa. The company later shifted the focus to its core business. Recently the company also tappend into trading of chemicals and commodity which delivered favourable results in terms of turnover and margins during FY10 and FY11. Product Mix De-oiled Cakes Groundnut de-oiled cake Rapeseed de-oiled cake Soyabean de-oiled cake Edible oils Solvent extracted Refined oil (Groundnut, Rapeseed, Soyaseed) Expeller Refined oil (Groundnut, Rapeseed, Cotton seed) Refined Palm oil Source: Company Annual report Revenue Break-up Total Revenue Break-up_FY10 3.3% 2.1% 0.5% Total Revenue Break-up_FY11 0.5% 6.3% 16.0% 7.0% De-oiled Cakes Solvent Extracted Oils Revenue Break-up_FY12 30.2% 46.6% 61.5% 17.3% 8.7% Expeller Oils Refined/Soyabean Degummed Oil Copper Scrap Seeds Phthalic Anhydride 100.0 % Trading of goods Note: Components of revenue break-up of FY10 is similar to FY11 After successfully running the business of solvent extraction and refinery for more than five decades, the company now finds it difficult to operate amidst several adverse factors affecting the solvent extractions industry in India. The various factors which have been posing challenges to the solvent extraction and refinery operations of the company for the last couple of years include low availability of groundnut crops, disparity in the pricing, volatile foreign exchange, low availability of feedstock, bumper crop production in U.S., Brazil, Argentina, etc, resulting into supply at a below cost price in the international market, etc, Indian Government s policy to permit huge import of refined oil from neighboring countries, farmers preference for other crop over groundnut, etc. All these adverse factors have resulted into very limited plant utilizations during last couple of years. Considering the long-term sustainability, the company decided to exit permanently from the manufacturing business of solvent extraction and refinery in FY12. It has now decided to focus completely on the business of chemicals export, trading in commodities, warehousing, trading in de-oiled cakes and groundnut seeds. Initiative of the BSE Investors Protection Fund -2-
Industry Overview Oilseeds and edible oils, two of the most sensitive essential commodities, hold considerable significance in the Indian economy. India is one of the largest producers of oilseeds in the world. A wide range of oilseeds crops are grown in different agro-climatic zones of India. The major oilseeds sources used for obtaining edible and nonedible grade oils include groundnut, mustard/rapeseed, sesame, soyabean, sunflower, safflower, linseed, nigerseed and castor. The secondary sources are coconut, cottonseed, rice bran, solvent extracted oils from tree and forest origin. Besides oils, several byproducts such as de-oiled cakes, oil meals and other minor oil products are obtained at the time of processing oilseeds, which also hold high economic value. Edible oils constitute an important component of food expenditure in Indian households. The demand for edible oils in India has grown steadily at a CAGR of 4.4% over the period from 2001 to 2011. The rising income levels and living standards have led to improvement in per capita consumption, which in turn, drove the demand for edible oils. However, compared to the demand growth for edible oils, the domestic oil and oilseed production have remained largely stagnant. This is due to low productivity in under-irrigated areas and shifting of acreage from oilseeds to other crops. As a result, a demand-supply gap has emerged which has been met through imports, further incentivized by a sharp cut in import duties. In recent times, the Indian Government has reduced the duty on oilcakes from 15% to nil in an attempt to ** increase the supply of feed ingredients and thereby checking price rises caused by inadequate supply. The Indian edible oil industry is highly fragmented, with a large number of participants present in both organised and unorganised sectors. This has resulted in severe competition and thin profit margins. Further, the profitability of market participants has also been vulnerable to risks, emanating from weak harvests; commodity price volatility and forex movements. * Status of the Vegetable Oil Industry in India as of November 19, 2012 Type of Vegetable Oil Industry No. Of Units Annual Capacity (Lakh MT) Average Capacity Utilisation Oilseed Crushing Units 1,50,000 (Approx) 425 (in terms of Seeds) 10-30% Solvent Extraction Units 795 419 (in terms of Oil-bearing Material) 34% Refineries attached with Vanaspati Units 127 51 (in terms of oil) 45% Refineries attached with Solvent Units 226 37 (in terms of oil) 29% Independent Refineries 590 35 (in terms of oil) 36% Total Refineries 943 123 (in terms of oil) 37% Vanaspati Units 268 58 (in terms of Vanaspati, Bakery Shortening & Margarine) 19% Source: Directorate of Vanaspati, Vegetable Oil and Fats. *Source: ICRA Report dated July 2011 ** Solvent Extractors Association of India Competitor Analysis We have compared Indian Extractions Ltd. with its closest peers in the domestic market. Company Year End CMP M Cap Revenue EBIT Margin EPS P/E Indian Extractions Ltd. Mar-12 7.0 2.0 9.8-0.13 53.6x Wadala Commodities Ltd. Mar-12 4.4 10.0 0.3 5.9% - - Source: Capitaline, BSE, Market cap and Revenue in Rs. crore. CMP as on 9 Nov 12 Initiative of the BSE Investors Protection Fund -3-
Summary Financials Particulars (Rs. Crore) FY10 FY11 FY12 Revenue from Operations 80.38 82.85 9.17 Other Op. Revenue 0.36 0.33 0.63 Total Revenue 80.74 83.18 9.80 Growth (%) 15.5% 3.0% -88.2% Cost of Goods Sold -77.54-78.59-9.23 Gross Profit 3.20 4.59 0.56 Employee Cost -1.42-0.96-0.51 Other Expenditure -2.43-4.51-0.94 EBITDA -0.64-0.88-0.89 Growth (%) PL NA NA Depreciation -0.68-0.70-0.21 EBIT Profit -1.32-1.58-1.10 Finance Cost -2.18-2.24-2.06 Other Income 0.43 0.46 0.08 Exceptional Items 0.00 3.85 3.13 PBT -3.07 0.49 0.04 Growth (%) NA LP -91.1% Income Tax 0.00 0.00 0.00 Profit after Tax -3.07 0.49 0.04 Extra Ordinary Items 0.00 0.00 0.00 Net Profit -3.07 0.49 0.04 Growth (%) NA LP -91.1% Rep. Basic EPS -9.19 1.47 0.13 Rep. Diluted EPS -9.19 1.47 0.13 Equity Capital 3.34 3.34 4.24 Face value 10 10 10 PL-Profit to loss, LP- Loss to profit NA-De-growth due to loss in both years Ratio Analysis FY10 FY11 FY12 Margins EBITDA Margin (%) - - - Net Profit Margin (%) - 0.59% 0.45% Valuation P/E (x) 4.74 53.62 P/BV (x) 0.12 0.19 0.47 Profitability ROCE (%) -^ -11.22% -16.06% RONW (%) -16.04% 4.06% 0.70% Solvency Ratio Deb/ Equity Ratio (x) 1.10 1.40 1.42 Interest Cover (x) - - - ^ Bifurcation between Long Term and Short Term Debt is not available Initiative of the BSE Investors Protection Fund -4-
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