Eic Analysis Of "chemical Industry"

EIC ANALYSIS CHEMICAL INDUSTRY ECONOMY

INDUSTRY

COMPANY

CONTENTS ECONOMY RELATED FACTORS

INDUSTRY RELATED FACTORS

•Growth Rates •Interest Rates •Inflation •BOP, Foreign Trade •Exchange Rates •Savings & Investments •Demographic Data •Monsoon

•PLC •Demand & Supply •Barriers to Entry •Market for the Products •Supply of inputs •Government Attitude •Other Details

FIRM SPECIFIC ANALYSIS • Company Details • Technical and Fundamental Analysis • Common Size Statements • Ratio Analysis • Trend Analysis

Growth RatesIndex of Industrial Production (IIP)

GDP 2006-07 2007-08

AGRICULTURE -

4.5 %

3.8%

INDUSTRY -

8.1%

10.6%

SERVICES -

10.7%

11.2%

April-May 2008 – rose by 5.0% April-May 2007 – rose by 10.9%

INFLATION AUGUST 2008 – 12.6% JULY 2008 – 11.89% MAR. 2008 – 7.75% MAR. 2007 – 4.76%

As on 18th Sep. 2008 – 12.1 %

INTEREST RATES Bank Rate- 6.00% Repo Rate – 9.00% Reverse Repo – 6.00% PLR : 12.75%-13.25% Savings Bank Rate : 3.5% Deposit Rate : 7.50%-9.60%

RESERVE RATIOS CRR – 9.00% SLR- 25.00%

Balance of Payments Merchandise Exports – rose by 23.7% as against 21.8% in 2006-07

Forex Reserves - US $ 309.7 billion at end-March 2008. FOREIGN TRADE

Exports – 21.7 % against 24.2% (as a % of GDP) Imports – 31.8% against 37.9%(as a % of GDP).

Exchange Rates – March 2008 – INR 39.97 / USD July 8 “ – INR 43.37 / USD July 25 “ - INR 42.23 / USD Rupee depreciated against upto July 2008 USD – 5.4% EURO – 5.0% POUND STERLING – 5.2% JPY – 1.3 %

As on 18th Sep., 2008 INR / 1 USD : 46.3400 INR / 1 EURO : 65.8200 INR / 100 Jap YEN : 43.6900 INR / 1 Pound Sterling : 82.9600

MARKET TREND (as on 18th Sep. 2008) • BSE Sensex : 13518.80 • S&P CNX Nifty : 4074.90

 MONSOON • Up to July 23, 2008 -cumulative rainfall 98% • June-September – forecasted to be 100 % by India Meteorological Department (IMD)

 DEMOGRAPHICS Population as on 1st Mar. 2001- 1,027,015,247 Male - 531,277,078 Female - 495,738,169 Most Populous State – Uttar Pradesh Least Populous State – Sikkim Highest Density – Delhi with 9,294 persons / sq. km Lowest Density- Arunachal Pradesh 13 persons / sq. km Sex Ratio – 933 females over 1000 males Literacy Rate – 65%.

Chemical Industry –  Includes manufacture and/or distribute chemicals including basic, intermediate and specialty chemicals, plastic resins and materials used in synthetic fibers, paints and coatings  Currently producing 70000 products.  Products Classification – • • • • • • • •

Inorganic Organic (commodity) chemicals, Drugs and pharmaceuticals, Plastics and petrochemicals, Dyes and pigments, Fine and specialty chemicals, Pesticides and agrochemicals, and Fertilizers.

COMPOSITION- Current & Projected

C o m p o s i t i o n O f I n d i a n C h e m i c a lC I no dm ups ot rsyi t -i o2 n0 0( P6 r o j e c t e d ) O f I n d

18%

25%

25%

57%

B A S IC

B A S IC

S P E C IA L T Y

SPEC

K NO W LW DG E

23%

52%

KNO W

Product Life Cycle Chemical Industry

Overview • • • • • • •

Total Investment – US$60 billion Contribution to GDP – 3% Share in Exports – 13-14% Imports – 8 – 9% 12th largest in World (In terms of Volume) 3rd Largest in Asia Per capita consumption in India – 1/10th of world average • Global chemical Indus. – US$ 1.7 trillion • One of the fastest growing Industry in India • Average growth rate 12.5%

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en l ze ne S od a As h S co W oo ot er le s n P F as ab se ric ng s er C ar C ig s ar re V tte A is ir co s se Co o S ta lers pl e Fi br e

B

M et

S

a

re a

Te

U

X M yl ac en hi ne e To ol s C e C m au en st t ic So da

Herfindahl Index

Key Features• Fragmented and dispersed - multi product and multi faceted. A Fragemented Chemical Industry in India

9 8 7 6 5 4 3 2 1 0

Industry

Key Features • Chemicals sold directly to large customers and through distribution channels.

• Annual Turnover Rs. 90,000 crore (approx.) • 1/3rd contribution by 3 main sub-sectors – basic chemicals, petrochemicals and pharmaceuticals.

Role of Government •

INPUT COSTS

•

REVOLUTIONIZING THE POWER SECTOR

•

INFRASTRUCTURE IMPROVEMENT

•

PCPIRs

•

R&D

•

FINANCIAL ASSISTANCE

•

EXPORT PROMOTION

•

ENVIRONMENT RELATED ISSUES

•

AMENDMENT IN LABOR LAWS

SWOT FRAMEWORK ANALYSIS OF INDIAN CHEMICAL INDUSTRY STRENGTHS

• Diversified Manufacturing Base • Vibrant downstream industries in different segments • Competitive core industries • Capability to produce world-class end products

STRENGTHS • Strong presence in the export market in sub-segments • Large domestic market • Major raw material component sources within the country • Good R&D base

WEAKNESSES • INFRASTUCTURE • COST DISADVANTAGES

Percentage of Net Sales

C ost D isadvantages - India vs. Other D eveloping C ountries 4.5 4 3.5 India

3 2.5 2 1.5

China T hailand Indonesia

1 0.5 0 Power

Interest

Local T axes

Name o f th e Co u n try

Import Duties

WEAKNESSES • SCALE OF PRODUCTION • TECHNOLOGY • MULTIPLICITY OF TAXES • LABOR LAWS

OPPORTUNITIES •

Challenge to compete globally by concentrating on weaknesses

•

Markets in the developed countries

•

A large number of products going off patent.

•

Advantages in certain categories can be used for boosting exports.

•

Close to middle-east- cheaper and abundant source for petrochemicals feedstock.

OPPORTUNITIES • Stringent environmental laws in the western countries • Climatic conditions in India • Competencies to utilize renewable resources • Competency to emerge as a global player in the area of Specialty chemicals.

THREATS • Imports of chemicals, intermediates and end products • Tariff levels for chemicals • Greater competition due to • Chinese products • Bilateral/multilateral trade agreements • The labor laws, power supply and infrastructure facilities

Growth Imperatives Imperatives

Degree of relevance Basic

Specialty

Knowledge

Aggressive growth strategies Stimulated demand Access to global markets Invest in new areas

Medium

Medium

High

Consolidation

High

High

High

Research & Development (R&D)

Low

Medium

High

Medium

Low

High

Medium

Cost reduction Operational Financial Collaboration Clusters Co-opetition Institutional interaction

High

Low

Firm Specific Analysis- BASF Ltd. • Started in India in 1943, • when it acquired shares of R. A. Cole Private Limited • Indoplast Limited in January 1963 •

BASF India Limited in September 1967.

• Public limited listed company • Subsidiary of BASF Aktiengesellschaft, Germany. • Prasad Chandran- Chairman and Managing director

At present, the BASF Group in India is represented by the following companies: • BASF India Limited • BASF Coatings Private Limited • BASF Styrenics Private Limited • BASF Polyurethanes India Limited • BASF Construction Chemicals (India) Private Limited • BASF Catalyst India Private Limited • BASF Asia Pacific (India) Private Limited

Activities & Products • Offers innovative, hi-tech and safe solutions • Tanning agents, • Leather chemicals and auxiliaries, • Crop protection chemicals, • Textile chemicals, • Dispersions and specialty chemicals,

Products • Plastics, automotive and coil coatings, catalysts, construction chemicals, polystyrene and polyurethane systems. • Strong manufacturing and R&D base, • >1300 employees multi-location production sites and an R&D centre, • Global Technology Platform

BASF- FINANCIALS • NETWORTH – Rs. 339.68 Cr. • BOOKVALUE – Rs. 120.50 Cr. • P/E – 9.47 • TURNOVER – Rs. 1031.86 Cr. • PAT – Rs. 59.37 Cr. • Market Capitalization – Rs. 720.82 Cr.

TECHNICAL ANALYSIS B A S F v s . S e n s e x (J a n 2 0 0 8 to S e p .

270

350

265

300

260

250

BASF

255

Sensex

Index

Index

B A S F v s . S e n s e x a s o n 1 8 th S e p ., 2 0 0 8

200

BASF

150

S ensex

250

100

245

50

240

0

1 2 3 4 5 6 7 8 9 10 1112 T im e

1

2

3

4

5 D a te

6

7

8

9

270

350

265

300

260

250

BASF

255

N i ft y

250

Index

Index

B A S F v s . N if t y a s o n 1 8 t h S e p ., 2 0 0 8 . B A S F v s . N ifty (J a n 2 0 0 8 - S e p . 2 0 0 8

200

BASF

150

N ift y

100

245

50

240

0

1 2 3 4 5 6 7 8 9 101112

1 2 3 4 5 6 7 8 9

T im e

D a te

RATIO ANALYSIS • ROE – Trend - ROE 0.18 0.16 0.14 0.12 0.1 ROE 0.08 0.06 0.04 0.02 0

Series1

1

2

3 Years

4

5

• ROTA T re n d - R O T A (0 4 -0 8 ) 0 .1 8 0 .1 6 0 .1 4 0 .1 2 0 .1 ROTA 0 .0 8 0 .0 6 0 .0 4 0 .0 2 0

T re n d - R O N A (0 4 - 0 8 ) 0 .3 0 .2 5 0 .2

S e rie s 1 R O N 0A. 1 5 S e rie s 2 0 .1 S e rie s 3 0 .0 5 1

2

3 Y e a rs

4

5

0

S e r ie s 1

1

2

3 Ye a rs

4

5

EBIT

SALES

T R E N D A n a ly s is - E B IT (0 4 -0 8 )

TREND Analysis - Sales (04-08) 1200

120

1000

100

800

80

Sale s 600

EB IT 60 Series1

400

20

200 0

S eries 1

40

0 1

2

3

4

5

1

2

3

Current Assets

PAT

T R E N D A n a ly s is - C A (0 4 -0 8 )

TREND Analysis - PAT (04-08) 60 50 40 PAT 30 Series1

20 10 1

2

3 Years

5

Ye a rs

Ye ars

0

4

4

5

295 290 285 280 275 C A 270 265 260 255 250 245

S eries 1

1

2

3 Ye a rs

4

5

TOTAL ASSETS

CURRENT LIABILITIES TREND Analysis - CL (04-08)

TREND Analysis - TA (04-08)

160

350

140

300

120 100

250

CL 80

TA Series1

60

150

Series1

100

40 20 0

200

50 1

2

3

4

0

5

1

2

3

Yea rs

4

Years

DIVIDEND

NETWORTH TREND Analysis - NW (04-08)

TREND Analysis - Dividend (04-08)

350 300 250 NW

200 150

Series1

100 50 0

1

2

3 Years

5

4

5

20 19.5 19 18.5 18 Dividend 17.5 17 16.5 16 15.5

Series1

1

2

3 Yea rs

4

5

Conclusion • Consistent Trend • Increasing Returns • Profitable

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