Prominent player in the green chemistry space…
About the Company: Fine Organic Industries Ltd (FOIL) manufactures a comprehensive range of plant-based, oleochemical-derived specialty additives used across industries such as foods, plastics, cosmetics, coatings among others.
• It owns seven manufacturing facilities located at Ambernath, Badlapur, Dombivli and Patalganga.
• The company has recently acquired ~ 30-acre site at the Jawaharlal Nehru Port Authority Special Economic Zone (JNPA SEZ) in Mumbai to support future capacity expansion to target exports.
Investment Rationale:
• Strong pedigree in oleo chemistry additives to the fore: The company’s expertise centres on oleo chemistry (plant based green chemicals) which provides both demand tailwinds and product differentiation versus petrochemical alternatives. FOIL enjoys early mover advantage in these segments as the world is still on the learning curve with regards to the adoption of green additives. Globally, there are only handful of transnational players in these categories. The company enjoys almost monopoly in India. Specialised nature of the business, customer stickiness and +50 years of experience provide high barriers to entry.
• Strong positioning in the food and plastic additives market: With decades of experience in food additives manufacturing and marketing, FOIL has established itself as a trusted partner for the food industry. The portfolio includes specialised food emulsifiers that help to prevent spoilage, improve texture and ensure product stability and quality. In plastics, the company provides advanced polymer additives that enhance performance, sustainability, and efficiency. The product range includes slip additives for friction reduction, anti-blocking additives, anti-static agents for safer handling, filler and pigment dispersants and anti-fog additives for clear agricultural and food packaging films. The company’s revenues are highly diversified as the largest customer contributes just ~3-4% to its revenues.
• Fresh capacity expansion to power the next leg of growth: The company will be undertaking a significant capex to address the expected stagnancy in revenues in FY26 / FY27 due to capacity constraints in core plants. This includes ₹750 crore at JNPA SEZ. This facility is expected to start commercial production within ~18-24 months. Moreover, the company’s wholly owned subsidiary in the US has acquired ~160 acres of land in South Carolina, where it plans to establish a greenfield capacity with an aim to establish a strong foothold in the US markets.
Rating and Target Price
• We assign BUY with a target price of ₹ 5,365 implying 33x EV/EBITDA for FY28 and 22x EV/EBITDA for FY29E. We expect full impact of the expansion to reflect from FY29E onwards.
