Paushak ltd
( update from credit rating and annual report)
PAUSHAK
1…Parental support
=Parental support from Nirayu Limited (Nirayu, rated ‘CRISIL AA+/Stable’), the holding company of the Alembic group. Nirayu overall holds a 53% stake in the company. This means a clearer intent by the parent to extend the requisite financial support in terms of letter of comfort, should it be required for future capital expenditure (capex) plans.
2…Capex
=Completion of 120cr capex in 2020-2022 for 3 times phosgene capacity.
=The company plans to undertake moderate capex plans of Rs 50-60 crore in the current fiscal, towards debottlenecking and corporate affairs.
3…FUTURE GROWTH
A…New plant
=The new plants have catalysed our growth while demonstrating our technical capabilities, commitment and our vision to become a global
technology leader in Phosgene and its derivatives while creating niche for us
B…Backward integration
=Backward integration of operations has led to robust operating margins (35% in fiscal 2023 and 36% in fiscal 2022). Return on capital employed was healthy at 19% in fiscal 2023.
=While most players in the specialty chemicals industry depend heavily on imports for their raw material supplies, the company has a low import bill.
C…New products
=We are working on new technology
platforms while launching new products in near future while investing more to create downstream capacities. We remain
committed to be “Partner of Choice” for our customers while expanding R&D capabilities to support such launches with addition of more technical resources.
D…Improving demand
=With the resurgence of Chinese manufacturers, pricing pressure and lower demand due to destocking being undertaken by customers, the first quarter of fiscal 2024 saw moderation in Paushak’s operating performance to Rs 49 crore of revenue and multi-quarter low margins of 25.4%
= However, with demand and pricing scenarios improving, operating performance is expected to recover, starting from the latter half of the fiscal, which would continue to be a key monitorable.
4…MOAT
A…Entry barrier
=The company is one of the few players licenced to manufacture phosgene gas, which is highly restricted by the government.
B…Backward integration
=Relatively stable margin despite headwinds of chemical industry.It is due to backward integration
=Paushak’s profitability, similar to other players in the specialty chemicals industry, remains susceptible to movement in the prices of key raw materials and end-user demand especially in the agrochemical and pharmaceutical industries.
=A dip in demand owing to destocking up the value chain, combined with some pricing corrections in the last 5-6 months owing to macroeconomic headwinds in 2023-2024 have led to margins moderating to 25% in the first quarter of fiscal 2024.
=However, a strong degree of backward integration and low fixed cost structure lends support.
Disc…invested
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