Regarding that the business economics is quite favorable as the capex cost is 40-50 crores for dhule plant for which they came with an IPO so it will be taken care from it and also on this capex they will get a 80% GST subsidy over 10 year period that will boost it.
Secondly, Once two plants come on board they will have 130-150 crores in topline at optimum capacity utilisation they will be able to generate 18-20 crores in cashflow and gor the working capital requirement of Maharashtra plant they already have set aside 10 crores in FD so that won’t be a issue and from that situation if we see then it won’t be a much of problem to setup plant 3 in MP as they will have sufficient cashflow plus, have money in reserves as well.
And as far as the commodity product is concerned we can understand that the sodium silicate plant is setup at 3/4 crores at Max and for the production of sodium silicate major cost component is power and that they are getting for free due to excess production of pyrolysis oil which they uses to produce it so theya re able to provide it at lower cost while realising similar realisations for it.
And rCB is increasingly used in industry for cost cutting purpose and is mixed in proportion along with the Virgin Carbon black for cost reduction and yes they will get affected due to price fluctuations but what i could understand is that if they are able to meet the input price and realisation price with expansion in capacity that will lead to reasonably good growth.
Plus, for them there only raw material is end of life tyre which they get at Rs. 13-16 per kg and with the increased awareness among tyre company they will also get the benefit of charging offtake comission that is price paid to get tyres recycled as it happens in US and EU and eventually India will follow the pack as far as i could understand it will majorly solve the issue.
Plus, till now End of life tyres were directly burnt into the cement furnace but CPCB has become quite vigilant regarding it so the cement players have started looking for alternative and pyrolysis oil produces more BTU heat per kg consumed as compared to other alternatives so that will further aid them.
PS: Right now they have just one plant and all this is what can happen in future so will have to keep close track of the developments going on and the industry as well…
I may be biased as i am invested but this is not a big or sell call…
I hope I was able to answer…
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