Thread on Issues and Concerns around Bharat

Rasayan .
1st Issue: Promoter is giving loan to company

The interest rate promoter is getting is 9% which is at arm's length. This reflects
promoter commitment and confidence in company rather than being a ref flag

2nd issue - High Receivables

3rd issue - Sales to group entities

Have addressed here in this thread. However, with the current results, 2nd issue is
alleviated.

2nd issue:

High Receivables

Here. Both Dalal's are pure idiots. Problem with receivables only when 1. If it turns into
provisions 2. It's not industry wide That's not the case here: Bharat Rasayan was set up
as backward Integration for its other 2 companies, so sales obviously will happen to
them

3rd issue: Sales to group entities

Have addressed here in this thread. However, with the current results, 2nd issue is
alleviated.

4th Issue: High Promoter Salary

Promoter's salary is actually low. Adding Profit linked incentive (commission) it

becomes high. This shows he is more invested to generate higher profits for the
company and his belief in growth. One should not be penny wise pound foolish.
5th Issue: Low dividend

True with all companies in aggressive growth phase. Investor should be happy that the
money is being invested to generate higher returns instead of paying tax and giving
dividend. Do you buy Growth Mutual Fund or Dividend Mutual Fund?

6th Issue: Negative Cash flow

Generally, happens with very aggressive growing companies in capital intensive sector.
Once they pause the investment even for a brief while, they clean up the balance sheet
pretty quick. Moreover this is no more of an issue with BR now.

7th Issue: Related Party Sales

BR was set up as a backward integration for other two companies and gradually it
found its own growth path surpassing the other group companies. Moreover, negligible
dues from group companies 6/n

8th Issue: Almost 10% stock is with stock broking companies

Won't detail much here as not to be spoken in public but observe 3 things for those
companies and connect the dots 1. Date of Acquisition 2. Holding Tenure 3. Their AGM
date

9th Issue: Gifted their Star plant to Nissan

which would have driven their next level of growth Plant 3 - This is now Nissan JV with
30% ratio of BR Capex - 290 cr + 20 cr land(this will be paid back to BR for selling the
land) Now some details

So their expansion share is 90 cr. Gupta ji won't give such an asset for JV if something
significant was not on offer. It is anybody's guess. I am inclined to assume Patented
molecules or higher share of business from Nissan.

Getting contracts from Japanese is the toughest and Gupta ji has been able to crack a JV
with them. If my assumption for patented molecules is correct, this is history in making
for BR.

Now coming to Plant 2 EC is pending site visit for 200 cr expansion If i add the
expanded capacity from Plant 2 and Plant 3(only 30% as their share) - For Those who
think they had only 1 star plant.

Total increased capacity for Plant 2 and 30% of plant 3 becomes 40k tpa for Agrochem
from 12.3k tpa 15.6k tpa for Formulations from 12k tpa If it was 100% of plant 3
capacity would have been 65.2k tpa for Agrochem 24k tpa for Formulations
So those writing obituaries, please get into details before you blurt out and show your
stupidity. Capacity is still expected to be 3.3 times for agrochem and 1.3 times for
formulations. This in itself is a stupendous number with a promoter like Gupta ji 13/n

I too am disappointed on the Plant 3 being JV with just 30% share, there are positives
though 1. Balance Sheet does not stretch 2. JV will significantly augment their
capabilities to next level BR has invested 9 cr in JV. I am not sure if BR has to invest any
more capital 14/n

This is one promoter i found to be utmost honest in his dealings and only focused on
his work !!

Very Very interesting development !! BIL now an MNC hence related party sales
concern addressed Patented molecules might come in BIL, for which BR will make
technicals (higher margin) This & Nissan JV, frees up mgmt's bandwidth - more focus on
BR
Japan's Mitsui, Nippon Soda acquire 56% stake in Bharat Insecticides

The new relationship with Mitsui and Nisso will further strengthen BIL's ability to
deliver innovative crop protection products and support sustainable growth of India's
agriculture sector

business-standard.com

"We hope that being part of Mitsui group will take BIL to the next level" - Promoter S N
Gupta ji Kimihide Kondo, GM Mitsui, joined BIL as joint MD, "This provides us the
exciting opportunity to contribute in manufacturing & distribution of plant protection
products in India"

Mitsui & Co Ltd is a global trading and investment company with an annual revenue of
USD 63 billion Nippon Soda provides value-added chemical products in diverse fields
like agriculture, pharmaceuticals and specialty chemicals.

BIL MD Dharmesh Gupta said, "BIL now will be in a unique position to leverage the
synergies in area of product development with access to Mitsui's global assets and
Nisso's world class R&D capabilities." BR would be pulled up by Mitsui, Nippo and
Nissan. Very very Exciting !!

Japanese companies Mitsui and Nippon Soda have acquired 56 per cent stake in agro-
chemical firm Bharat Insecticides Ltd (BIL).
As a result of this deal, BIL has become a group company of Mitsui & Co Ltd and
Nippon Soda Co Ltd (Nisso), the Delhi-based company said on Wednesday, without
disclosing the deal value.
"Mitsui and Nisso have acquired 56 per cent stake in BIL through a special purpose
company co-founded by Nisso and Mitsui. The BIL's promoters will continue to hold
balance shares in BIL," the company said in a statement.
The new relationship with Mitsui and Nisso will further strengthen BIL's ability to
deliver innovative crop protection products and support sustainable growth of India's
agriculture sector, it added.
BIL's founder promoter Sat Narain Gupta said, "This is a momentous occasion for us.
BIL was started 43 years back with just 2 products and since then, BIL has come a long
way. We hope that being part of Mitsui group will take BIL to the next level."
Other promoters, MP Gupta and RP Gupta, also expressed confidence that the tie-up
will help BIL grow at a faster pace.
BIL Managing Director Dharmesh Gupta said, "With this alliance, BIL will be in a unique
position to leverage the synergies in area of product development with access to
Mitsui's global assets and Nisso's world class R&D capabilities."

The alliance will help BIL to grow not only in domestic market but also global markets.
As part of this association, there are few additions to BIL's leadership team, the
statement said.
Kimihide Kondo, GMMitsui, has joined BIL as joint MD, and Masanori Katsura has
joined as the CFO. Both will be based out of New Delhi.
Kondo said, "Although Mitsui has been active in the rapidly growing Indian
agrochemical industry, this investment into BIL provides us the exciting opportunity to
contribute in mainstream manufacturing and distribution of plant protection products
in India."

BIL started its operations in 1977 and has steadily developed its presence in the Indian
market along with Bharat Rasayan Ltd, a Bharat Group company and producer of
active ingredients for agrochemicals.
Mitsui & Co Ltd is a global trading and investment company with an annual revenue of
USD 63 billion. It has a diversified business portfolio that spans approximately 65
countries, and has over 45,600 employees.
Nippon Soda provides value-added chemical products in diverse fields like agriculture,
pharmaceuticals and specialty chemicals