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Soumya Agrawal BV1
Soumya Agrawal BV1
DECEMBER 20
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Laxmi Organics Industry Ltd
It is a specialty chemical manufacturer that operates majorly in two business
segment one is Acetyl Intermediates (AI) and other is Specialty Intermediates. It is
the leading manufacturer of ethyl acetate with over 30% market share and only
manufacturer of diketene derivatives in India.
Laxmi Organic Industries is a leading manufacturer of Acetyl intermediates include
ethyl acetate, acetaldehyde, ethanol in petroleum and other solvents during
specialized intermediaries form ketene, diketene derivatives which include esters,
acetic anhydride, amides, arylides and some other chemicals. This company
products find application in a variety of high-growth industries, including
pharmaceuticals, agrochemicals, dyes and pigments, inks and coatings, paint,
printing and packaging, flavors and perfumes, pastes and used in other industries
applications.
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from in the life sciences, health sciences and pigment industries.
The Mission statement of the company states that it wants to provide
customers complete satisfaction has gained leadership in selected markets,
products and services in the domestic and international markets with new
technologies.
Management structure
Laxmi Organic's organizers are Ravi Goenka and the Yellow Stone Trust, which
held a total of 19,99,38,282 shares in total, it nearly represents 83.10 percent
of the company's total revenue.
Satej Nabar is the CEO and Chief Executive Officer of the company.
Product mix
Company’s products are currently divided into 2 broad categories, namely the
Acetyl Intermediates (AI) and the Specialty Intermediates (SI). The Acetyl
Intermediates include ethyl acetate, acetaldehyde, fuel-grade ethanol and
other proprietary solvents, while the Specialty Intermediates comprises of
ketene, diketene derivatives namely esters, acetic anhydride, amides, arylides
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and other chemicals. They have dedicated manufacturing facilities especially
available for each AI & SI with combined installed capacity of 239,365 MTPA.
Acetyls are used as intermediaries for many types of applications such as
solvents, adhesives, water-based paints, wood, dyestuff, emulsifiers, etc. The
global acetyl market is currently looking at the present estimates expected to
grow by 6.4% CAGR over the next five years due to a strong demand arising
from final use. The acetyl market is estimated at US $ 13.4 billion by 2019.
Looking at the current trends it is expected reached US $ 18.3 billion by the
2024.
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Acetyls market value chain
The acetyl series forms the various building blocks used production of acetyl
intermediates used in the manufacture special products used in many
industrial applications and business segments.
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Ethyl Acetate
The global ethyl acetate market is expected to grow at a higher CAGR
4.5% over the next ten years in terms of volume. Ether ethyl acetate
The market is expected to grow from ~ 4 MMT in 2019 to ~ 5 MMT by 2024E,
Regarding the use that led to the search from the APAC region. Ether ethylthe
acetate content was ~ 5 MMT in 2019 with energy consumption at ~ 80%.
Ketene derivatives market: Acetic anhydride
Acid anhydride is a clear, colorless liquid fragrance and is widely used in the
manufacture of pharmaceuticals, industrial chemicals, polymers, flavors and
perfumes, dyes, etc.
Diketene derivatives market
The global market for duct products is estimated to be close
US $ 1-1.2 billion in 2019. The volume was approximately estimated to be
around between 0.4 MMT and 0.45 MMT in 2019 and is expected to grow
around 0.5-0.55 MMT by 2024 grows at CAGR of ~ 4%.
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distribution and promotion of competitor’s product differences are intensely
taken up.
4. Decline: last stage of a product if it’s not able to redesign itself.
1989 – Incorporated as Laxmi Organic Industries Limited, a limited public
company.
1992-Export of the first plant to Raigad for production glacial acetic acid
1996- initiated production of ethyl acetate.
2004-Investment in a renewable energy source for the exploitation.
2008- Increasing investment by the river used in Jarandeshwar. Expansion of
ethyl acetate capacity over 50,000 MT.
2010- entered the Specialty Intermediate business by acquiring the business
of Clariant’s diketene.
2011-acetate volume increased by more than 120,000 MT. Diketene's
acquisition capacity has grown to more than 13,000 MT.
Set up an DSIR-approved R&D center in our SI production facility.
2012-Investment by International Finance Corporation in
Equality and debt.
2013- Services in the Netherlands and Dubai and construction of stock points
in Europe.
2018-Investment in energy project at Yedgaon.
2019-Set DSIR accredited Rabale Establishment Center.
2021-Ethyl acetate energy expansion by acquiring Yellowstone Chemical.
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a) Past 10 years growth trends
Market cap Rs. 14,866.63 Cr
Revenue (TTM): Rs. 1,768.5 Cr
Earnings (TTM): Rs 127.06 Cr
Cash: Rs 541 Cr.
Total Debt: Rs. 141.09
Promoters’ ownership: 72.92%
Liquidity: High
52 Week range: Rs. 143.25-628.05
Face value: Rs. 2
Shares outstanding: 26,36,62,773
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10 years Aggregate:
CFO – 318.06 Cr
EBITDA: 1,135.62 Cr
Net Profit: 534.04 Cr
Company is beating 3 Year Revenue CAGR – annual growth of 15.24%
It outperformed its 3-year CAGR of 8.66%
Company has spent less than 1% of its operating revenues towards
interest expenses and 5.25% towards employee cost in year ending
Mar 31,2021.
Company has good profit growth of 36.77% CAGR over last 5 years.
The company has carried a poor sales growth of 11.06% over past five
years.
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The global scope of LOIL activities exposes you to the risks of doing
business abroad, including constantly changing economic, regulatory,
social and political conditions in the areas in which they operate and
want to work, which may work adversely affects business, financial
status and performance results.
Demand and supply analysis, comparative analysis with its peer group,
Competitive analysis, Major competitors
Leading producer of ethyl acetate with significant market share: Global ethyl
acetate market is expected growth rate more than 4.5% CAGR over the next
decade in volume and is expected to grow from ~ 4 MMT in the calendar year
2019 to ~ 5 MMT for the calendar year 2024.
The only Indian manufactured manufacturer of diketene with a large market
share and one of the largest production positions of diketene products is
estimated to be between 0.4-0.45 MMT in 2019 and according to the current
estimates it is expected to grow to 0.5-0.55 MMT by 2024 growing in the
CAGR ~ 4%.
Various customer domains in growing industries and long-term customer
relationships: LOIL products find application in a wide range of growth
industries including pharmaceuticals, agrochemicals, dyes and piglets, inks
and packaging, paint, printing and packaging, flavours and perfumes,
packaging and other applications industrial applications.
Strategically located manufacturing facilities, vertical integration and supply
chain efficiencies: LOIL currently has two high-end production facilities for
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Acetyl Intermediates and Specialty Intermediates and is able to quickly import
raw materials and export its products thus providing cost and operational
resources.
In-house research and development capabilities and steady track record of
technology interest: Research and development of new products to meet
customers’ requirements is a key growth driver of LOIL’s business.
Global presence and low geographical concentration: In addition to India,
Laxmi Organics has customers globally over 30 countries including China,
Netherlands, Russia, Singapore, United Arab Emirates, United Kingdom and
United States of America.
Differentiated business model, asset base, product mix and experience in
handling complex chemistries create high entry barriers: LOIL's industry has
high barriers to entry due to some complex chemical involvement in the
manufacture of its products and the need to register as a supplier after the
proper suitability of certain products and customers, especially customers in
the pharmaceutical and agricultural industries.
Experienced promoter, board of directors and key managerial personnel:
LOIL has a strong and knowledgeable Board, supported by highly efficient
heads and key management executives who participate and participate in
their strategies, operations and business development.
Peer Comparison
Given below is the competitor analysis of Laxmi Organics between Pidilite
Industries Ltd., SRF Ltd, Aarti Industries Ltd, Deepak Nitrite Ltd, Atul Ltd on
various parameters like Current market price, Price to Earnings Ratio, Market
Capitalization, Dividend Yield, Sales and Book Value respectively.
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Revenue from Operations:
The Company earns revenue primarily from sale of Chemicals. Laxmi Organic
Industries is a specialty chemical manufacturer, focusing on two key areas Acetyl
Intermediates and Specialty Intermediates. Revenue is recognized when transferring
control over products or services promised to customers at a price that reflects the
Company's consideration for exchanging those products or services. Revenue is
recognized to the extent that economic benefits will flow to the Company and
revenue can be measured reliably, regardless of when the payment is made.
Revenue is recognized in the period in which the obligation to act in connection with
the sale of chemicals or the provision of services to the Customer is the period
during which the customer receives the goods and services. Revenue from related
entities is recognized based on their fair value. Revenue is measured at the fair
value of the consideration received or receivable, after deducting any trade
discounts, volume discounts, refunds for transfer of controls in respect of ownership
to the consumer who normally sends goods or any other taxes or services. Collected
in the name of the Government levied on sale as Income Tax (GST). Discounts
offered include discounts, discounts and other benefits offered to customers. No
financial item is currently taken as the sale is made at the time of payment that is
consistent with market performance. Income from employment is recognized when
all relevant activities have been completed and the right to earn money has been
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established. This applies in the case of service services provided by the Company to
customers. A company divides revenue from the sale of goods or the provision of
services to customers according to product categories, environment and customer
category.
Product
Segments
Acetyl
Intermediates 410.4 55.40% 801.9 59.30% 883.6 62.20% 621 49.20%
Specialty
Intermediates 224 30.20% 434.7 32.20% 452.7 31.90% 408.5 32.40%
Others
(including
traded goods) 106.9 14.20% 115 8.50% 83.4 5.90% 232.2 18.40%
Revenue from
sale of
manufactured
products and 100.00 1,261.6 100.00
services 741.2 % 1,351.50 100% 1,419.70 100% 0 %
Geography
10,010.0 10,390.8 4,979.4
India 9,914.80 71.60% 0 64.20% 0 68.00% 0 61.50%
3,116.2
International 3,934.10 28.40% 5,583.90 35.80% 4,883.80 32.00% 0 38.50%
100.00 15,593.9 15,274.6 8,095.6 100.00
Total 13,848.90 % 0 100% 0 100% 0 %
Swot analysis
Strengths
Growing Net Profit with Increasing Margin Profit (QoQ)
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Quarterly Profit Growth in Increasing Margin Profit (YoY)
Low debt company
Rising Income Quarterly in the last four quarters
Company with Zero Promoter Pledge
Companies with rising profit margins - quarterly and TTM
Weakness
The shareholders have decreased their MFs last quarter over 190% for
the 6.4 years.
The company has declining Net Cash Flow i.e., companies are not able
to generate net cash.
Companies with growing costs Year on Year for long term.
Opportunities
Rising Delivery Percentages compared to previous day.
Highest Recovery from 52 Week low.
Companies with a 10% increase in stock prices over three months, with
a growing profit margin.
Companies that have seen improvements in total profit, operating
income limit and revenue in the last quarter.
Threats
Increasing trend in non-core Income
Stocks with high PE (PE>40)
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Potters five forces model
1. Rivalry among existing players – When the competition is intense it becomes difficult
for existing players such as Deepak Nitrate, Aarti industries etc to get a sustainable profit.
High rivalry in market share. Scale economies are high, so there is a lot of competition in
price strategies. Maintenance costs are high and current costs also are high.
2. Threat of new entrants - If there is a strong threat of new entrants then current players
will agree to earn a small revenue to reduce the threats. New Chemical Entrepreneurs -
Major Diversified introduces new products, innovations and pressures to Laxmi Organics
through a low-cost strategy, cost reduction, and offering value propositions to customers.
Laxmi Organics must manage all these challenges and create effective barriers to protect
its competitive edge.
4. Threat of substitute products and services - If the risk of replacement is high then
Laxmi Organic should continue to invest in R&D or risk losing out to disruptors in the
industry. Consumers need the same type of chemicals to use them. Changing the chemical
composition involves a lot of R&D costs.
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manufacturer of organic fluorosppecialties and electrochemical fluorination
for the purpose of entering the chemical business of fluorosppecialty and
leverage its experience and skills. The company too secured 14 patents, 41
REACH registrations and all formats, production and storage data and
research and development data through this discovery. It aims to take stock
of the given Mitati market existing chemicals and past customer base. A capex
of 230-The 250 crore and turnover of this business will be about 1.3x. This
plant is expected to be shipped by Q4FY22.
References:
https://www.laxmi.com
https://www.screener.in/
https://economictimes.indiatimes.com/laxmi-organic-industries-
ltd/stocks/companyid-49476.cms
https://www.business-standard.com/article/news-cm/laxmi-organic-industries-
completes-acquisition-of-acetyls-holding-121100100905_1.html
https://www.indiainfoline.com/company/laxmi-organic-industries-ltd/peer-
comparison/23722
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