Any current/future capex/capital investment/strategic investment?

AksharChem is undertaking a capital expenditure (CAPEX) of Rs. 175 crore focused on Specialty Chemicals, Dyes & Intermediates, and Organic Pigments. Rs. 69 crore out of this has been raised through a qualified institutional placement (QIP). Brownfield Pigment Green expansion to complete by Q3 FY18; production to start in Q4 FY18. H-Acid dye intermediate expansion to complete by end of Q4 FY18; revenues expected from Q1 FY19. Greenfield expansions for precipitated silica and Pigment Green planned for commissioning around Q4 FY19; full benefits expected in FY20. Precipitated silica project at Da

Future growth expectations in sales/revenue/volumes?

Vinyl Sulphone (VS) volumes grew modestly by 1.7% in Q1 FY18; expected to remain significant with ~70% contribution within dye intermediates by 2020. Pigment Green volumes rose sharply by 28.8% in Q1 FY18, aided by acquisition of 2-3 new long-term customers. Precipitated silica capacity (120 tonnes) expected to be operational by end FY19; initial sales modest due to product approval timelines (~6 months). Export sales remain strong (~85-90%) and are expected to continue post-expansion. Brownfield expansions (Pigment Green, H-Acid) to complete by Q3/Q4 FY18, driving revenue growth in FY19. Gree

Future growth expectations in earnings/operating earnings/profits/EPS?

The company expects volume growth and realization improvements in Vinyl Sulphone (VS) and CPC Green businesses to drive revenue growth. Despite a raw material price impact in Q1 FY18, margins are anticipated to recover, targeting EBITDA margins of 21% to 23%. Expansion plans include Brownfield and Greenfield projects; benefits from expanded Green and H-Acid capacities expected from FY19 Q1. Greenfield precipitated silica and Pigment Green expansions to contribute fully by FY20, with potential revenue doubling relative to CAPEX. Vinyl Sulphone contribution to revenues projected to reduce to abo

Current/ Expected Orderbook/ Pending Orders?

The order book for CPC Green is full for the next four to five months (Page 14). Strong order book position is driving revenue growth in pigment business (Page 15). Due to the strong order book, alignment of Violet 23 and Green expansions has been delayed but is now planned (Page 14). New customer acquisitions for Pigment Green have been made in the last quarter, leading to a 28% rise in volumes (Page 15). Customer acquisition time varies from 2-3 months for some products to 6 months to 1 year for others (Page 4). The current order book for existing CPC Green will last until Diwali; capacity r

Any current/future new fundraising through debt or equity?

The company has completed a QIP (Qualified Institutional Placement) of ₹69 crore. For the ongoing ₹175 crore CAPEX, funding will be primarily from internal accruals. Some additional debt may be taken towards the end phase of the CAPEX project, particularly for the precipitated silica project. No immediate plans for large-scale new equity fundraising were mentioned. Finance is not considered a hindrance for the expansion as permissions are in place, and the execution is on track.

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AksharChem (India) LtdQ2 FY17Chemicals & Petrochemicals

AksharChem (India) Ltd Q2 FY17 Earnings Call Analysis

Revenue, margin, capex, fundraise and order book outlook from management commentary.

Price: ₹253Market Cap: ₹160 CrSector: Chemicals & Petrochemicals

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Yes

Order

Yes

Capex

Yes

3 of 5 growth signals are positive.

Full analysis

Revenue guidance

Category 3

→Vinyl Sulphone (VS) volumes grew modestly by 1.7% in Q1 FY18; expected to remain significant with ~70% contribution within dye intermediates by 2020.
→Pigment Green volumes rose sharply by 28.8% in Q1 FY18, aided by acquisition of 2-3 new long-term customers.
→Precipitated silica capacity (120 tonnes) expected to be operational by end FY19; initial sales modest due to product approval timelines (~6 months).
→Export sales remain strong (~85-90%) and are expected to continue post-expansion.
→Brownfield expansions (Pigment Green, H-Acid) to complete by Q3/Q4 FY18, driving revenue growth in FY19.
→Greenfield expansions (Precipitated silica, Pigment Green) to start contributing from FY20 onwards.
→Order book for CPC Green full for next 4-5 months, supporting volume growth.
→Overall vision to achieve equal revenue contributions from dye intermediates, pigments, and specialty chemicals in ~3 years.

Margin guidance

Category 3

→The company expects volume growth and realization improvements in Vinyl Sulphone (VS) and CPC Green businesses to drive revenue growth.
→Despite a raw material price impact in Q1 FY18, margins are anticipated to recover, targeting EBITDA margins of 21% to 23%.
→Expansion plans include Brownfield and Greenfield projects; benefits from expanded Green and H-Acid capacities expected from FY19 Q1.
→Greenfield precipitated silica and Pigment Green expansions to contribute fully by FY20, with potential revenue doubling relative to CAPEX.
→Vinyl Sulphone contribution to revenues projected to reduce to about 20% in three years, with growth in pigments and specialty chemical segments.
→Export revenues expected to remain above 85%.
→Management confident of smooth execution without significant roadblocks and stable pricing despite competitive pressures.
→Overall, structural industry growth and strategic expansions position the company for sustainable earnings growth over the next 2-3 years.

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Fundraise plans

Yes

→The company has completed a QIP (Qualified Institutional Placement) of ₹69 crore.
→For the ongoing ₹175 crore CAPEX, funding will be primarily from internal accruals.
→Some additional debt may be taken towards the end phase of the CAPEX project, particularly for the precipitated silica project.
→No immediate plans for large-scale new equity fundraising were mentioned.
→Finance is not considered a hindrance for the expansion as permissions are in place, and the execution is on track.

Order book

Yes

→The order book for CPC Green is full for the next four to five months (Page 14).
→Strong order book position is driving revenue growth in pigment business (Page 15).
→Due to the strong order book, alignment of Violet 23 and Green expansions has been delayed but is now planned (Page 14).
→New customer acquisitions for Pigment Green have been made in the last quarter, leading to a 28% rise in volumes (Page 15).
→Customer acquisition time varies from 2-3 months for some products to 6 months to 1 year for others (Page 4).
→The current order book for existing CPC Green will last until Diwali; capacity realignment planned post-Diwali (Page 6).

Capex plans

Yes

→AksharChem is undertaking a capital expenditure (CAPEX) of Rs. 175 crore focused on Specialty Chemicals, Dyes & Intermediates, and Organic Pigments.
→Rs. 69 crore out of this has been raised through a qualified institutional placement (QIP).
→Brownfield Pigment Green expansion to complete by Q3 FY18; production to start in Q4 FY18.
→H-Acid dye intermediate expansion to complete by end of Q4 FY18; revenues expected from Q1 FY19.
→Greenfield expansions for precipitated silica and Pigment Green planned for commissioning around Q4 FY19; full benefits expected in FY20.
→Precipitated silica project at Dahej site, aimed to be operational by end of FY19.
→Funding to be primarily from internal accruals; some debt expected towards the end of the precipitated silica project.
→Expansion projects largely on schedule with no anticipated execution roadblocks.

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