Tata Chemicals is the global leader in soda ash and sodium bicarbonate. It is a globally leading multinational company engaged in the manufacture of inorganic chemistry products with plants spread across four continents America, Europe, Africa and Asia. Apart from huge revenue from operations and stable operating profit margins, company has huge inter company investments as a result of which book value of the company could be more than the current market price of the company’s stock.
Current Market Price at the time of Publishing this report-: 887 Rs
In past over two decades, barring TCS and Titan there would be hardly any company which would have created that kind of wealth consistently among all Tata Group companies.Lack of proper capital allocation where previous leadership thought process was to gain market share and gain global footprint thereby leaving not much focus on balance sheet and return ratios thereby leaving much less for wealth creation.
However this seems to have changed dramatically with N chandrashakeran at the helm of Tata Group. Under his leadership, there has been drastic change in the Tata Group companies have focussed on improving profitability, capital allocation and return ratios and much more.
Thus under the Leadership of N Chandrashakeran and the New Tata 2.0 strategy we strongly believe Tata Chemicals could be a game changer going forward not just in terms of profitability or financial ratios but could also be one of the wealth creators from the Tata group.
Consolidated revenues for the quarter were at Rs. 3,142 crore up 21% more than previous year and PAT at Rs. 340 crore almost 70% more than last year. This was mainly due to the growth in soda ash and bicarb volumes, notably in US, UK and Kenya and the impact of price increases in India and other geographies.
For India business, revenue was at Rs. 931 crore up 15% compared to the previous year. The EBITDA margin was 26% an increase of 3%. The PBT has gone from Rs. 148 crore to Rs. 214 crore up 45% compared to Q3 last year.
For the US business there was a volumes rebound compared to the previous year and revenue was Rs 891 crore up 20% over Q3 previous year. PBT stood at Rs. 37 crore. The US volumes remain strong with growth in domestic and export markets as compared to previous years. Export volume mix is higher than previous years. Export pricing is seeing recovery while domestic prices remain stable.
For the UK Business Revenue stood at Rs. 551 crore up 47% and PBT was at Rs. 13 crore compared to Rs. 2 crore profit last year. UK soda ash sales volumes remain stable with higher sales price. Margins were higher for the quarter due to higher sales price despite rising input costs including Coke, ammonia, packaging cost. Additionally Tata Chemicals also started hedging its carbon in UK. The markets opened up in the UK ETS in the month of May or June and the counter-parties were able to offer hedging for October 1st. So as of now company is hedging all its carbon exposures in UK.
For the Kenya Business Revenues stood at Rs. 132 crore up 24%, EBIT stood at Rs. 18 crore almost same as last year. Kenya is performing well with improved sales volumes at higher sales price.
Rallis Inddia a subsidiary of Tata Group also was covered as DARKHORSESTOCK IDEA previously .
Revenue stood at Rs. 628 crore, EBIT at Rs. 48 crore, revenue has been steady with growth coming from domestic crop care and international business. However margin were impacted due to the higher raw materials and fixed cost.
CapEx spend was Rs. 1,040 crore for 9M as compared to Rs. 895 crore last year.
Net debt at Rs. 4,120 crore, Rs. 200 crore more than March. Despite increase in Net debt the interest cost for the quarter was lower as company had refinanced lot of loans in the US. These loans we refinanced at Libor + 1.5% while earlier they were ar Libor+4% resulting in lower interest cost compared to Q3 last year.
Consolidated Financials for December 2021 -: Q3FY22
- Net Sales at Rs 3,141.58 crore in December 2021 up 20.55% from Rs. 2,606.08 crore in December 2020.
- Quarterly Net Profit at Rs. 310.33 crore in December 2021 up 92.93% from Rs. 160.85 crore in December 2020.
- EBITDA stands at Rs. 584.22 crore in December 2021 up 13.53% from Rs. 514.61 crore in December 2020.
- Tata Chemicals EPS has increased to Rs. 12.19 in December 2021 from Rs. 6.31 in December 2020.
Tata Chemicals is the global leader in soda ash and sodium bicarbonate. These are mature, commodity businesses, growing at 3-4% per year and yielding consistent cash flows. Tata chemicals is a part of Tata group company which is know for it integrity , principles and taking in to consideration of all stakeholders for overall growth and prosperity. Although company has huge debt of 4,120 crs and most of it refinanced at extremely lower rate of Libor+1.5% there is very minimised risk. Additionally has huge ongoing capex. Apart from that Tata Chemicals also has huge investments in other Tata Group companies which could be valued at significantly higher prices compared to current market price of 887 Rs.
Tata chemicals was first suggested on 14th February 2021 when the stock was trading at Rs 561 since then it has hit 52 Week High of 1158 Rs there by delivering 106% returns before falling to current levels.
FROM THE PREVIOUS REPORT
A part of US$ 113 billion Tata Group, Tata Chemicals is a globally leading multinational company engaged in the manufacture of inorganic chemistry products with plants spread across four continents America, Europe, Africa and Asia. Their salt works, spread over 36,000 acres, are the largest in Asia. Tata chemicals produces soda ash using synthetic and natural mining process. Of this, 3/4th capacity consists of natural soda ash
Tata Chemical offers inorganic chemistry solutions that serve the world’s leading downstream brands.
Tata Chemicals currently is the world’s third largest producer of soda ash with manufacturing facilities in Asia, Europe, Africa and North America. Tata Chemicals is the world’s third largest producer of sodium bicarbonate, which has applications that range from food to pharmaceuticals to air pollution control. Tata Chemicals is the pioneer and market leader in India’s branded Iodised salt segment. The company sells pulses and spices under the Tata Sampann brand. The company’s Tata Swach range of water purifiers includes a low-cost, nanotechnology-based purifier that provides safe drinking water at affordable prices. The company also makes nutraceuticals for healthy and tasty modern food. With its Farming Essentials portfolio, the company through its subsidiary Rallis India has a strong position in the crop protection business.
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Incorporated in 1939 the company completed the bromine plant, the first unit of the company’s chemical works. Later they started production of caustic soda, liquid chlorine, bleaching powder, hydrochloric acid and zinc chloride.
Currently Tata chemicals is involved in Agri Sciences , Nutritional Sciences , Material Sciences and Energy Sciences .
- Alkali products: Soda Ash, Sodium Bicarbonate, Caustic Soda, Crushed Refined Soda
- Halogen products: Chlorine-based products, Bromine-based products Salt products
- Industrial Salt, Livestock Salt, Animal Salt, Gypsum
The cement plant has an installed capacity of 1,500 tonnes per day and manufactures two varieties of cement under the brand name Tata Shudh: Ordinary Portland cement (grade 53) & Masonry cement. Shudh cement has already acquired a 4 percent share in the cement market in Gujarat despite tough competition from its better-established competitors.
Company through its subsidiary Rallis India manages business of agri sciences . Tata chemicals has a reach of upto 80% of India’s districts and have seven power brands through our subsidiary Rallis India, which offers crop protection and agri-input solutions..Rallis develops and manufactures a wide range of products and solutions including seeds, crop protection solutions and Specialty Nutrient solutions to improve farm productivity. Its international business deals with active ingredients and its formulation and contract manufacturing.
Tata chemical offers an innovative range of nutritional solutions, prebiotics and healthier alternatives to regular sugar for consumers. Company offers nature-inspired and science- backed ingredient and formulation solutions, marketed under the brand Tata NQ, catering to human and animal health. Its flagship product lines – FOSSENCE® and GOSSENCE® – are prebiotic dietary fibres that promote gut microbiome growth for better digestive and immune health.
- FOOD & BEVERAGES
- Nutri Foods
- Nutri Beverages
- Indian Sweets
Tata chemicals is a leading player in the niche area of advanced nano-material solutions. With growing demand for superior materials like Highly Dispersible Silica (HDS) for high-performance and fuel-efficient green tyres and nano Zinc Oxide (nZnO) for improved anti-fungal, anti-microbial and UV blocking properties in industrial and cosmetic applications, this business caters to an expanding market. A similar demand trend for high-performance silica products in non-tyre rubber (automotive elastomers) and non-rubber applications (oral care, coatings) provides more growth opportunity.
Lithium-ion cells are one of the most critical components in an Electric Vehicle (EV); and with the Company’s inherent strengths in chemistry, Tata Chemicals is creating a platform to become a world- class provider of cutting-edge and disruptive electro- chemistry solutions for Energy Storage. Apart from EVs, there are numerous applications in stationary storage, in particular for supporting growing number of renewable energy generation projects.
With strong capabilities in chemistry, Tata Chemicals has also launched its Lithium- ion battery recycling operations.
Demerger of the Consumer Products Business
With a view to enable the Company to focus on its Basic Chemistry and Specialty products Business and to integrate the Consumer products Business activities undertaken by both, the Company and tata Consumer products limited (formerly known as tata global Beverages limited), under a single entity, the Board of directors of the Company at its Meeting held on May 15, 2019 approved the Scheme of arrangement amongst tata Consumer products limited (‘tCpl’) and the Company and their respective shareholders and creditors (‘the Scheme’) for the demerger of the Consumer products Business of the Company (‘CpB’) to tCpl. the CpB consisted of the business of sourcing, packaging, marketing, distribution and sales of (i) vacuum evaporated edible common salt for human consumption, (ii) spices, (iii) protein foods and (iv) certain other food and other products.
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In accordance with the provisions of the Scheme, shareholders of tata Chemicals limited holding 100 shares of Rs 10 each as on the record date i.e. March 5, 2020, were allotted 114 equity Shares of Rs 1 each of tata Consumer products limited, which are listed on BSe limited, the national Stock exchange of India limited and the Calcutta Stock exchange limited.
Tata Chemicals North America Inc.
Tata Chemicals North America Inc., hereinafter referred to as Tata Chemicals North America (TCNA), is one of the world’s leading producers of high-quality soda ash. TCNA and its predecessor companies have been producing soda ash (also known as sodium carbonate) since 1884. Formerly known as General Chemical Industrial Products Inc., TCNA became a part of Tata Chemicals Ltd. (TCL) in 2008.
During the year under review, Valley Holdings Inc., a step- down wholly-owned subsidiary of the Company, has acquired the remaining 25% partnership interest in tata Chemicals (Soda ash) partners Holdings from the andover group, Inc., a subsidiary of owens-Illinois Inc. for uS$ 195 million. With this acquisition, the Company, through its subsidiaries in the united States, has increased its ownership in tata Chemicals (Soda ash) partners, the soda ash producing entity, to 100%.
For FY 2019-20, eBItda at tCna was uS$ 104.80 million (Rs 742.80 crore) against uS$ 97.90 million (Rs 684.28 crore) in the previous year. Profit before tax and profit after tax and non-controlling interest for FY 2019-20 were at uS$ 64.15 million (Rs 454.68 crore) and uS$ 35.96 million (Rs 251.35 crore) respectively against uS$ 82.30 million (Rs 575.24 crore) and uS$ 54.60 million (Rs 381.63 crore) respectively in the previous year.
TCE Group Limited and British Salt Limited
Tata Chemicals Europe (TCE) is one of Europe’s leading producers of sodium carbonate, salt and sodium bicarbonate and other products, from our plants in Cheshire, UK. Having been founded in 1874, and being a founder-member of ICI. Now owned by Tata Chemicals, we are proud to be part of the Tata Group of companies. TCE group limited’s business consists of Soda ash, Sodium Bicarbonate and energy units and British Salt limited manufactures and sells food grade and industrial salt.
Tata Chemicals Magadi Limited
Established in 1911, Tata Chemicals Magadi Limited has been producing soda ash at Lake Magadi for a hundred years. Formerly known as Magadi Soda Company, TCML has been a part of Tata Chemicals since 2005. Tata Chemicals Limited (TCL), part of the global Tata group, is one of the world’s leading chemical companies, with a widespread portfolio of household products, industrial chemicals and agricultural inputs. TCL’s operations are located in the US, the UK, Kenya and India. Tata Chemicals Magadi Limited (TCML) occupies a significant place in the African economy. It is Africa’s largest soda ash manufacturer and one of Kenya’s leading exporters
Tata Chemicals Africa
Tata Chemicals South Africa (TCSA) is a subsidiary of Tata Chemicals Limited one of Tata Sons Holding group of companies. TCSA is situated in the Port of Durban and is one of the largest importers of a chemical sodium carbonate (Soda Ash) into South Africa. TCSA’s core business is handling and distribution of Soda Ash. It is shipped as a bulk commodity and arrives at the Durban terminal for sale to local and neighbouring markets
Tata Chemicals International Pte. Limited
It is a wholly owned subsidiary of the Company, constitutes trading, procurement and holding investments in overseas subsidiary.
For 3rd Qtr ended Dec 2020
- Mithapur expansion plan is progressing well. And we have the CAPEX spend which company has already highlighted of Rs. 2,400 crore, company already committed Rs. 800 crore and balance will be spent over the next two years.
- On a consolidated basis, company had Rs. 3,118 crore of cash at the end of December, up slightly from September 2020’s balance of Rs. 3,039 crore.
- Net debt was Rs. 3,743 crore, pretty flat with September’s Rs. 3,767 crore.
- Net Sales at Rs 812.24 crore in December 2020 up 6.96% from Rs. 759.37 crore in December 2019.
- Quarterly Net Profit at Rs. 115.64 crore in December 2020 down 0.52%
- EBITDA stands at Rs. 200.53 crore in December 2020 down 12.6% from Rs. 229.44 crore in December 2019.
- Tata Chemicals EPS has decreased to Rs. 4.54 in December 2020 from Rs. 4.55 in December 2019.
For year ended march 2020
- Consolidated revenue from operations was flat at
10,357 crore in FY 2019-20. EBITDA increased by 9% to1,949 crore.
- PAT was ` 1,028 crore.
- Business continues to generate robust cash flows at ` 1,780 crore which supported the Capex to the tune of ` 1,199 crore during the year.
- Profit after tax from Continuing operations decreased from `1,162.82 crore in FY 2018-19 to `1,028.41 crore in FY 2019-20, decrease of 12%.
- Profit for the year (Continuing operations and discontinued operations) increased from `1,386.85 crore in FY 2018-19 to `7,228.15 crore in FY 2019-20 (includes exceptional post-tax gain of `6,168.40 crore relating to discontinued operations).
- Profit for the year attributable to equity shareholders of the Company increased from `1,155.91 crore in FY 2018-19 to `7,006.33 crore in FY 2019-20 (includes exceptional post-tax gain of `6,168.40 crore relating to discontinued operations).
India Operations – For FY 2019-20, revenues from the Basic Chemistry products business dropped by 7.65% to ` 2,836.91 crore as against ` 3,071.92 crore in the previous year. profit before tax (pBt) for FY 2019-20 was ` 819.20 crore as against ` 762.48 crore in the previous year, which is higher by 7.44%.
Agri Sciences (Rallis India Limited) during the year under review, rallis India limited, listed subsidiary of the Company (‘rallis’), achieved a consolidated revenue from operations of ` 2,251.82 crore compared to ` 1,983.96 crore in the previous year, an increase of 13.5%. net profit after tax of ` 183.69 crore, higher by 18.7% as against a net profit after tax of ` 154.78 crore in the previous year.
Nutritional Sciences – Revenues grew to ` 65.15 crore, while the customer base grew to more than 250 customers.
Earnings from the cash surplus investments during the year amounted to ` 162.20 crore.
Progress in FY 2019-20
- Ongoing capex for capacity expansion and debottlenecking at Mithapur with implementation phased to focus on rapid expansion of essential products .
- Environmental Impact Assessment (EIA) approval for Soda Ash expansion at Mithapur
- Acquired remaining 25% stake in Tata Chemicals (Soda Ash) Partners Holdings from The Andover Group Inc for US$ 195 million, thereby increasing Tata Chemicals’ ownership to 100%
- Rs800 crore investment approved for growth in key molecules and enhancing of formulation plant capacity .
- Metahelix Life Sciences-Rallis merger to enhance shareholder value and leverage synergies of businesses
Commissioned state-of-the-art Nutraceuticals plant at Nellore
- ‘Green’ patented technology for manufacturing Highly Dispersible Silica (HDS) for tyres .
- Wide range of customised Conventional Silica products. Patented process for Nano Zinc oxide and strong R&D capabilities including nanotechnology .
- Commissioned 10 KTPA precipitated Silica manufacturing plant at Cuddalore post upgrading the plant infrastructure & systems .
- Accelerated R&D and commercial engagement with tyre companies . Capacity enhancement for manufacturing of Nano Zinc Oxide and increase in customer engagements
- Investing in microbiome and fermentation- based ingredients, prebiotics, probiotics and enzymes.
- Shifting from traditional to synthetic biotech and promote co- development model with customers .
- High quality Natural Extracts for food and pharma industry
- Build on technologies in Lithium-ion battery/ cell manufacturing and Next Generation chemistries . Partnership with Tata Technologies to establish own Battery Engineering Centre in Pune .
- Land acquisition and development at Dholera, Gujarat .
- Development of batteries at our engineering centre for 2W and 3W OEMs .
- Engagements with power and telecom companies for Energy Storage Solutions.
- Commenced pilot scale Lithium-ion battery recycling operations and commercial sale of recovered, metal salts
- Focussing on HDS for tyre and other high-growth applications and exploring adjacent innovative materials .
- Evaluating and executing phased capacity expansion of Silica .
- Scale Nano Zinc Oxide business into coatings and additive applications .
- Expansion of portfolio into other nanomaterials aimed at healthcare and advanced applications .
- Building < 1 GWh cell line by 2021 with technology from a global leader .
- Completing 2-3 commercial scale energy storage projects .
- Scaling Lithium-ion battery recycling operations .
- Setting up pilot line to manufacture cathode active materials