Kiri Dyes And Chemicals Ltd.

Plot No. 299/1/A, Near Water Tank, Phase-II, GIDC, Ahmedabad, Gujarat - 382445 Phone: 25894477 2583 5297 Fax: 25834960

Public Issue of 37,50,000 equity shares
of Rs 10 each for cash at a
premium of Rs 140 per share.

Issue details

Issue open	Issue close
25 Mar, 2008	02 Apr, 2008

Issue price (Rs)	Total size (Rs)
150.00	56.25 Crores

QIB	Non-Institutional	Retail	Employee
18,75,000	5,62,500	13,12,500	-

Lead Managers	Registrar
CENTRUM CAPITAL LIMITED	CAMEO CORPORATE SERVICES LTD Subramanian Building, No.1, Club House Road, Chennai (Madras), Tamil Nadu - 600002 Phone: 28460390 Fax: 28460129

Analysis
Company Analysis

• Kiri Dyes & Chemicals Ltd. (KDCL) was incorporated as a private limited company in May 1998 and was converted into a public ltd co. in May 2006.
• KDCL is engaged in the business of manufacturing and marketing of:
  1. Reactive Dyes- Synthetic Organic Dyes (S.O. Dyes)
  2. Dye Intermediates- Vinyl Sulphone and H-Acid
• KDCL’s production hub is centrally located in Gujarat. S.O. Dyes are manufactured and processed in three plants located in Vatva, Ahmedabad and dye intermediates are being produced at Padra plant in Vadodara.
• The installed capacity for dyestuff (S.O. Dyes) was 10,800 MT per annum with capacity utilization of 77.37% in FY 07.
• The installed capacity for dye intermediates (Vinyl Sulphone and H-Acid) was 3,600 MT per annum each with capacity utilization of 42.94% and 4.17% respectively in FY 07.
• KDCL’s product range comprises of more than 120 dyestuffs used by textiles, leather, paint and printing-ink industries.
• KDCL supplies reactive, acid, and direct dyes as well as dye-intermediates in various forms like standardized spray dried/tray dried - powder/granular, crude and reverse osmosis.
• KDCL has seen increase in the % share of the domestic market from 0.80% in FY 03 to 33.55% in FY 07. For half year ended September 2007, the same has increased nearly to 49%.
• KDCL’s major chunk of export revenue comes from Turkey (18%) and Korea (18%) followed by Bangladesh (17%), USA (15%),Taiwan (7%) and Indonesia (6%).
• Some of KDCL’s top customers includes both Indian and global companies such as, Dystar (India) Pvt ltd (India), Kyungin Synthetic Corporation (Korea), Sen Er Boya Kimya (Turkey), Biddle Sawyer Corporation (USA), Befuwell Enterprise Co Ltd (Taiwan) and Shangyu Yide Chemical Co. Ltd (China).
• On November 1, 2007, KDCL entered into the Memorandum of Understanding with M/s. Zhejiang Lonsen Group Stock Co. Ltd. with the objective to establish a joint venture manufacturing facility in India for the production of reactive dyes.
• Post issue promoter and promoter group shareholding will reduce from 88.76% to 66.57%.

Objects of Issue

• To fund the capital expenditure for setting up of a plant to manufacture Sulphuric Acid, Oleum and Chloro Sulphonic Acid with a combined capacity of 500 M.T. per day adjacent to KDCL’s existing unit at Village Dudhwada, Taluka Padra, District Vadodara thus enabling backward integration and economies of scale.
• To fund the capital expenditure for Dyes and Intermediates Unit located at GIDC, Vatva, and Ahmedabad.
• To fund the additional working capital margin.

Strengths

• OPM has increased from 7.9% in FY 06 to 10.7% in FY 07. For half year ended September 2007, OPM stands at 15%.
• KDCL’s source of revenue is well diversified. Therefore, the company’s revenue will not be majorly affected if any of the markets slow down.

Weaknesses

• During five years from FY 03 to FY 07, company had negative cash flows in three years.
• The debt-equity ratio of the company increased from 1.10 times in FY 05 to 1.76 times in FY 07 due to increase in the long term debt taken by the company from Rs. 19.64 crore in FY 05 to Rs. 59.67 crore in FY 07.

Financials

• Sales increased at a CAGR of 10.13% to Rs. 133.76 crore in FY 07 from Rs. 90.9 crore in FY 03 on account of growth in production and sales of dyes and commencement of commercial production and sales of Vinyl Sulphone & H-Acid. For half year ended September, sales stood at Rs. 97.02 crore.
• Net profit increased at a CAGR of 20.75% from Rs.4.06 crore in FY 03 to Rs. 8.63 crore in FY 07. PAT for half year ended September June 2007 was Rs. 8.9 crore.
• NPM has increased from 4.5% in FY 03 to 6.5% in FY 07. For half year ended September 2007, NPM was 9.2%.
• The RONW has increased from 15.70% in FY 04 to 25.5% in FY 07 because of increase in PAT.
• Debtors’ turnover ratio for FY 07 stood at 4.47 times as compared to 10.13 times in FY 06.
• Book value per share decreased from Rs. 108.1 in FY 03 to Rs. 35.6 in FY 07 mainly due to increase in the issue of equity capital over the period. BV per share as on 30 September, 2007 was Rs. 44.

Valuation

• EPS of the company increased from Rs. 4.7 in FY 06 to Rs. 9.1 in FY 07. EPS as on September 30, 2007 (annualized based on half year of FY 08) was Rs. 17.80.
• Post issue EPS is Rs 11.87 (based on PAT of year ending on March 31st, 2008).
• Post issue PE at upper price band is 12.64 and at the lower price band is 10.53.The shares have been offered at a price band of Rs. 125/- to Rs. 150/- per share.

Peer Analysis: (As on September 30, 2007)

Company	Net Sales Rs Crore	PAT Rs Crores	PAT/Sales (%)	P/E (Times)	EPS Rs	BV per share Rs
KDCL	97.01	8.90	9.17	10.53-12.64	8.90	44.00
Metrochem Industries Ltd.	125.38	1.75	1.40	11.21	5.03	76.91
Poddar Pigments Ltd.	71.29	1.78	3.62	15.18	1.71	25.67
Priya Ltd.	49.22	0.22	0.31	8.61	2.17	75.98

Source: CMIE