navin fluorine international - initiating coverage - june 14

INITIATING COVERAGE Navin FluorineInternational

© B&K Securities 2014

All Rights Reserved

Attention is drawn to the disclaimer andother information on the last page

Batlivala & Karani

MID CAP

Exciting times ahead!!!

Navin Fluorine International Ltd. (NFIL), an Arvind Mafatlal Group companywas established in 1967 to manufacture Fluorochemicals. It has now diversifiedinto Refrigerants, Inorganic Fluorides, Speciality Fluorochemicals and CRAMS.NFIL is gearing up to monetise huge opportunities arising out of recovery indeveloped countries and virtual capitulation in China. Further, CRAMS businessis at the inflection point and is expected to double profits over the next threeyears. Total investments (real estate+non-trade) value at current prices is ~Rs178/share and cash per share is expected to rise to Rs 229 by FY15E. Combinedvalue is ~67% of current m.cap. NFIL’s dividend payout ratio has beenconsistently above 30%. We like the stock and expect re rating as CRAMS gainstraction. We initiate coverage with a Buy and assign a target price of Rs 850.

Year to March FY13 FY14 FY15E FY16E CAGR (%)

P&L Data (Rs mn) FY14-16E

Revenues 5,482 4,843 5,499 6,312 14.2

EBITDA 827 660 785 959 20.6

Adjusted net profit 434 524 624 755 20.0

Margins (%)

EBITDA 15.0 13.6 14.2 15.1 –

Adjusted net profit 7.9 10.8 11.3 12.0 –

Balance Sheet (Rs mn)

Total assets 7,256 7,794 8,359 8,910 6.9

Shareholders’ funds 5,042 5,553 5,983 6,533 8.5

Per Share Data (Rs)

Adjusted EPS 44.4 53.7 63.9 77.4 20.0

CEPS 65.8 76.0 87.2 101.9 15.8

Returns (%)

RoCE 11.9 11.2 12.4 13.9 –

RoE 8.8 9.9 10.8 12.1 –

Ranjit [email protected]+91-22-4031 7127

Presence in Fluorine Chemistry: Indian chemical companies (Fluorinebased) are witnessing good times as global MNCs are now recognising theirability to manufacture newer molecules and execute complex processes. NFILwith over 40 years of experience is well placed to capture this growth.

Rebooting to pursue higher growth: End of easy money regime (incomefrom carbon credits) in 2013 compelled management to get its focus back togrowing business verticals. NFIL has rebooted itself and started improvinginternal efficiencies and diversifying into new geographies and products.

CRAMS – next growth driver: Encouraged by strong response fromMNCs, NFIL is investing Rs 650 mn at its Dewas site. The capacity is expectedto come in FY15 and would drive EBITDA margins and profitability considerably.

Key risks: Volatile currency and aggressive pricing by Chinese players.

Relative Performance

26 June 2014

BUY

Share Data

Market Cap. Rs 5.9 bn (US$ 98 mn)

Price Rs 619

Target Price Rs 850

BSE Sensex 25,314

Reuters NAFL.BO

Bloomberg NFIL IN

6M avg. daily turnover (US$ mn) 0.3

52-week High/Low (Rs) 660/148

Issued Shares 9.76 mn

Valuation Ratios (Consolidated)

Yr to 31 Mar FY14 FY15E FY16E

EPS (Rs) 53.7 63.9 77.4

+/- (%) 20.8 19.0 21.1

PER (x) 6.5 9.7 8.0

PBV (x) 0.6 1.0 0.9

Dividend/Yield (%) 4.6 2.7 2.9

EV/Sales (x) 0.5 0.9 0.7

EV/EBITDA (x) 3.5 6.0 4.4

Shareholding Pattern (%)

Promoters 39

FIIs 8

MFs 3

Public & Others 50

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Prepared for [email protected] - Sent on Thursday, June 26, 2014 8:10:45 AM

2NAVIN FLUORINE INTERNATIONAL

B&K RESEARCH JUNE 2014

Index ...................................................................... Page No.

Investment arguments .................................................................................. 3

Investment concerns .................................................................................... 8

Outlook and valuation .................................................................................. 9

Company background ................................................................................ 11

Business segments ....................................................................................... 15

Industry ...................................................................................................... 20

Financial analysis ........................................................................................ 22

Annexure I ................................................................................................. 25

Detailed financials ....................................................................................... 28




Investment arguments

Presence in Fluorine Chemistry

Indian chemical companies are witnessing good times as global MNCs have started to recognise

their ability to manufacture newer molecules and execute complex processes. Companies are

witnessing higher enquires from global MNCs to aid their innovation and research. CRAMS

business in chemicals seems to be at inflection point and would likely take off in the near future.

Further, recovery in the developed countries augurs well for global chemical companies as

their performance is directly linked to GDP growth. Also, slowdown in China due to clampdown

by the governmental officials for implementing stringent effluent treatment norms to bring

down the pollution levels is expected to benefit Indian players with proven technical capabilities.

Global fluorochemicals market is expected to reach US$ 25 bn by 2020. Positive demand outlook

from key application markets such as refrigeration, pharmaceuticals, aluminium, steel and

electronic consumables is expected to drive fluorochemicals sales over the next six years. Fluorine

chemistry is very complex and it needs high technical expertise to manage and manufacture

different compounds with high purity. Some of the compound takes 7-8 weeks involving 15-18

different processes, while some are manufactured within a day. Managing such complexity and

getting high purity remains key to success in fluorochemcials industry. NFIL with rich experience

of over 40 years in manufacturing of Fluorine based derivatives would be a key beneficiary. The

company is well placed to capture growth emanating from Fluorine based derivatives.

Some of the key takeaways from earnings call of MNCs having significant exposure in China.

BASF: BASF 2014 outlook flags China slowdown risk to chemicals. Asia accounted for the

largest regional reduction in chemicals growth in BASF’s 2014 outlook. Given China GPD’s

chemicals-intense nature, this contributed to a global forecast for slowing chemical growth

(4.4%).

Eastman: Eastman added to Dow’s cautious comments on chemicals demand growth in

China in its discussion of 1Q results. Growth of just 1% in sales in the Asia-Pacific region

was the slowest since 1Q12 and demand for solvents, tyres and plasticiser in China was

weak. Management reiterated confidence that China’s demographic and consumer trends

will drive long-term demand. Yet, it noted slowing China demand is affecting chemical plant

construction and reducing speciality fluids sales.

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China Wes tern Europe Others Mexico Japan USA

51

18

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World Fluorspar production

Source: Industry, B&K Research

World Fluorspar consumption

With virtual capitulation inChina, Indian players areexpected to benefit




Rebooting to pursue higher growth targets

End of easy money regime (income from carbon credits) in 2013 compelled management to get

its focus back to growing business verticals. NFIL has rebooted itself and started diversifying

into newer geographies, introducing new products and improving internal efficiencies. Further,

it has embarked on an aggressive plan to strengthen its business verticals and reviewing its

work practices and standard operating procedures and modifying them to bring in overall

permanent cost efficiencies in input-output norms, energy usages, import-export points, parcel

sizes, etc. The results were partly visible in FY14 as the company was able to hold its

EBITDA margins at 13.6% despite zero carbon credits income. Logistics costs were

also well managed as Hazira port became operational for containerised cargos during the year.

NFIL would continue to enjoy this permanent advantage due to the proximity of Bhestan

plant to Hazira.

Segmental revenues

(Rs mn) Refrigerants Speciality Chemicals Inorganic Fluorides CRO/CRAMS

Applications Air conditioning and Pharma, Agrochemicals Metals industries (mostly Research for a broad range

household refrigerators and Petrochemical industries steel, abrasive and glass) of pharma and agro companies

Geographical presence India, South East Asia, India, Europe, US and Asia India and Asia India, Europe and US

Middle East and South Africa

Domestic (%) 68.0 64.0 96.0

Exports (%) 32.0 36.0 4.0 >90.0

Revenues in FY14 1,540 1,560 1,130 630

Contribution (%) 32.0 32.0 23.0 13.0

Key competitors – SRF, Gujarat SRF, Tanfac Inds Tanfac Inds SRF

Domestic Fluorochemicals

Key competitors – Chinese refrigerant Honeywell, BASF, Chinese players Chinese players

International players Arkema, Rhodia,

Saltigo, Chinese players

Growth drivers Internal efficiencies, niche New product launches Export to newer Synergies from MOL,

pharma applications geographies higher share of CRAMS

Source: Company, B&K Research

EBITDA margins steady inFY14 despite no carboncredit income

Carbon credit income

(Rs mn) FY10 FY11 FY12 FY13 FY14

Revenues 4,292 4,297 7,219 5,482 4,843

EBITDA 1,433 1,125 2,505 827 660

EBITDA margin (%) 33.4 26.2 34.7 15.1 13.6

Carbon credits (CC) 1,500 783 2,519 571 –

Revenues (excl. CC) 2,792 3,514 4,700 4,911 4,843

EBITDA (excl. CC) 83 420 238 313 660

EBITDA margin (%, excl. CC) 3.0 12.0 5.1 6.4 13.6




CRAMS – next growth driver

NFIL’s offerings in the dedicated fluorine space are now well accepted by global pharma

researchers and formulators (MNCs). In FY14, the company has developed, worked and

delivered more than 40 molecules to more than 15 global pharma and agro majors.

The division has registered revenues of Rs 260 mn. The management expects strong growth

in FY15 and beyond.

Encouraged by strong responses from large global players, NFIL is investing Rs 650 mn at its

Dewas site to deliver tonne level quantities in large batch sizes. The cGMP compliant capacity

is expected to come on-stream during FY15.

The company also intends to leverage its acquisition of Manchester Organics Ltd. (MOL). The

acquisition of MOL provides NFIL access to some of the advanced molecules as well as

established relationships with global pharma and agrochemical companies. Though MOL had

R&D capabilities it was unable to service clients with tonne level production requirements due to

lack of scale. With the synergies flowing in, the management expects NFIL-MOL combine to

garner higher share in the contract research and manufacturing space of fluorinated molecules.

NFIL is offering Contract Research and Manufacturing Services (CRAMS) for custom

chemical syntheses of fluorinated compounds for the pharmaceuticals, agro chemicals and

speciality chemicals industries. Offerings and capabilities include basic research, library

syntheses, process development, scale-up and small and large batch manufacturing.

CRO/CRAMS

(Rs mn) FY13 FY14 FY15E FY16E

Revenues 140 630 860 1,200

% of total revenues 3.0 13.0 15.6 19.0

Domestic (%) 10.0 10.0 – –

Exports (%) 90.0 90.0 – –

Growth (%) – 350.0 36.5 39.5


Speciality chemicals business to grow at rapid pace

Key segment for NFIL, is witnessing higher sales of Fluorine based molecules with niche

applications in Pharma, Agro and Petrochemicals. NFIL has 40 products (indigenously built) in

this segment and has introduced six new fluorinated compounds in FY13 and two products in

FY14. During FY14, the segment’s performance was under pressure as one of its key selling

product (Boron Trifluroide – BF3) witnessed weak demand. It is used as catalyst in making

Polymer, Pharma and adducts. NFIL has one of the largest BF3 facilities in the world.

The company intends to expand manufacturing and research capacity to speed up new product

development and commercialisation. It has also augmented its Multi Purpose Plant (MPP)

capacity to increase its product basket and intends to generate sales of Rs 700 mn from it in

near future. If the demand exceeds it would further take steps to implement MPP 2 plant. It

also intends to grow the business by diversifying into newer geographies.

In order to meet the growing demand of novel fluoro compounds and new chemical entities

(NCE), NFIL expanded its Navin Research Innovation Center (NRIC) infrastructure to provide




strong R&D support to global clientele. R&D is well supported by a pilot plant enabling faster

development of fluoro compounds. It currently has 6 Phds, 31 Post Graduates, 1 M.Phils, 4

Chemical Engineers and 3 Graduates working in its R&D.

Speciality chemicals

(Rs mn) FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E

Revenues 794 853 1,075 908 1,175 1,590 1,780 1,560 1,794 2,063

% of total revenues 31.0 29.6 25.9 21.2 27.3 22.0 32.5 32.2 32.6 32.7

Domestic (%) – – – – 65.0 50.0 54.0 64.0 – –

Exports (%) – – – – 35.0 50.0 46.0 36.0 – –

Growth (%) – 7.4 26.0 (15.6) 29.4 35.3 11.9 (12.4) 15.0 15.0


Refrigerant business to remain steady

NFIL manufactures R22 class of refrigerant which is used in residential and commercial air

conditioning. The gas is not used in automobile air conditioning; however, it is also used in

Household Refrigerators. It exports 32% of its products to countries like South East Asia,

Middle East, Saudi Arabia, Turkey, Egypt and South Africa through distribution network of

120 distributors. R22 class of refrigerant is under phase out due to its Global Warming Potential

(GWP). Production is now restricted at average of 2009-10 levels with 10% cut in 2015 and

complete phase out by 2030. With the country’s air conditioner market expected to rise owing

to rapid increase in middle class households and supply been constrained, the company expects

this segment to deliver healthy performance. The company does not manufacture R 134a

grade of refrigerant (automobile air conditioning), however, it does trading of this gas in India.

Factors that are expected to sustain R22 consumption

• No proven substitute is available yet. R140a is being looked at as an alternative; however,

owing to its high GWP the usage is been limited in developed countries.

• High growth in ACs, Refrigerators from Asia is expected to drive demand for R22.

• R22 is increasingly finding applications in pharma, however, it is still in the nascent stage.

Refrigerants


Revenues 1,268 1,386 2,296 2,480 2,387 4,469 2,331 1,540 1,602 1,682

% of total revenues 49.4 48.1 55.2 57.8 55.6 61.9 42.5 31.8 29.1 26.6

Domestic (%) – – – – 32.0 60.0 68.0 68.0 – –

Exports (%) – – – – 68.0 40.0 32.0 32.0 – –

Dealers (Nos.) – – – 125 120 120 120 120 – –

Growth (%) – 9.3 65.6 8.0 (3.8) (18.3) (9.7) (12.5) 4.0 5.0





Inorganic fluorides – Exports to drive growth

This segment includes product such as ammonium bifluoride, potassium fluorides, sodium

fluorides and other inorganic fluorides that find application in industries like Glass, Metals,

Agro, Pharma and FMCG. This has been a stable business for NFIL and has been generating

revenues of Rs 1 bn for it. The company plans to introduce new inorganic fluorine compounds

and also intends to increase its international presence. It has initiated exports in a good way

and intends to improve its capacity utilisation.

The division has introduced a compound for the glass industry in FY14 and expects high

growth potential for it in both domestic and international markets in the coming years.

Inorganic fluorides


Revenues 543 671 808 596 770 980 990 1,130 1,243 1,367

% of sales 21.2 23.3 19.4 13.9 17.9 13.6 18.1 23.3 22.6 21.7

Domestic (%) – – – – 98.0 95.0 97.0 96.0 – –

Exports (%) – – – – 2.0 5.0 3.0 4.0 – –

Growth (%) – 23.5 20.5 (26.2) 29.2 27.2 1.0 14.1 10.0 10.0


Net cash company trading at attractive valuations

NFIL is a net cash company with cash equivalents of ~Rs 1.6 bn (27% of m.cap) and has

dividend payout ratio of ~30% in the last three years. Further, it also has real estate property

worth Rs 475 mn (BV) from which it derives lease rentals of Rs 110 mn p.a.




Investment concerns

Raw materials availability and price

Fluorspar, Chloroform, Sulphur and Boric acid are the key raw materials for NFIL. Currently

it requires ~40,000 MT of fluorspar annually and the supply is been met by imports. In order

to secure supply, the company has formed JV with GMDC and Gujarat Fluorochemicals for

beneficiation of fluorspar ore from reserves located in Gujarat. Supply is expected to commence

post FY16.

Aggressive pricing by Chinese competitors

China is a big player in Refrigerant gases and enjoys dominant market share. Therefore any

aggressive pricing from Chinese players would impact NFIL.

Stringent effluent treatment norms

Chemical manufacturing inherently produces wastes/effluents that need to be treated before

dumping into atmosphere/environment. Failing to do so could harm the ecological balance in

the long-term. World over, the governments are taking cognizance of this fact and are coming

out with stringent norms.

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Movement in forex (USD/INR) over the last 10 years

Source: B&K Research

Rs

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With exports expected to rise in future, rupee appreciation could be a dampener.




Outlook and valuationPresence in Fluorine Chemistry for the last 40 years has given the company an edge in catering

to growing demand of Fluorine based molecules. Global fluorochemicals market is expected

to reach US$ 25 bn by 2020. Positive demand outlook from key application markets such as

refrigeration, HVAC, pharmaceuticals, aluminium, steel and electronic consumables is expected

to drive fluorochemicals sales over the next six years. With the group company now coming

out of woods and aiming to grow its chemical business, NFIL seems to be set on a high growth

path. Though there would be headwinds in the near term w.r.t. introduction of new products

and phasing out of R22, however, FY16 could be a watershed year for the company as it would

witness the increased contribution from CRAMS. Ability to introduce new fluorine based

molecules and ramp-up of its CRAMS remains a key trigger for the company.

Though the stock price has more than doubled in the last one year owing to superior margins

despite zero CERs, we believe the company is still worth looking at from two-three years

perspective as it has just embarked on a growth journey.

We expect NFIL to post revenue CAGR of 14% and PAT CAGR of 20% over 2015-16. We

expect valuation multiple to re-rate and therefore feel comfortable in assigning 11x multiple to

FY16E EPS of Rs 77.4.

We have also worked out SOTP based valuation by assigning 11x multiple to core earnings

and adding cash per share+investments. The target price thus achieved is Rs 975 per share.

Price movement Relative performance


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Valuation comparison with peers

CY13/FY14

Bloomberg No. of CMP M Cap Revenues EBITDA PAT EPS RoE RoCE EV/ TPE

ticker shares (mn) (Rs) (Rs mn) (Rs mn) (Rs mn) (Rs mn) (Rs) (%) (%) EBITDA (x) (x)

Navin Fluorine NFIL IN 9.8 619 6,041 4,843 660 524 53.7 9.9 11.2 3.5 11.5

International

SRF SRF IN 51.4 509 29,252 40,181 5,225 1,658 28.9 8.2 7.4 8.2 17.6

BASF BASF IN 43.3 876 37,922 44,299 2,520 1,205 27.8 11.6 13.5 16.8 31.5

Clariant* CLRC IN 26.7 870 23,194 12,132 1,209 839 31.5 31.0 20.1 11.3 27.7

Pidilite Inds PIDI IN 512.6 320 164,045 38,561 6,780 4,802 9.4 25.5 32.4 22.8 34.2

Atul Ltd. ATLP IN 29.7 893 26,486 23,983 3,637 2,192 73.9 29.6 27.6 4.3 12.1

Castrol* CSTRL IN 494.5 316 156,262 31,796 6,815 5,086 10.3 75.2 108.7 20.5 30.7

Source: Company, B&K Research. *CY ending.




Company backgroundNavin Fluorine International Ltd. (NFIL), an Arvind Mafatlal Group company was established

in 1967 to manufacture Fluorochemicals. It was a part of Mafatlal Industries till 2003 and was

divested as a part of Financial Restructuring. NFIL has now diversified its business into

Refrigerants (R22), Inorganic Fluoride, Speciality Fluorochemicals and CRAMS and derived

34%, 25%, 35% and 6% of its revenues from these segments, respectively, in FY14. The

mother plant is located at Surat (Gujarat) and another one at Dewas (Madhya Pradesh). The

company derived ~25% of its revenues from exports.

Subsidiaries and Joint Venture

Subsidiary companies % holding of NFIL

Sulakshana Securities Ltd. 100

Manchester Organics Ltd. 51

Urvija Associates 80

Joint Venture

Swarnim Gujarat Fluorspar Pvt. Ltd. 25

Journey

1967 : Establishment of the first integrated Fluorochemicals Complex in South East Asia

(excluding Japan) to produce HF, refrigerant gases and a range of inorganic fluorides at

Surat, Western India.

1969 : Commencement of commercial production of refrigerant gases.

1978 : Facility was set up at Dewas to produce Alkylated Anilines and Toluidine.

1982 : Capacity expansion at Surat for Smelter Fluorides and AIF3.

1990 : CFC 113 plant commissioned at Surat.

1999 : Commencement of organic and inorganic speciality fluoride production at Surat.

2000 : Commencement of Fluorobenzene and Benzotrifluoride series production at Surat.

2001 : Set up first large scale plant in South East Asia for production of Boron Trifluoride

Gas at Surat.

2003 : Capacity expansion of speciality organic fluorides at Surat.

2004 : Commissioned Trifluoroacetic acid plant at Surat.

2005 : Commissioned Trifluoroethanol plant at Surat.

2006 : Capacity expansion of Boron Trifluoride Gas.

2007 : Commissioned CDM plant at Surat.

2008 : Inauguration of new R&D centre – Navin Research Innovation Centre (NRIC) at Surat.

2009 : Start-up of pilot plant for scale-up of research and development molecules.

2010 : Established multi-purpose plant and CRO at Surat.

2011 : Capacity expansion of BF3 at Surat, acquisition of land at Dahej for further expansion,

acquisition of Manchester Organics Ltd., commissioning of cGMP pilot plant at Dewas.

2013 : Expansion of multi-purpose plant at Surat.




Vision

We at Navin Fluorine are committed to be a world-class, customer focused, innovative

organisation in the field of Fine and Speciality Chemicals and partner of choice to global

Refrigerant, Chemicals, Crop Sciences and Life Science companies.

Mission

• To provide customers the best “Value for Money” by producing world-class speciality

fluorochemicals at most competitive prices.

• To continue and grow R&D as the sustenance engine of the organisation.

• To innovate, build and operate chemical plants in the most safe and environment friendly

manner.

• To continuously enhance stakeholder value by optimum utilisation of resources.

Board of Directors

Mr H.A. Mafatlal, Chariman

Mr H.A. Mafatlal is the chairman and a promoter director of Navin Fluorine International

Limited. He heads the Arvind Mafatlal group of companies, a conglomerate having major

interests in Textiles, Denim, Rubber Chemicals and Fluorochemicals. He was vice-chairman

of the Cotton Textiles Export Promotion Council. Mr Mafatlal holds a Bachelor’s Degree in

Commerce (Hons.) and has attended Advanced Management Programme at the Harvard

Business School, USA.

Mr Shekhar Khanolkar, Managing Director

Mr Khanolkar is the Managing Director and has over 22 years of experience in various

reputed Indian and multinational organisations. He has been on the board of the company

since 2008. He holds a Bachelor of Engineering (Chemical) degree from Pune University and

holds a degree in Masters of Management Studies (MMS) from University of Mumbai. He has

completed Advanced Management Programme at the Harvard Business School, USA.

Senior management

Dr Ashis Mukherjee, President – CRAMS & Chief Technology Officer

Mr. Mukherjee is a post graduate in Science, Ph.D. and a postdoctoral fellowship from The

Rockefeller University, NY, USA. He has work experience of 21 years in Pharma, R&D and

CRO/CRAMS. He has been with the company since 2009.

Mr Partha Roychowdhury, Vice President – Finance & Accounts

Mr Roychowdhury is a C A with 29 years of post-qualification experience. He has been with

the company since 1995.

Mr Radhesh Welling, President – Marketing & Corporate Strategy

Mr Welling is a mechanical engineer from NIT, Surat and followed with MBA from IIFT, Delhi

& IMD, Switzerland with a total work experience of more than 17 years.




Equity capital Promoter’s stake


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Technical capabilities

Capability and experience to develop innovative and cost effective processes

Fluorination capabilities include catalytic, non-catalytic, gas phase, and liquid phase fluorination

using HF. Other specialised fluorination reactions include Balz- Schiemann, Schiemann and

Swarts. Safe handlings of HF and Halogen exchange are niche capabilities. It also practice

vapour phase chemistries namely alkylation, halogenations including bromination,

ammoxidation, etc.

Expertise includes

High Pressure Chemistry

• Ammonolysis

• Chlorination

• Fluorination

• Hydroxylation

• Hydrogenation

• Halogen exchange

Diazotization

• Sandmeyer’s (Halogenations, etc.)

• Schiemann

• Balz-Schiemann

• Deamination

• Hydroxylation

• Meerwein arylation

Vapor Phase Chemistry

• Alkylation

• Ammoxidation

• Chlorination

• Fluorination

• Oxidation

• Hydrolysis

Others

• Acylation

• Friedel-Crafts

• Bromination

• Chlorination

• Nitration

• Sulfonation

• Desulphonamidation

• Halogen exchange (Halex)

• Organometallics

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Process scale-up and technology transfer

NFIL has developed capability and expertise to scale up from research to pilot and

manufacturing. Dedicated teams manage projects from development trials to final delivery of

the desired compound. The pilot facility at Surat can simulate full scale production conditions

and provide transition from laboratory to production plants.

Technological expertise spans

Fluorinations: With metal fluorides (Halex), anhydrous HF, HF amine complexes, SF4 (under

high pressure) and F2 gas.

High pressure synthesis: Using catalytic hydrogenation and hydro-dechlorinations,

ammonolysis, hydroxylation, halogen exchange using HF, Kolbe reaction.

Vapour phase synthesis: Using alkylation, fluorination, ammoxidation, chlorination,

hydrolysis, oxidation.

Diazotizations: Fluorination (Schiemann reaction and Balz-Schiemann reaction), bromination

and chlorinations (Sandmeyer Reactions), hydrolysis to phenols, deamination and Meerwein

arylation.

Other capabilities: Nitration, bromination, chlorination, acylation, chlorosulfonation,

condensation, methoxylation, organometallic chemistry, Grignard reaction and n-BuLi

applications. Reductive deamination with sodium borohydride, hydrogen peroxide oxidation,

Friedel – Crafts acylation, Fries Rearrangement, Kolbe’s synthesis and hydrolysis.

Surat: New Fluorination Technologies

NFIL has been using AHF and KF as fluorinating agents for several years now. Recently they

have developed capabilities to handle fluorinating reagents like SF4 and fluorine gas. These

reagents are highly hazardous and require special precautions to handle. They are also working

on newer fluorinating agents like XtalFluor in collaboration with Manchester Organics.

Dewas: State-of-the-art technology capabilities

NFIL’s team is capable of undertaking any organic synthesis challenge and assignment involving

chiral chemistry, moisture sensitive reactions, and other speciality requirements. Their focus

though is centered on fluorination based expertise and technologies.

These include:

• Fluorination by anhydrous hydrogen fluoride (AHF) fluorinating reagents.

• Fluorination using Halex Reactions (KF, CsF, Py-HF).

• Reactions using BF3, BF3 adducts, DAST, Selectfluor and other similar reagents.

• Chemistry involving Trifluoromethylation using CF3TMS and other reagent.




Business segments

Refrigeration

NFIL introduced refrigerants into India in 1967 by commissioning its manufacturing plant at

Surat, Gujarat. It is backward integrated into manufacturing of critical intermediates namely

Sulphuric and hydrofluoric acid (HF) which are precursors to refrigerants. NFIL offers

refrigerants under its brand name Mafron and offers refrigerants for various refrigeration and

air conditioning applications.

Key strengths are:

• High performance and high quality refrigerants.

• Suitable for various refrigeration and air conditioning applications.

• Supplied in returnable cylinders, disposable cylinders and ISO tanks.

Industries and application segments

• Window and split room air conditioners.

• Chillers, packaged air conditioners and commercial and industrial refrigeration.

• Intermediate for API’s.

HCFC 22 Process Flow

Salt

Power

Caustic soda

Chlorine

Hydrogen

MethyleneDichloride

Chloroform

CTC

Chlorine

Methanol

Flourspar

Sulphuric Acid

AHF

Gypsum

AHF Plant

ChloromethanePlant

AHF

Chloroform

HCFC-22

Hydrochloric Acid

Refrigerant GasPlant

Caustic Soda Plant


+

+

+

+




Brief on Refrigerant gases

Refrigerant gases are used for cooling purpose and therefore find application in Air conditioners

and Refrigeration. These gases have evolved over the years and also faced phased outs due to

their ozone depleting potential and now owing to their global warming potential. Earlier, gases

like methyl chloride, sulphur dioxide were used as refrigerants. In 1930s chlorofluorocarbons

(CFCs) dominated the market, however, due to their ozone depleting potential; they were

phased out and replaced by HCFCs in 1950s. Over the years, HCFCs were also discovered as

been harmful to environment and currently are been replaced by HFCs. HCFCs are already

phased out in developed countries and are been phased out in developing countries (by 2030).

HFCs, the next generation gases are been seen as viable substitutes. However, owing to their

global warming potential, developed countries are currently contemplating to replace it by

HFOs. Duponts’ HFO-1234YF is been encouraged as viable alternative.

Details of Refrigerant gases

Type Name Energy Ozone Depletion Global Warming

efficiency (COP) Potential (ODP) Potential (GWP)

CFCCFC - 11 6.6 1.00 5.0

CFC - 12 6.3 1.00 11.0

HCFCHCFC - 22 6.1 0.050 1.7

HCFC - 123 6.5 0.025 0.5

HFC - 134A 6.2 – 1.3

HFC - 410A 5.8 – 2.1

HFC HFC - 32 5.9 – 0.8

HFC - 152A 6.3 – 0.1

HFO - 1234YF 6.0 – –

Propane 6.1 – –

Others Carbon dioxide 6.3 – –

Ammonia 6.3 – –

Phase out of R22 gas


0

10

20

30

40

50

60

7080

90

100

2005 2010 2015 2020 2025 2030 2035

Bas

elin

e Pe

rcen

tage





Inorganic fluorides

NFIL has one of the largest Anhydrous Hydrofluoric (AHF) and Aqueous Hydrofluoric acid

manufacturing capacities in India. AHF is used for captive manufacture of various inorganic

fluorides. NFIL enjoys a good market share with large consumers of inorganic fluorides.

Additional investments are planned to enhance capacities and widen the product range.

Products

• Ammonium bifluoride.

• Potassium fluoride.

• Sodium fluoride.

• Potassium fluorotitanate.

• Potassium fluoroborate.

• Hexafluorophosphoric acid.

• HF adducts as HF Pyridine complex and HF urea complex.


• Oil & Gas.

• Stainless Steel.

• Pharmaceutical & Agrochemicals.

• Abrasives.

• Electronics.

• Solar energy.

Speciality fluorochemicals

NFIL’s expertise, built through decades of experience in fluorine chemistry, coupled with state

of art manufacturing infrastructure enables it to produce a wide range of value added speciality

fluoro intermediates in large quantities. NFIL has dedicated multipurpose plants (MPP) to

process multi step products and intermediates which are high in the value chain. It has

capabilities to handle complex chemistries and deliver high quality products in all forms. NFIL

is one of the leading high quality producers of Boron Trifluroide gas and its adducts.

NFIL’s strength in speciality fluoro intermediates

• Strong R&D interface with customers for development of new products and technologies.

• Flexible manufacturing capabilities.

• Ability to execute a variety of complex multi-step reactions.

• Ability to supply and service small and bulk quantities at a short notice.


• Pharmaceuticals.

• Crop protection.

• Hydrocarbon.

• Fragrances.




CRAMS – Leveraging proven skills in Fluorination Chemistry

NFIL has recently started offering Contract Research and Manufacturing Services (CRAMS)

for custom chemical syntheses of fluorinated compounds for the pharmaceuticals, agro

chemicals and speciality chemicals industries. Offerings and capabilities include basic research,

library syntheses, process development, scale-up and small and large batch manufacturing.

NFIL has made investments in cGMP pilot and multi-purpose plant at Dewas, Madhya Pradesh

to service its clients from milligram to kilogram to multi tonne scale. It offers custom synthesis,

and contract research services through both Full Time Equivalent (FTE) and Fee for Service

(FFS) arrangements.

Contract Research Services (CRO)

Contract research services at NFIL include fluorination and introduction of fluorine at the

position of choice in molecule. The increasing needs for extending pipelines and new chemical

entities (NCE) with fluorine in the molecule both for pharmaceutical and agro chemical

application are well understood by the scientific and discovery chemists worldwide.

Contract Manufacturing (CMO)

NFIL’s contract manufacturing is focused to help clients in designing, developing and

commercialising various chemical compounds as per needs of product development life cycles.

Its cGMP pilot plants at Dewas is fully geared to deliver milligrams to kilograms quantities

required by life sciences, agro chemical and other speciality chemical industries. NFIL is further

expanding its manufacturing capabilities by investing in cGMP multi-purpose plant, offering

clients a single source for bulk quantities on a consistent basis.




Details of subsidiaries

Sulakshana Securities Limited (SSL): SSL was created through Sanctioned Scheme of

Rehabilitation (SS) of Mafatlal Industries Limited (MIL) to settle dues of term lenders of MIL.

All debts of SSL stands settled/funded. NFIL received Rs 39.5 mn during FY14 from SSL,

towards partial repayment of interest free advances provided in earlier years. Consequently,

provision for doubtful advances made in this context in earlier years of Rs 38 mn was written-

back. The market value of assets of SSL far exceeds the outstanding advance to SSL of Rs

242 mn. SSL has properties in Lower Parel, Nariman Point and Churchgate. It has rented its

properties on lease and received annual rental income.

Manchester Organics: NFIL holds 51% of Manchester Organics Limited, an operating

specialised chemicals research company in Runcorn, UK.

Mafatlal Industries Ltd.

NFIL held 43% of Mafatlal Denim Limited (MDL) which was its only associate company. With

effect from 01 April 2012, MDL was amalgamated with Mafatlal Industries Limited (MIL)

under the composite scheme of arrangement and amalgamation of MDL and Mishapar

Investments Ltd. with MIL. Consents of the Hon’ble High Courts of Bombay and Gujarat for

the scheme were received and filed with the Registrar of Companies. NFIL received shares of

MIL in lieu of the MDL shares of the same value. The company currently has no associate

company. With the redemption of preference shares of Rs 300 mn by Mafatlal Industries

Limited (MIL) during the year, all financial assistances provided to MIL for their expeditious

rehabilitation stands repaid as on 31 March 2014.

Details of non-trade investments

Book value (Rs mn) FY13 FY14 Market value

Investment in properties 453.7 474.8 ~1,300

150,000 equity shares of Sulakshana Securities Ltd. 1.5 1.5 NA

5,100 equity shares of Manchester Organics Ltd. 326.5 326.5 NA

Stake in Mafatlal Denim Ltd. 155.3 – –

Stake in Mafatlal Industries Ltd. – 155.3 273.0

Stake in NOCIL Ltd. 113.8 113.8 168.0




Industry

Fluorine

Fluorine atom is an extremely reactive and poisonous elemental gas. However, its compounds

are known to be best inert and stable as well. It is this characteristic of fluorine which helps it

to find more and more applications. Fluorine is the 24th most abundant element in the known

universe and the 13th most abundant within the earth’s crust. Primary mineral source of

fluorine is fluorite. About half of mined fluorite is used directly in steel-making while

other half is converted to hydrogen fluoride (HF) which is the precursor to many

fluorochemcials.

Fluorine finds its usage right from Toothpaste to Teflon (cookware coating), rocket fuel,

refrigeration, pharma and agrochemicals. The most important end-use segments of the fluorine

economy are steel pickling, aluminum smelting, fluoropolymers and fluorochemicals.

The steel industry is a sizeable user of HF in so-called “pickling” lines, where steel is stripped

of any surface corrosion or contamination by an acid bath. Metspar is often added to furnaces

making steel to help lower the melting point and save money otherwise spent on energy.

Cryolite and Aluminum fluoride are used during the production of aluminum, as they melt at

much lower temperatures than aluminum oxide (Al2O3) and also dissolve aluminum oxide

and make it possible to electrolytically extract aluminum metal, consuming much less energy

than would be required otherwise.

Well-known fluoropolymer is Dupont’s Teflon, a compound properly known as poly-

tetrafluoroethylene, or PTFE. The use of Teflon is gaining traction with consumers in India

and China increasingly using Teflon-coated cookware and kitchen utensils. Flouropolymer like

poly-vinylidenefluoride (PVDF) is also used in lithium batteries. Along with PVDF, a polymer

known as fluorinated ethylene propylene (FEP) is used in the jackets of fibre optic cables.

Refrigerants like chlorofluorocarbons (CFCs), hydrochlorofluorocarbons (HCFCs),

hydrofluorocarbons (HFCs) and hydrofluoroolefins (HFOs) are termed as Fluorochemicals.

Fluorspar

Fluorspar is the commercial name for the mineral fluorite (calcium fluoride:CaF2), which when

pure, consists of 51.1% calcium and 48.9% fluorine. Fluorine represents around 0.06 to 0.09

%of the earth’s crust and predominantly occurs in the mineral fluorspar. Commercial fluorspar

is graded according to quality and specification into acid-grade, metallurgical grade and ceramic

grade. Acidspar is the highest-grade form of fluorspar and has the highest indirect use in

downstream industry. Fluorspar is the dominant source for chemical element Fluorine (F), and

due to Fluorine’s extreme chemical properties, it is largely irreplaceable in its use.

Metallurgical grade (metspar) = 60-85% CaF2 with a limit on silica content, and is used as a

fluxing agent in the making of steels. In essence, the addition of metspar lowers the melting

point of steel by an appreciable amount, making steel far less expensive to manufacture.

Ceramic grade = 85-96% CaF2 is used to make certain glasses and ceramics. Given the chemical

stability of compounds containing F, these materials are able to withstand high temperatures

without issue, and include cookware, labware.




Acid grade (acidspar) = 97%+ CaF2, Acidspar is so called because it is converted to hydrofluoric

acid (HF), the basic starting point for almost all fluoro chemistry. Acidspar is also the starting

point for the creation of one of the key compounds used in the smelting of aluminum, aluminum

fluoride (AlF3). Aluminum refining is a major consumer of acidspar.

The global supply and demand for fluorspar has seen steady growth over the decade 1998 to

2008. 2009 witnessed contraction in acidspar supply and demand followed by a recovery in

2011. During 2012 and through 2013 demand for acidspar has softened which has been

reflected in the price. The China export price for acid-spar is a traditional benchmark price

and is currently published as US$ 310–330/tonne (Industrial Minerals Magazine).

The largest acidspar consuming regions outside of China are Western Europe, Canada and the

USA, collectively importing more than 900,000 tonnes of acidspar per year. The uncertainty

of Chinese acidspar supply has resulted in increasing pressure on these regions to secure long-

term sources and recent upstream merger and acquisition integration in the industry reflects

this position.

Fluorite HF (acidspar) x HFC

Metal smelting(metspar)

Cryolite

HCFC

CFC

Teflon, otherfluoropolymers

Water fluoridation

Uraniumenrichment

Sulfur hexafluoride

WF6, ReF6, NF3,halogen fluorides,

niche organo-fluorines

Direct use: glass,ceramics, welding

Fluorapatite

Steel pickling, metalfluorides

Fluorosilicic acid

Petrochemicalcatalyst

x

Fluorine chain


Fluorine gas

Fluorocarbons49%

Waste (phosphogypsum, byproduct offertilizer manufacture)

Legend

Uses of inoraganic fluorides

Uses of fluorocarbons

Uses of fluorine gas

47%

4%

1%

99%

42%

33%

16%

5%

2%

2%

95%

55%

42%

3%

5%

47%

40%

13%

40%




Financial analysis

946838

918925

526

114 101

426526576

0

200

400

600

800

1,000

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

E

FY16

E

Rs

mn

0.0

0.1

0.2

0.3

0.4

0.5

0.6

x

Debt Debt to Equity

0

500

1,000

1,500

2,000

2,500

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

E

FY16

E

Rs

mn

0

50

100

150

200

250

Rs

APAT AEPS

Revenue and revenue growth EBITDA and EBITDA growth


7,21

9

4,84

3

5,48

2

5,49

9

6,31

2

4,29

7

4,29

2

4,15

6

2,88

1

2,56

4

01,0002,0003,0004,0005,0006,0007,0008,000

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

E

FY16

E

Rs

mn

(40)

(20)

0

20

40

60

80

%

Net Sales Growth (%)

322

359

953

1,43

3

1,12

5

2,50

5

827

660

785

960

0

500

1,000

1,500

2,000

2,500

3,000

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

E

FY16

E

Rs

mn

0510152025303540

%

EBITDA EBITDA (%)

PAT and PAT growth Capex


509

313

78 14 238

616

164

164

464

174

0

100

200

300

400

500

600

700

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

E

FY16

E

Rs

mn

0.0

0.2

0.4

0.6

0.8

1.0

1.2

x

Capex As set turn (X)

Debt to decline in future Return ratios to improve


12.110.89.98.8

53.3

22.4

31.4

24.2

8.6 2.90

10

20

30

40

50

60

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

E

FY16

E

%

0

10

20

30

40

50

60

70

%

RoE RoCE




Quarterly results (Standalone)

(Rs mn) Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14

Net Sales 1,949 1,920 1,595 1,546 1,565 1,373 1,245 1,045 1,144 992 1,097 1,238

YoY (%) 125.9 145.0 69.6 (9.4) (19.7) (28.5) (21.9) (32.4) (26.9) (27.7) (11.9) 18.4

Gross Profit 1,394 1,381 960 809 815 739 641 494 580 553 590 626

Gross Margins (%) 71.5 71.9 60.1 52.3 52.1 53.8 51.5 47.3 50.7 55.7 53.8 50.5

Staff Cost 90 79 89 138 102 95 98 147 132 116 120 116

Other Expenditure 405 393 296 508 351 329 327 367 273 280 342 378

As % of Net Sales 20.8 20.5 18.5 32.9 22.4 24.0 26.3 35.1 23.9 28.2 31.2 30.5

Total Expenditure 1,053 1,040 1,088 1,360 1,262 1,069 1,034 1,080 970 834 970 1,110

Operating Profit 896 880 507 187 303 304 212 (35) 175 158 127 127

Margins (%) 46.0 45.8 31.8 12.1 19.4 22.1 17.0 (3.4) 15.3 15.9 11.6 10.3

Other operating income 6 10 9 20 4 5 4 5 4 6 4 6

EBITDA 902 890 516 207 307 310 216 (30) 179 164 131 133

EBITDA Margin (%) 46.1 46.1 32.1 13.2 19.6 22.5 17.3 (2.9) 15.6 16.5 11.9 10.7

YoY (%) – – – (66.7) (66.0) (65.2) (58.2) (114.7) (41.8) (46.9) (39.4) (538.9)

Other Income 33 33 42 784 36 34 27 45 63 67 30 133

EBIT 895 881 511 942 295 294 193 (35) 191 179 110 215

EBIT margins 45.9 45.9 32.0 60.9 18.8 21.4 15.5 (3.3) 16.7 18.1 10.0 17.3

Interest 6 9 13 7 11 16 13 20 12 11 14 17

Depreciation 40 42 47 48 48 49 50 49 51 52 51 52

PBT 889 872 498 935 283 278 180 (55) 179 168 96 198

Tax 287 284 160 151 90 88 55 21 45 45 27 16

Tax/PBT 32.3 32.5 32.2 16.2 31.8 31.7 30.8 (37.5) 25.3 26.9 28.7 8.3

Income 602 588 338 784 193 190 124 (76) 134 123 68 181

Adjusted PAT 602 588 338 784 193 190 124 (76) 134 123 68 181

YoY (%) 295.3 962.9 237.7 91.8 (67.9) (67.7) (63.2) (109.7) (30.7) (35.3) (45.0) (338.4)

PAT Margin(%) 30.9 30.6 21.2 50.7 12.4 13.8 10.0 (7.3) 11.7 12.4 6.2 14.6

No. of shares in mn 9.76 9.76 9.76 9.76 9.76 9.76 9.76 9.76 9.76 9.76 9.76 9.76

Adjusted EPS 61.7 60.3 34.6 80.4 19.8 19.5 12.8 (7.8) 13.7 12.6 7.0 18.6




Annual Segmental Revenues (Consolidated)

Rs mn FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E

Refrigerants 1,268 1,386 2,296 2,480 2,387 4,469 2,331 1,540 1,602 1,682

% of Sales 49.4 48.1 55.2 57.8 55.6 61.9 42.5 31.8 29.1 26.6

Growth (%) – 9.3 65.6 8.0 (3.8) (18.3) (9.7) (12.5) 4.0 5.0

Specialty Chemicals 794 853 1,075 908 1,175 1,590 1,780 1,560 1,794 2,063

% of Sales 31.0 29.6 25.9 21.2 27.3 22.0 32.5 32.2 32.6 32.7

Growth (%) – 7.4 26.0 (15.6) 29.4 35.3 11.9 (12.4) 15.0 15.0

Bulk Fluorides 543 671 808 596 770 980 990 1,130 1,243 1,367

% of Sales 21.2 23.3 19.4 13.9 17.9 13.6 18.1 23.3 22.6 21.7

Growth (%) – 23.5 20.5 (26.2) 29.2 27.2 1.0 14.1 10.0 10.0

CRO/CRAMS – – – – – – 140 630 860 1,200

% of Sales – – – – – – 2.6 13.0 15.6 19.0

Growth (%) – – – – – – – 350.0 36.5 39.5

Quarterly revenue growth Quarterly gross margin


1,54

6

1,56

5

1,37

3

1,24

5

1,04

5

1,14

4

992

1,09

7

1,23

8

1,94

9

1,92

0

1,59

5

0

500

1,000

1,500

2,000

2,500

Jun-

11

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Rs

mn

(50)

0

50

100

150

200

%

Net Sales YoY%

1,39

4

1,38

1

960

809

815

739

641

494

580

553

590

626

0200400600800

1,0001,2001,4001,600

Jun-

11

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Rs

mn

01020304050607080

%

Gros s Profit (%)

Quarterly EBITDA and margin Quarterly PAT


902

890

516

207

307

310

216

179

164

131

133

(30)(200)

0

200

400

600

800

1,000

Jun-

11

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Rs

mn

(10)

0

10

20

30

40

50

%

EBITDA EBITDA margin (%)

602

338

193

190

124

134

123

68

181

(76)

784

588

(200)

0

200

400

600

800

1,000

Jun-

11

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Rs

mn

(200)

0

200

400

600

800

1,000

1,200%

PAT Growth (%)




Annexure I

Product list for Refrigerants

Product Applications Packaging

HCFC 22 Window and split Room Air conditioners, Chillers, Commercial and Industrial Returnable cylinders, non returnable disposableRefrigeration Units and intermediates for Life science. cylinders and ISO tank.

HCFC 22 Intermediate for fluoropolymer resins Returnable Iso TankPTFE Grade

HFC 134a Domestic and industrial Refrigerators, Deep Freezers, Water Coolers, Foam Returnable cylinders, non returnable disposable

Blowing and Mobile Airconditioning (MAC) cylinders ,non returnable cans and ISO tank.

HFC 404a Refrigerated vans and cold rooms Returnable cylinders

HFC 410a Residential and Commerical Airconditiong, Window and Split air conditioners, Returnable cylindersChillers

Product list for Inorganic division

Product Packaging Industry

Aluminium Fluoride 25/50 kg HDPE bags Frosting of Bottles, Oil Well, Sugar

Ammonium Bifluoride 25/35 kg HDPE bags Electroplating , Sugar Industry,Oil Well

Drilling

Anhydrous Hydrofluoric Acid 600 kg tonners/ 17mt ISO tanks Refrigrant Gases, Oil Refinery

Anhydrous Hydrofluoric Acid ISO tanks Refrigrant Gases, Oil Refinery

Dilute Hydrofluoric Acid - 20% 30/35 kg HDPE carboys / 220 kg drums Steel Industry

Dilute Hydrofluoric Acid - 30% 30/35 kg HDPE carboys / 220 kg drums Steel Industry

Dilute Hydrofluoric Acid - 40% 38 kg HDPE carboys / 220 kg drums Steel Industry


Dilute Hydrofluoric Acid - 50% 38 kg HDPE carboys / 220 kg drums Steel Industry / Glass Industry


Dilute Hydrofluoric Acid - 60% 38 kg HDPE carboys / 220 kg drums Steel Industry / Glass Industry


Fluboric Acid 50% 25/30/40 kg HDPE carboys / 220 kg drums Electroplating Industry

Hexafluoro Phosphoric Acid 40 kg carboys Pharmaecuticals Inetremediates

HF Pyridine 55% 25 kg HDPE carboys/ 150 kg MS HDPE composite drums Pharmaecuticals Inetremediates

HF Pyridine 70% 25 kg HDPE carboys/ 150 kg MS HDPE composite drums Pharmaecuticals Inetremediates

HF Urea 70& 25 kg HDPE carboys/ 150 kg MS HDPE composite drums Pharmaecuticals Inetremediates

Mafrolite 40 kg HDPE bags Abrasive/ Automobiles

(Synthetic Cryolite - Crushed)

Potassium Bi Fluoride 25/500/600 kg HDPE bags Pharmaceuticals / Atomic

Potassium Fluoride 25/7 kg fibreboard / 300 kg jumbo bags Pharmaecuticals Inetremediates / Agro

Chemicals

Potassium Fluoro Borate 25 kg HDPE bags Foundry Flux

Potassium Fluoro Titanate 25 kg HDEP bags Foundry Flux/ Titanium

Sodium Bi Fluoride 25/500/600 kg HDPE bags Tin Plates

Sodium Fluoride 25/500/600 kg HDPE bags Toothpaste/ Pharmaceuticals Intermediates




Product List for Speciality Fluorochemicals

Product Industry

2 ,4 -Difluorobenzyl Amine Pharmaceuticals

2 -Amino-Benzotrifluoride Crop protection/Pharmaceuticals/Splty Pigment/Dyes

2 -Fluoro Nitrobenzene Pharmaceuticals

2,3,5,6 -Tetra Fluorobenzyl Alcohol Crop Protection/Personal Care

2,4- Difluorobenzoicacid Pharmaceuticals

2- Bromo Fluoro Benzene Pharmaceuticals

2- Fluoro Aniline Pharmaceuticals

2- Fluoro Phenol Crop protection/Pharmaceuticals

2- Fluoro Propionic acid Pharmaceuticals

2- Fluoro- 4- Bromo Aniline Crop protection/Pharmaceuticals

2-Amino -5-Chloro Benzotrifluoride Crop protection/Splty Pigment/Dyes

2-Bromo- 4- Fluoro Aniline Crop protection/Pharmaceuticals

2-Chloro-4-Fluoro Toluene Crop protection

2-Fluoro-5-Hydroxy Benzotrifluoride Crop protection

2-Methyl-3(Trifluoromethyl) Aniline Pharmaceuticals

3 - Fluoro Toluene Crop protection/Pharmaceuticals

3 -Amino-Benzotrifluoride Crop protection/Pharmaceuticals

3 -Bromo- 1,1,1-Trifluoroacetone Pharmaceuticals

3 -Chloro Benzotrifluoride Crop protection/Pharmaceuticals

3 -Chloro- 4- FluoroBenzotrifluoride Crop protection

3- Amino- 4- Chloro Benzotrifluoride Pharmaceuticals/Splty Pigment/Dyes

3- Bromo-Benzotrifluoride Pharmaceuticals

3- Hydroxy Benzotrifluoride Crop protection/Pharmaceuticals

3-(Trifluoromethyl) Cinnamicacid Pharmaceuticals

3-Chloro-2-Fluoro Benzoicacid Pharmaceuticals

4 -Bromo-Benzotrifluoride Pharmaceuticals

4 -Fluoro Aniline Crop protection

4 -Fluoro Anisole Pharmaceuticals

4 -Fluoro Benzaldehyde Pharmaceuticals

4 -Fluoro Benzyl Chloride Crop protection/Pharmaceuticals

4 -Fluoro Nitrobenzene Pharmaceuticals/Personal Care

4,4 -Difluro cyclohexane Carboxylic Acid Pharmaceuticals

4,4’ – Difluoro Benzophenone Pharmaceuticals/Hydrocarbon/Polymers/Personal Care

4- Bromo Fluoro Benzene Crop protection/Pharmaceuticals

4- Fluoro Benzonitrile Crop protection/Pharmaceuticals




Product Industry

4- Fluoro Benzyl Amine Pharmaceuticals

4- Fluoro Phenol Crop protection/Pharmaceuticals

4- Fluoro Toluene Crop protection/Pharmaceuticals

4-Trifluoromethyl Salicylic acid Pharmaceuticals

Benzotrifluoride Crop protection/Pharmaceuticals/Splty Pigment/Dyes

BF3 Acetic Acid Pharmaceuticals/Flavours and Fragrences/Hydrocarbon/

Polymers

BF3 Etherate Crop Protection/Pharmaceuticals/Flavours and Fragrences/

Hydrocarbon/Polymers

BF3 Phenol Crop Protection/Pharmaceuticals/Hydrocarbon/Polymers

BF3 THF Crop protection/Pharmaceuticals

BF3. Acetonitrile Crop protection/Pharmaceuticals

Boron Trifluoride(gas) Pharmaceuticals/Hydrocarbon/Polymers

Fluoro Benzene Crop protection/Pharmaceuticals

Methyl -2- Fluoropropionate Pharmaceuticals




Detailed financials

Income Statement

Yr end 31 Mar (Rs mn) FY11 FY12 FY13 FY14 FY15E FY16E

Net Sales 4,297 7,219 5,482 4,843 5,499 6,312

Raw Material Cost 1,716 2,553 2,631 2,283 2,579 2,938

RMC (%) 39.9 35.4 48.0 47.2 46.9 46.6

Personnel Cost 298 490 535 591 650 721

Other exp 1,168 1,698 1,506 1,329 1,507 1,717

Other Operating income 11 27 18 20 22 24

EBITDA 1,125 2,505 827 660 785 959

EBITDA margin (%) 26.1 34.6 15.0 13.6 14.2 15.1

Depreciation 138 188 208 218 228 240

Other Income 106 758 141 308 314 319

EBIT 1,093 3,075 761 750 871 1,039

Interest paid 36 36 61 55 52 48

Pre-tax profit 1,057 3,039 700 827 819 991

Tax (current + deferred) 344 886 258 148 188 228

Net profit 713 2,153 441 680 631 763

Asso Profit & Minority Int (0) 21 (7) (23) (7) (8)

Adjusted net profit 713 2,174 434 524 624 755




Balance Sheet


Current assets 1,583 2,981 2,792 3,516 3,842 4,409

Cash & bank 177 1,258 1,132 1,663 1,844 2,237

Debtors 578 665 744 905 997 1,110

Inventory 551 886 774 656 669 682

Loans and advances 261 111 124 260 295 339

Non-current assets 3,620 4,661 4,464 4,278 4,517 4,500

Fixed assets (Net block) 1,879 2,577 2,498 2,475 2,711 2,646

Add: Capital WIP 322 52 87 57 57 57

Investments 478 1,400 1,192 1,018 978 973

Total assets 5,203 7,641 7,256 7,794 8,359 8,910

Current liabilities 1,329 2,275 1,579 1,530 1,657 1,649

Creditors 553 464 506 609 688 784

Other current liabilities 130 105 131 216 226 236

Non-current liabilities 491 527 566 618 625 632

Total debt 491 946 838 576 526 426

Total Liabilities 1,819 2,802 2,145 2,148 2,282 2,281

Total shareholder's fund 3,384 4,777 5,042 5,553 5,983 6,533

Paid up capital 98 98 98 98 98 98

Reserves and surplus 3,287 4,679 4,944 5,456 5,886 6,435

Total equity and liab. 5,203 7,641 7,256 7,794 8,359 8,910




Cash Flow


Pre-tax profit 1,057 3,039 700 827 819 991

Depreciation 54 188 208 218 228 240

Chg in working capital (245) 103 85 (28) (107) (146)

Total tax paid (362) (791) (219) (139) (188) (228)

Cash flow from oper. (a) 395 2,481 788 904 775 876

Capital expenditure (238) (616) (164) (164) (464) (174)

chg in investments (469) (1,112) (417) (296) 40 5

Cash flow from inv. (b) (708) (1,635) (534) (431) (395) (140)

Free cash flow (a+b) (312) 847 253 474 380 736

Equity raised / (repaid) (136) 0 0 0 0 0

Debt raised / (repaid) (13) 455 (108) (261) (50) (100)

Dividend (incl. tax) (89) (193) (840) (171) (97) (194)

Other financing activities (76) (218) (56) 20 (52) (49)

Cash flow from fin. © (313) 44 (1,004) (413) (199) (343)

Net chg in cash (a+b+c) (625) 891 (750) 61 181 393




Balance Sheet (Consolidated)

Period end (Rs mn) Mar 13 Mar 14 Mar 15E Mar 16E

Share Capital 98 98 98 98

Reserves & surplus 4,944 5,456 5,886 6,435

Shareholders' funds 5,042 5,553 5,983 6,533

Minority Int, Share Appl, 70 92 94 96Pref Capital

Non-Current Liabilities 566 618 625 632

Long-term borrowings 1 2 2 2

Other Long term liab, Prov, DTL 565 615 622 629

Current liabilities 1,579 1,530 1,657 1,649

Short-term borrowings, 836 574 524 424Curr Maturity

Other Current Liab + Provi 742 956 1,133 1,225

Total (Equity and Liab.) 7,256 7,794 8,359 8,910

Non-current assets 4,464 4,278 4,517 4,500

Fixed assets (Net block) 2,585 2,532 2,768 2,703

Non-current Investments 1,192 1,018 978 973

Long-term loans and advances 277 318 362 415

Other non-current assets, 410 410 410 410DTA, Goodwill

Current assets 2,792 3,516 3,842 4,409

Cash & Current Investment 1,132 1,663 1,844 2,237

Other current assets 1,659 1,853 1,998 2,173

Total (Assets) 7,256 7,794 8,359 8,910

Total Debt 838 576 526 426

Capital Employed 6,514 6,838 7,226 7,685

Income Statement (Consolidated)


Net Sales 5,482 4,843 5,499 6,312

Growth (%) (24.1) (11.7) 13.5 14.8

Operating expenses (4,673) (4,203) (4,736) (5,377)

Operating profit 809 640 763 935

Other operating income 18 20 22 24

EBITDA 827 660 785 959

Growth (%) (67.0) (20.2) 19.0 22.2

Depreciation (208) (218) (228) (240)

Other income 141 308 314 319

EBIT 761 750 871 1,039

Finance Cost (61) (55) (52) (48)

Profit before tax 700 827 819 991

Tax (current + deferred) (258) (148) (188) (228)

P/(L) for the period 441 680 631 763

P/L of Associates, (7) (23) (7) (8)Min Int, Pref Div

Reported Profit/(Loss) 434 657 624 755

Adjusted Net profit 434 524 624 755

Growth (%) (80.0) 20.8 19.0 21.1

Cash Flow Statement (Consolidated)


Profit before Tax 700 827 819 991

Depreciation 208 218 228 240

Change in working capital 85 (28) (107) (146)

Total tax paid (219) (139) (188) (228)

Others 88 77 (44) (115)

Cash flow from oper. (a) 788 904 775 876

Capital expenditure (164) (164) (464) (174)

Change in investments (417) (296) 40 5

Others 47 29 29 29

Cash flow from inv. (b) (534) (431) (395) (140)

Free cash flow (a+b) 253 474 380 736

Debt raised/(repaid) (108) (261) (50) (100)

Dividend (incl. tax) (840) (171) (97) (194)

Others (56) 20 (52) (49)

Cash flow from fin. (c) (1,004) (413) (199) (343)

Net chg in cash (a+b+c) (750) 61 181 393

Key Ratios (Consolidated)

Period end (%) Mar 13 Mar 14 Mar 15E Mar 16E

Adjusted EPS (Rs) 44.4 53.7 63.9 77.4

Growth (80.1) 20.8 19.0 21.1

CEPS (Rs) 65.8 76.0 87.2 101.9

Book NAV/share (Rs) 516.5 568.9 613.0 669.3

Dividend/share (Rs) 15.0 16.0 17.0 18.0

Dividend payout ratio 39.4 27.8 31.1 27.2

EBITDA margin 15.0 13.6 14.2 15.1

EBIT margin 13.8 15.4 15.8 16.4

Tax Rate 37.0 33.9 23.0 23.0

RoCE 11.9 11.2 12.4 13.9

Total debt/Equity (x) 0.2 0.1 0.1 0.1

Net debt/Equity (x) (0.1) (0.2) (0.2) (0.3)

Du Pont Analysis - ROE

Net margin 7.9 10.8 11.3 12.0

Asset turnover (x) 0.7 0.6 0.7 0.7

Leverage factor (x) 1.5 1.4 1.4 1.4

Return on equity 8.8 9.9 10.8 12.1

Valuations (Consolidated)

Period end (x) Mar 13 Mar 14 Mar 15E Mar 16E

PER 4.8 6.5 9.7 8.0

PCE 3.2 4.6 7.1 6.1

Price/Book 0.4 0.6 1.0 0.9

Yield (%) 7.1 4.6 2.7 2.9

EV/EBITDA 2.1 3.5 6.0 4.4



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B&K Investment Ratings1. BUY: Potential upside of > +25% (absolute returns) 3. UNDERPERFORMER: 0 to -25%

2. OUTPERFORMER: 0 to +25% 4. SELL: Potential downside of < -25% (absolute returns)

B&K Universe Profile

By Market Cap (US$ mn) By Recommendation

62 64

8 3 1

152

0

20

4060

80

100

120140

160

180

Buy OP UP Sell NR URno

. of c

ompa

nies

23

105

162

020

4060

80

100120

140160

180

> $1bn $200mn - $1bn <$200mn

no. o

f com

pani

es


navin fluorine international - initiating coverage - june 14

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