SPIC Ltd
Company Overview
Incorporated in 1969, Chennai based Southern Petrochemical Industries Corporation Ltd. (SPIC) is one of India’s leading fertilizer manufacturer. Its manufacturing units are spread across Tamil Nadu and are capable of producing 6,20,000 MT of Neem Coated Urea. SPIC is a household name in Tamil Nadu especially the farming community.
Associates & JV
Tuticorin Alkali is the only producer of Soda Ash using the Japanese Toyo Soda Dual Process. Its manufacturing unit is located at Tuticorin in Tamil Nadu contiguous to the SPIC Plant. The unit co-produces Ammonium Chloride fertilizers. SPIC holds 23.46% stake in the company.
Tamilnadu Petroproducts Ltd. (TPL) produces Linear Alkyl Benzene (LAB) used in manufacturing of surfactants for detergents. It is also used in manufacturing sanitizers, which at present are in great demand due to the current Covid-19 pandemic. SPIC holds 16.93% stake in it.
CAPEX
SPIC has incurred capex of around Rs.500 crore over the past 3 years to convert to natural gas-based operations from the high-cost naphtha. This will boost the company’s production volume from 620000 to 700000 MT and also reduce its storage cost. SPIC has already entered into an agreement with IOC and ONGC for supply of natural gas and has started receiving it from IOC. This will lead to a huge turnaround in the company.
Valuations
SPIC has RoCE of 12.9% and RoE of 16.7%. The company has been reducing its debts and has : equity (DE) ratio of just 0.23x and has delivered a good profit growth of 45.44% CAGR over the past 5 years. Currently, the stock is available at PE of 15.4
