India Glycols is Pursuing Expansion Opportunities

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India Glycols (BSE: 500201) is one of the leading manufacturers of glycols, ethoxylates and PEGs, performance chemicals, glycol ethers and acetates, natural gums and potable alcohol in India.

The Company is actively pursuing expansion opportunities for its business in different areas. The Company is setting up 10 ton biomass/day capacity pilot plant to convert lignocellulosic agricultural waste biomass to ethanol. The company is also evaluating plans to further expand its Ethoxylates capacity to improve its product mix and also considering the setting up its own power plant to reduce its dependence on external power.

The chemical industry size is estimated to about 3% of India’s GDP. In India, the chemical industry is highly diverse, with major sectors like Petrochemicals, Inorganic Chemicals, Organic Chemicals, Fine and specialties, Bulk Drugs, Agrochemicals, Paints and Dyes, etc. Western India accounts for 45-50% of total Indian chemical industry.  It accounts for 13-14% of total exports and 8-9% of total imports of the country.

Reports suggest that India is 12th largest in the world and 3rd largest in Asia in terms of volume. The per capita consumption of products of chemical industry in India is about 1/10th of the world average suggesting more room for growth in the sector. The recent investments in R&D resulted in growth in the knowledge sector consisting of specialty chemicals, fine chemicals and pharmaceuticals.

The advance estimates of The Central Statistical Organization (CSO) have pegged the growth of Services at 6.6% in 2012-13. It is projected to grow at 7.7% in 2013-14. While Goldman Sachs has paged India’s GDP growth rate at 6.4% for financial year ending March 2014.

The stock is trading well below its book value of Rs 182. The stock is currently trading at PE of 3.3 which provides some safety to the  industry average of 4.3. With the equity capital of Rs 309.6 million, its market cap is Rs 4240 million at the current market price of Rs 137. Considering the undergoing expansion plan will improve earnings, the stock is looks attractive for the long term.