Eco-friendly fuels brighten the future

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: for 28% of our total imports last year, the government is actively promoting the manufacturing and production of bio fuels and Chemcel should greatly benefit from the tax deductions it receives from this diversification. The company’s primary business is in the agrochemical industry, since they manufacture pesticides, mainly those used for rice cultivation.

Chemcel was incorporated on September 29, 1995 and their main products are in three forms: liquids, granules and dusts. They have CIB registrations for 34 products to manufacture pesticides for crops like paddy, cotton, sugarcane, turmeric, chillies, pulses, vegetation, etc and are currently manufacturing 17 of these products. Chemcel hexa, cosy, counter and celphate are the highest selling products they currently have, with distribution strength of over 18 distributors, 350 direct dealers and 550 retailers.

Promoters and concerns

The promoters and promoter group of the company currently hold 57.23% of the company shares, and will continue to hold a 29.4% stake in the company post-issue. The chairman and managing director, as well as other key personnel have a great deal of experience within the agrochemical industry and have been following the agricultural markets in India for a long time. Since the essentially planned on launching their IPO in 2006, the company has closely understood the bio fuels world for sometime now. However, the current management team has no experience in running a bio-diesel manufacturing unit so far. “We do however plan to hire experienced personnel within this field,” says Vijaya Kumar, Md, Chemcel. The company’s major weakness however is that while the company has shown moderate growth over the past few years, it is still a small company with rather big expansion and future plans, in an industry, which requires a high working capital. Also, the company has shown negative cash flows for the past few years on account of the same, though with the diversification into bio fuels, this should change. Another point for future investors to note is that the manufacturing of bio-diesel will only commence post-September 2009, after which the company financials should really pick up. However, the fundamentals of Chemcel are strong, with an even growth story essayed so far.

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