Kiri Dyes and Chemicals is engaged into the business of manufacturing of reactive dyes such as Synthetic Organic Dyes (SO dyes) used in cotton fabrics like garments, dress materials, bed-sheets, and carpets. It manufactures dye intermediates that are used in the manufacturing of dyes. It manufactures more than 120 dyestuffs used in textiles, leather, paint and printing-ink industries with total production capacity of 10800 MT per annum. Apart from (S. O. Dyes), it manufactures dyes intermediates like vinyl sulphone and H-Acid. It has manufacturing facilities located at Ahmedabad and Padra Taluka near Vadodara. The company intends to expand by backward integration.
Plans?
Of the total capital of Rs 56.25 crore (at the higher end of the price band), the company intends to put up, it plans to use Rs 42.07 crore 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 its existing unit at Village Dudhwada, Taluka Padra, District Vadodara. To meet its capital requirements, the company plans to utilise Rs 6.6 crore. To fund its unit of dyes and intermediates at Vatva in Ahmedabad, the dye-manufacturer has earmarked Rs 1.73 crore of the total capital.
Investonomics
The company, on the operational front, has delivered encouraging performance(stand alone). Its operating profit margin (OPM) has increased on a consistent and linear basis. For the nine months as of September 2007, the company has delivered around 9.5% operating profit margin. Also on the net profit margin, the company has increasing growth. For the nine months as of September 2007, the company has delivered around 8.5% net profit margin. However, sustainability of both the margins would hold significance for the company to become a good investment option. The company is aiming at backward integration, which is a good strategy as it involves total integration and fair margins. The company derives 63% of its revenues from exports and hence the susceptibility of its revenues to currency fluctuations cannot be pronounced insignificant. Also the company?s promoters are in the same line of business and hence conflict of businesses cannot be ruled out.
Valuation
On the valuation front, considering the post-equity basis and annualised earnings, the company quotes a P/E of around 18(x) and 15(x) respectively at the higher and lower end of the price band. On an immediate comparison with its peers like Aarti Industries (total income?Rs 260 crore) and Atul Ltd (total income?Rs 290 crore), which are operationally bigger and quote a P/E of around 6.2(x) and 8(x) respectively, the company?s (total income?Rs 14 crore, annualised) offering seems high-priced.
Investors must take into account of these facts before investing.