MULTIBAGGERS : BINDAL AGRO

Ashish Chugh, Investment Advisor

Oswal Chemicals & Fertili : Reco Price Rs. 32.55 CMP: Rs.32.85 (Gain 0.92%)

As on 31st March 2006, Oswal Chemicals and Fertilizers had cash and bank balance of around Rs 1300 crores. Assuming an annual return of 10% on the surplus cash with the company, the current cash could be around Rs 1450 crores. The market cap of this debt free company at the current price is Rs 835 crores.
Oswal Chemicals & Fertilizers Ltd.
CMP – Rs. 32.55 NSE Symbol – BINDALAGRO
For Oswal Chemicals & Fertilizers, its name itself is a misnomer. The company’s current business has nothing to do with either Chemicals or fertilizers – Infact, as of now, the company is without any business. Oswal Chemicals & Fertilizers is a part of Punjab based Abhay Oswal group. The company had put up mega fertilizer projects at Shahjahanpur in Uttar Pradesh and Paradeep in Orrisa.
The company sold off both the plants in FY 2005-06. The company sold off its Urea Plant at Shahjanpur, U.P. to Kribhco Shyam Fertilizers Ltd. (KSFL) for a sale consideration of around Rs1900 crores. The company also sold its DAP plant located at Paradeep, Orissa to Indian Farmers Fertiliser Cooperative Ltd. (IFFCO). The company received a consideration of Rs 240 crores towards the Sale of the plant and in addition, IFFCO has taken over liabilities aggregating to Rs 2053 Crores of Term loan lenders and Working Capital lenders and OCPS/OCCRPS liability aggregating to Rs 327 Crores.
With the sale of both the plants, the company’s balance sheet is now debt free, the company’s net worth has become positive and the company has a Cash and Bank balance of around Rs 1300 crores (as on 31st March 2006).
The latest financials are given as under :-
QUARTERLY - LATEST RESULTS - Oswal Chemicals & Fertilizers Ltd (Curr: Rs in Cr.)
Particulars Quarter Ended Quarter Ended Quarter Ended Year Ended Year Ended Year Ended

(Jun 07) (Jun 06) (% Var) (Mar 07) (12) (Mar 06) (12) (%Var)
Sales 28.88 31.29 -7.7 190.38 781.85 -75.7
Other Income 0.19 0 - 3.55 701.54 -99.5
PBIDT 24.15 21.16 14.1 99.68 390.93 -74.5
Interest 0.14 0.14 0 0.23 142.44 -99.8
PBDT 24.01 21.02 14.2 99.45 248.49 -60
Depreciation 0.4 0.3 33.3 1.83 88.77 -97.9
PBT 23.61 20.72 13.9 97.62 159.72 -38.9
Tax 0.03 0.04 -25 0.21 0.33 -36.4
Deferred Tax 0 0 - 0 0 -
PAT 23.58 20.68 14 97.41 159.39 -38.9

(Source: Capitaline)
Latest Data As On 06/08/2007
Latest Equity(Subscribed) 256.81
Latest Reserve 1913.22
Latest Bookvalue -Unit Curr. 84.5
Latest EPS -Unit Curr. 3.91
Latest Market Price -Unit Curr. 32.5
Latest P/E Ratio 8.55
52 Week High -Unit Curr. 53
52 Week High-Date 10/30/2006
52 Week Low -Unit Curr. 21.5
52 Week Low-Date 8/3/2006
Market Capitalisation 834.6
Stock Exchange NSE
Dividend Yield -% 0
(Source: Capitaline)

Conclusion

Oswal Chemicals is a company which is without any business operations after the sale of both the fertilizer plants. However, with the sale of both the plants, the company’s balance sheet is now debt free, the company’s net worth has become positive and the company has a Cash and Bank balance of around Rs 1300 crores (as on 31st March 2006).

Abhay Oswal – The Man who thinks BIG

Abhay Oswal is a man who thinks BIG. Oswal Chemicals has been credited with putting up fertilizer plants which are world scale plants. The urea plant at Shahjahanpur in Uttar Pradesh and its DAP plant at Paradeep in Orrisa were one of the largest plants in private sector in the country. With over a thousand crores in his kitty, Abhay Oswal would definitely be scouting for projects where the surplus cash could be deployed. The company had indicated exploring opportunities in Petrochemicals, Oil & Gas, Mining & Metals and Real Estate space.

Oswal Agro Mills – Surplus Land at Chembur

The group company Oswal Agro Mills owns around 65 acres of land at Chembur in Mumbai. So, Oswal Agro owns land and Oswal Chemicals has cash which could come in handy for the development of the land – could a marriage be on the Cards ???
There are a host of questions which we donot have the answers to at this point of time – infact, the company itself would be contemplating various options for deploying the surplus cash. Hence, as of now the picture is hazy and unclear; crystallisation of the plans of the company could provide a trigger to the stock. However, what the past has taught us is that you get stocks at bargain price only when there is uncertainty, and things are unclear since most investors shun the opportunity as risks are higher.

The comforting factor however is that the company is available at over 40% discount to its cash value. As on 31st March 2006, the company had cash and bank balance of around Rs 1300 crores. Assuming an annual return of 10% on the surplus cash with the company, the current cash could be around Rs 1450 crores. The market cap of this debt free company at the current price is Rs 835 crores.
Long Term Investors can accumulate the stock at the current price and on declines.