IG Petrochemicals is in the business of manufacturing Phthalic Anhydride – used as a petrochemical in manufacturing paints. It supplies the product to leading paint companies including the likes of Nerolac. The company hasn’t really grown its revenues and profits over the last four years – reporting about 45cr of operating profits on 630cr of revenues in the last financial year. It operated with modest net debt of about 45cr (as at 30 th September, 2010). The business is subject to several risks including crude oil price rises, adverse foreign exchange movements on raw material supplies, import competition via lax government regulation, cyclicality – business fluctuates with the construction cycle etc. Moreover, there were plant fires in the recent past calling into question the safety regulations in place at the plant. Management haven’t declared a dividend in the last three years, which is inexplicable since it doesn’t appear to be deploying funds for profitable growth.
An Individual Investor's Perspectives On The Indian Financial Markets