NEW IPO :Gokul Refoils and Solvent :09.05.2008
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K.Karthik Raja
May 9, 2008, 7:10:55 AM5/9/08
to Kences1
Gokul Refoils and Solvent
*Capacity and geographic expansion
*Low and volatile margin and highly competitive business
Promoted by Balvantsinh Rajput, Kanubhai Thakkar, Mrs. Bhikiben Rajput
and
Mrs. Manjulaben Thakkar in 1982, Gokul Refoils and Solvent extracts
solvents;
refines edible oils, castor oils and their derivatives; and
manufactures
vanaspati.
Besides 680-tonne-per-day (tpd) seed-processing capacity, Gokul Refoil
and
Solvent has 600- tpd of solvent-extraction, 1,200-tpd of refining, and
200-
tpd of vanaspati manufacturing facility. The company gets captive
power from
four windmills of 1.25 MW each in Kutch, Gujarat. It has also set up a
co-
generation power plant of 500 KWH at its Gandhidham unit in Gujarat.
To expand the scale of operations and have a global presence, Gokul
Refoils
and Solvent has set up two wholly owned subsidiaries in Mauritius and
Singapore: Maurigo International Ltd and Maurigo Pte Ltd. The
Mauritius
subsidiary, Maurigo International, is involved in commodity trade on
the
Chicago Board of Trade and the Malaysia Derivatives Exchange
(MDEX),Kula
Lumpur, Malaysia. The Singapore subsidiary, Maurigo Pte, procures raw
material and trades in commodity. Its strategic presence in Singapore
enables
it to locally negotiate and deal with the small and fragmented oil
suppliers
of Malaysia and Indonesia, which will enable the company to procure
raw
materials at reasonable terms.
Products are marketed under the brand name, Gokul, in Gujarat,
Maharashtra,
Rajasthan, Madhya Pradesh and Punjab.
Gokul Overseas is a partnership firm manufacturing and processing
castor
seeds and oil and their derivatives with plant at the Kandla Special
Economic
Zone (KASEZ). This partnership firm has reported sales of Rs 205 crore
and
net earning of Rs 8.59 crore in the financial year ending March 2007
(FY
2007).
Consolidated net sales stood at Rs 1323.20 crore and Rs 1563.46 crore
in the
eight months ended November 2007 and FY 2007. Operating profit margin
(OPM)
was 6.5% and 3.8%, and net profit Rs 41.83 crore and Rs 25.73 crore.
Standalone net sales stood at Rs 1309.28 crore and Rs 1562.49 crore in
the
eight months ended November 2007 and FY 2007. OPM was 6.3% and 3.9%,
and net
profit Rs 37.82 crore and Rs 26.94 crore.
A soya processing plant, with installed capacity of 1500 tpd and
capital
investment of Rs 51 crore, is proposed at Gandhidham, Gujarat. The
existing
edible oil refinery at Surat is being expanded to 400 tpd from 100
tpd, with
an estimated outlay of Rs 12.31 crore. About Rs 15 crore is to be
invested in
brand building, Rs 10 crore to increase the warehousing capacity and
meet
other capital expenditure at existing units, and Rs 60.69 crore to
fund part
of long-term working capital. Rs 139.59 crore is to be raised at the
cap
price of the price band, and Rs 38.25 crore will be taken on loan from
banks.
==============================================================================
Strengths
==============================================================================
Versatile manufacturing capabilities, giving extreme flexibility to
manufacture all type of oils depending on the market requirement and
availability of raw materials at competitive rates.
==============================================================================
Weakness
==============================================================================
Earnings are vulnerable to changes in the duty differential between
crude and
refined oil.
The business is characterised by inherently low margin.
Has negative cash flow fof Rs 5.39 crore from operating activity in FY
2007,
Rs 21.18 crore in FY 2006 and Rs 18.91 crore in FY 2004.
Primarily present in the bulk market, where there are strong
competitive
pressures from the unorganised segment.
==============================================================================
Valuation
==============================================================================
Gokul Refoils and Solvent has set a price band of Rs 175 to Rs 195 per
equity
share of Rs 10 face value. At the lower band of Rs 175 per share, the
P/E
would be 7.4x times annualised EPS of Rs 23.8 for the November 2007
ended
period and 17.9x times the EPS of Rs 9.8 for FY 2007 on post-issue
equity of
Rs 26.38 crore. At the upper band of Rs 195 per share, the P/E would
be 8.2x
times and 19.9x times respectively. In the edible oil industry, the
comparable companies such as Ruchi Soya Industries, Gujarat Ambuja
Exports,
and K S oils have TTM P/E of around 12.6, 9.3 and 21.3, respectively.
==============================================================================
K.Karthik Raja
Research Dept
*Capacity and geographic expansion
*Low and volatile margin and highly competitive business
Promoted by Balvantsinh Rajput, Kanubhai Thakkar, Mrs. Bhikiben Rajput
and
Mrs. Manjulaben Thakkar in 1982, Gokul Refoils and Solvent extracts
solvents;
refines edible oils, castor oils and their derivatives; and
manufactures
vanaspati.
Besides 680-tonne-per-day (tpd) seed-processing capacity, Gokul Refoil
and
Solvent has 600- tpd of solvent-extraction, 1,200-tpd of refining, and
200-
tpd of vanaspati manufacturing facility. The company gets captive
power from
four windmills of 1.25 MW each in Kutch, Gujarat. It has also set up a
co-
generation power plant of 500 KWH at its Gandhidham unit in Gujarat.
To expand the scale of operations and have a global presence, Gokul
Refoils
and Solvent has set up two wholly owned subsidiaries in Mauritius and
Singapore: Maurigo International Ltd and Maurigo Pte Ltd. The
Mauritius
subsidiary, Maurigo International, is involved in commodity trade on
the
Chicago Board of Trade and the Malaysia Derivatives Exchange
(MDEX),Kula
Lumpur, Malaysia. The Singapore subsidiary, Maurigo Pte, procures raw
material and trades in commodity. Its strategic presence in Singapore
enables
it to locally negotiate and deal with the small and fragmented oil
suppliers
of Malaysia and Indonesia, which will enable the company to procure
raw
materials at reasonable terms.
Products are marketed under the brand name, Gokul, in Gujarat,
Maharashtra,
Rajasthan, Madhya Pradesh and Punjab.
Gokul Overseas is a partnership firm manufacturing and processing
castor
seeds and oil and their derivatives with plant at the Kandla Special
Economic
Zone (KASEZ). This partnership firm has reported sales of Rs 205 crore
and
net earning of Rs 8.59 crore in the financial year ending March 2007
(FY
2007).
Consolidated net sales stood at Rs 1323.20 crore and Rs 1563.46 crore
in the
eight months ended November 2007 and FY 2007. Operating profit margin
(OPM)
was 6.5% and 3.8%, and net profit Rs 41.83 crore and Rs 25.73 crore.
Standalone net sales stood at Rs 1309.28 crore and Rs 1562.49 crore in
the
eight months ended November 2007 and FY 2007. OPM was 6.3% and 3.9%,
and net
profit Rs 37.82 crore and Rs 26.94 crore.
A soya processing plant, with installed capacity of 1500 tpd and
capital
investment of Rs 51 crore, is proposed at Gandhidham, Gujarat. The
existing
edible oil refinery at Surat is being expanded to 400 tpd from 100
tpd, with
an estimated outlay of Rs 12.31 crore. About Rs 15 crore is to be
invested in
brand building, Rs 10 crore to increase the warehousing capacity and
meet
other capital expenditure at existing units, and Rs 60.69 crore to
fund part
of long-term working capital. Rs 139.59 crore is to be raised at the
cap
price of the price band, and Rs 38.25 crore will be taken on loan from
banks.
==============================================================================
Strengths
==============================================================================
Versatile manufacturing capabilities, giving extreme flexibility to
manufacture all type of oils depending on the market requirement and
availability of raw materials at competitive rates.
==============================================================================
Weakness
==============================================================================
Earnings are vulnerable to changes in the duty differential between
crude and
refined oil.
The business is characterised by inherently low margin.
Has negative cash flow fof Rs 5.39 crore from operating activity in FY
2007,
Rs 21.18 crore in FY 2006 and Rs 18.91 crore in FY 2004.
Primarily present in the bulk market, where there are strong
competitive
pressures from the unorganised segment.
==============================================================================
Valuation
==============================================================================
Gokul Refoils and Solvent has set a price band of Rs 175 to Rs 195 per
equity
share of Rs 10 face value. At the lower band of Rs 175 per share, the
P/E
would be 7.4x times annualised EPS of Rs 23.8 for the November 2007
ended
period and 17.9x times the EPS of Rs 9.8 for FY 2007 on post-issue
equity of
Rs 26.38 crore. At the upper band of Rs 195 per share, the P/E would
be 8.2x
times and 19.9x times respectively. In the edible oil industry, the
comparable companies such as Ruchi Soya Industries, Gujarat Ambuja
Exports,
and K S oils have TTM P/E of around 12.6, 9.3 and 21.3, respectively.
==============================================================================
K.Karthik Raja
Research Dept
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