Thread by @TYMFinance

DCM Shriram Ltd conducted their con-call on 21 jan 2022.

“A diversified company determined to achieve the best.”

Here are the key takeaways….

Business Update

- The company has delivered strong growth during the period.

- The company receives the most of its revenue from the chemical, Vinyl business and least from the SFS business with negative revenue from Sugar.

- High volatility in commodity prices along with supply constraints has made their operating environment very dynamic for Chloe’s-vinyl and Fenesta business.

- Even with uncertain rains had disrupted their agri business. They seems to manage the situation.

- The vinyls business input and output prices were at levels that the content has never seen before.

- Sugar production has increased on YOY basis.

- Cane crush scale has even increased.

- Sugar subsidised are yet to be announced if any. 5-6 metric tons exports are expected to be done.

- For this business they will maintain an optimal mix for their distillery and sugar operations.

- Fenesta delivered healthy momentum across segments, Covid might have impact as the things stay same.

- On commodity prices front all have increased a lot but they will be maintained and be in a comfortable range.

- On Cane crush, to understand more about the business, research team are working on ground levels to get the most out of the things available.

Business Capex

- Company is looking forward in upgrading its business through scale, Integration and Cost optimisation in chemical sugar and Fenesta business.

- In farm solution business they are looking forward towards more Opex intensive and scale upgrade.

- Company has made more investments in their Sugar business.

- Under chemical business 120 megawatt captive power plant is been created and they are increasing their soda capacity by 850 tons per day And flicker capacity by 600 tons per day.

- Aluminium chloride capacity is going up by 90 tons per day.

- The company is also setting up a 51000 tons per annum epi chlorohydrine capacity plant

- And along side this they are installing 52500 ton per annum hydrogen peroxide capacity plant.

- They are going to start soon, minimise the delay.

- The Cost will increase a bit but margins are least affected.

- As international prices are satisfactory so exports are a comfortable for them at present. but that is linked to volatility of prices.

- For sugar business, They are setting up 120kilo liters per day multi feed distillery and they are increasing their sugar refining capacity from 500 ton crush per day to 26500 ton crush per day.

- They are also expanding their sugar capacity by 3000 tons per day.

- This will be done based on the timeline and cost management decided by the management.

- Under agri inputs
Shriram farm solution , bio seed and fertilisers business all together showed good results.

- This could have been better if things could have been done in proper time.

- Under fertiliser space, urea subsidy outstanding is higher than expected levels given the increase in cash in gas prices.

- Under Fenesta business, company bought the 50% stake of their jv making that firm their whole subsidiary.

- More capex is done in product and production levels to get the best.

- For Bioseed, business has been under performance pressure for last 2 years. But as per research by our team and employee and with strong product pipelines they expect a good turnaround soon.

- Higher losses in this segment, was due to unethical and illegal market programs in India along with no subsidiary has also affected their performance.

- Move inventory shift is also done along with higher provisioning.

Financials

- During the quarter, Company has increased its revenue by 26%.

- And PAT has increased to 350 cr. A jump of 38% from last year.

- There has been a reduction in the financial cost of the company by 39%.

- There has been a reduction in the net debt levels as well due to strong operating cash flow.

- In chemical space, business industry is very dynamic and prices of key products like soda has moved to historical levels due to supply constraints.

- This was in start of the quarter but now the constraints seems to have cooled down but textile and paper segments seems to struggle today.

- Clothing business has a bit constrains as well for the same.

- Rise in price of many raw material has harmed business.

- Still business is taking all necessary measures to deal all situation and maintain no effect to business.

- Many product prices are at healthy levels.

- In sugar business, The excise duty on county liquor sales were down 14%.

- sugar volumes were down due to lower monthly release.

- Gas price increase is yet to be notified by govt and is the main reason in substitute use increase.

- During the period, company witnessed higher tax rate of about 32% .

- This is because the company is more profitable then before and tax benefits had came down, leaving input price go up.

- Next year as well it’s going to be around 30%.

- Company still have mat credit with itself and post that it will plan out to target 25% tax business.