Opportunity Snapshot
Investment Opportunity
Equity/Debt investment is required to acquire a closed chemical manufacturing facility in Shahdol, Madhya Pradesh, India.
Key Headline: Sodium Dichromate & Chromium Sulphate plant for sale
Location: Shahdol, Madhya Pradesh
Category: Chemical Industry
Condition: Running
Details:
The industry is into manufacturing sodium dichromate and basic chromium sulphate and Saccharin. These chemicals are used in paints, dyes and leather industry.
The total land area of the plant is 14 acres and build up area is 1,70,000 sq. ft. and is located in Madhya Pradesh.
The capacity of the plant at 80% utilization is 1200 tons per month and at 100% utilisation the capacity is 1,500 tons per month. The profitability of the plant is expected up to 30 Cr. and expected revenue is 150 to 200 Cr.
The property is lying with bank for settlement.
Asking Price: Rs. 26 Crores
Competitive Advantage
Future Outlook & Market Opportunity
Current market scenario is extremely positive for industries manufacturing Sodium Dichromate. The demand for Sodium Dichromate is about 100000 MT per annum in India. The demand growth rate is expected to be around 15% per annum due to entry barriers in view of pollution norms adopted by various countries.
According to 2010 statistics, 66% of Sodium Dichromate is used in manufacture of chromic acid, 13% in leather tanning, 9% in chromic oxide production and 6% in pigment manufacture and the remaining for manufacture of compounds having diverse applications.
Sodium Dichromate is the main raw material for manufacturing Chromic Acid, which is used mainly for electroplating in automobiles, railways, defence etc. Presently, Chromic Acid is being produced by Bajaj Chemicals, Calcutta and few other small companies. There is a huge gap in demand and supply for Chromic Acid in India and the same is being imported from China regularly. In case the Sodium Dichromate is available in India at reasonable rate and quantity, Chromic Acid can be manufactured in India for its requirement completely.
Sodium Dichromate is used to manufacture Lead Chromate compounds which are further used in manufacturing of paints, printing ink, colours etc. It is also used in in the manufacture of textile dyes and textile dying operations.
Further Chrome Oxide Green, another product from Sodium Dichromate, is also being used as a colour pigment in Ceramic Industry. It has got huge demand for this product as usage and production of ceramic products are increasing in India due to urbanization. Presently Chrome Oxide Green has been importing from China and other countries. This product is being manufactured by Bajaj Chemicals, Calcutta and some small units in Tamil Nadu.
Saccharin (Sweetening agent), Vitamin K3, Potassium Dichromate also require Sodium Dichromate as main raw material in their process.
There is a demand for the company’s products in European Markets which can be tapped once full operations are started. There is a good market for export of Chromium Sulphate and Sodium Dichromate mainly to Korea, Bangladesh and European Countries.
There is a good market for export of Basic Chrome Sulphate mainly to Korea, Bangladesh and European Countries. DCL has been exporting this product to Korea, Sri Lanka and Bangladesh etc., from the past five years regularly. Sodium Dichromate also has good export potential as the same is being manufactured by very few companies compared to Basic chromium Sulphate.
The unit-II is located in Central part of India. The northern markets like Kanpur, Lucknow, Firozabad in the State of Uttar Pradesh, Delhi, Punjab, and Gujarat are very nearby compared to the location of the existing unit-I in Andhra Pradesh. The direct transportation gives cost advantage and also edge over the other manufactures in India and captures the northern market of India. The Unit –I in Andhra Pradesh is nearer to the Chennai port which can cater to export market.
Rationale for the deal
Investment Highlights
The operations of the company have been suspended due to non-availability of working capital some easily solvable operational issues.
Investor/Lender has to appreciate the fact that they shall have immediate access to manufacturing facilities and marketing channels. Green field establishment of manufacturing facilities of the company’s scale need a minimum gestation period of two years and an estimated capital outlay of INR 1000 Mn. under the current market conditions.
The products of the company have huge demand and company shall achieve EBIDTA level margins of around 25- 26% and at PAT level margins of around 12-13% when operating at full operational capacity.
The Madhya Pradesh Unit is entitled to sales tax deferment benefit. The benefit is to an extent of INR 350 Mn. or actual sales tax liability for period of 14 years whichever is less commencing from the date of commercial production.
“One Time Settlement” proposal is accepted by the financial institutions. The investors shall benefit from reduced outstanding liabilities.
1 Name of the Project : Sodium Dichromate & Saccharin Project
2 Name of the Organisation: TBD
3 Project Location: Shahdol District, Madhya Pradesh
4 End Product: Sodium Dichromate, Basic Chromium Sulphate, White Sodium Sulphate, Saccharin (Equipment to be procured and installed)
5 Plant Capacities (MTPD)
a. Sodium Dichromate: 50
b. Basic Chromium Sulphate: 30
c. White Sodium Sulphate: 15
d. Saccharin: 3.33
6 Annual Productions (MT)
a. Sodium Dichromate: 16500
b. Basic Chromium Sulphate: 9000
c. White Sodium Sulphate: 4500
d. Saccharin: 1100
7 Man Power Requirement (No’s): 200
8 Annual Raw materials Requirement (MT)
a. Chrome Ore: 25000
b. Soda Ash: 18000
c. Sulphuric acid: 17000
d. Sodium Bisulphate: 450
e. Molasses: 80
f. Ortho Toluene Sulphonamide: 1400
9 Project Capital Cost (Rs. Crores)
Total: 65
10 Sale Price (Rs/Mt)
a. Sodium Dichromate: 95000
b. Basic Chromium Sulphate: 58000
c. White Sodium Sulphate: 8000
d. Saccharin: 800000
11 Cost of Production (Rs. / Mt)
a. Sodium Dichromate : 85000
b. Basic Chromium Sulphate: 27000
c. White Sodium Sulphate : 2300
d. Saccharin : 593000
Use of financing
26 crore is required for the acquisition of the chemical manufacturing plant. Plus some extra (5-6crores) is required to ensure the plant run successfully for at least one year till the point the plant revenue is sufficient to manage the plant under profit.
A major portion (12 crore) of the acquisition would be debt which would be under the name of the new owner but rest of the investment is required to complete the acquisition process. The rest of the investment can in the form of equity or debt.
Opportunity for the investor
• Investment in equity or debt.
• 12 crore investment is required.
• In case of equity investment.
• A silent investor is required.
• Shares according to the investment range.
• In case of debt.
• Span-8 years
• Interest rate-8%
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