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Himadri Chemicals and Industries Limited
Investor Presentation
June 2013
Important Notice
Forward Looking Statements
This presentation contains statements that contain “forward looking statements” including, but without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to Himadri Chemicals & Industries Limited’s (Himadri Chemicals or the Company) future business developments and economic performance.
While these forward looking statements indicate our assessment and future expectations concerning the development of our business, a number of risks, uncertainties and other unknown factors could cause actual developments and results to differ materially from our expectations.
These factors include, but are not limited to, general market, macro-economic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with us, legislative developments, and other key factors that could affect our business and financial performance.
Himadri Chemicals undertakes no obligation to publicly revise any forward looking statements to reflect future / likely events or circumstances.
1
Table of Contents
2
1. Investment Highlights 3
2. Business Overview 4
3. Industry Overview 12
4. Board of Directors 13
5. Ownership 14
6. Financial Performance 15
7. Strategic Outlook 18
8. Corporate Social Responsibility 19
• Achieved a ~38% CAGR in Revenues over FY2009-13 period
• Long-term investors like Bain Capital, Citi Venture Capital and International Finance Corporation
Premier Global Customer Base
• Serves aluminium and graphite, lithium-ion battery, tyre and rubber and infrastructure industries
• Strong clientele including BALCO, Hindalco, Nalco, PT Inalum, Vedanta, Graphite India, HEG and SGL Carbon SA and other aluminium and graphite players
• Has strong relationships and supply contracts with customers globally
• Long-term relationships with all major Indian raw material suppliers and is the largest purchaser of Coal Tar in India
• Strategically imports raw materials based on prevalent global, economical and demand-supply dynamics, thereby optimizing costs
Strategic Sourcing Advantages
3
Investment Highlights An Integrated Speciality Carbon Company with Global Leadership Position
• Engaged in producing a wide range of carbon products such as Coal Tar Pitch, chemical oils, Carbon Black, Naphthalene, Advanced Carbon Material, corrosion protection, Sulfonated Naphthalene Formaldehyde (SNF) and clean and green Power
• One of the few integrated specialty carbon companies of the world
• Largest producer of Coal Tar Pitch in India with ~63% market share, catering to around two-thirds requirements of the Indian Graphite and Aluminium industries; only Indian company using advanced technology for coal tar distillation
• One of the few global manufacturers to produce Zero Quinolene Insoluble (QI) impregnating Coal Tar Pitch and advanced carbon material
Compelling Competitive Position
Strategically-located Facilities with Significant
Capacities
Strong Financial Performance
• Eight manufacturing facilities – seven across India in West Bengal, Gujarat, Andhra Pradesh and Chhatisgarh and one in China with good access to rail and road networks
• Coal Tar Distillation, Carbon Black and SNF capacities of 250,000, 120,000 and 68,000 TPA, respectively
• Expanding the Coal Tar Distillation capacity by 150,000 TPA and is expected to be operational by FY2014
Himadri Ispat Ltd. was merged in the
Company
Established as Himadri Casting Pvt.
Ltd.
First Coal Tar distillation plant in
Howrah
Himadri became a public company
Establishment of new unit at
Vishakhapatnam
Expansion at Howrah Plant
Business Overview Track Record of Growth and Development
4
1987
1990
1991
1999
1999
2000
Established new Coal Tar distillation
plant at Hooghly
2004
Started double production capacity
in Hooghly
2005
Commercialised a by-product refining plant at Mahistikry
2006
Established new facility at Korba in
Chhattisgarh
2007
Commenced production at
Advanced Carbon plant
2008
Acquisition of a plant in Vapi for
commercial production
2009
Started production at Carbon Black plant and started
power plant at Mahistikry
2009
CTP plant expansion in Hoogly & SNF
capacity expansion in Vapi
2010
Recognised as a R&D centre by the
Government of India; Started a CTP
plant in China
2011
Started producing Advanced Carbon
Material in Falta and CTP in China
2012
1987-1991 1992-2000 2001- 2006 2007- 2009 2010- 2013
Expanded the Carbon Black
capacity & started producing SNF at
Hooghly
2012
Business Overview Diversified Product Portfolio with Presence across the Carbon Value Chain
5
Coal Tar Pitch
Carbon Black
Advanced Carbon
SNF
Power
• A complex chemical with 22 chemical and physical properties obtained through coal tar distillation
• One of the most important industrial chemicals in the world
• Applications include rubber, plastics, coating, inks and batteries
• Only company outside Japan to possess the technology to manufacture high quality advanced carbon material
• Used in the manufacture of lithium ion batteries
• Value-added product derived from Naphthalene • Used in ready mix concrete
• Commissioned its captive power plant running on carbon black off-gas and connected to the grid
FY2013 Revenue Breakup Description Products
Increased Focus on Exports:
• The Company’s China facility is leveraged for exports to New Zealand, Asia-Pacific, Africa and Middle East
• Exports also act as a natural hedge against currency movements for raw material imports
Domestic94.0%
International6.0%
Category Products Applicability/developments
Coal Tar Distillation
Aluminium grade pitch Aluminium production
Graphite grade binder pitch
Graphite electrode manufacture
Graphite grade zero QI coal tar impregnating pitch
Graphite electrode, nipple impregnation and UHP grade electrode manufacture
Mesophase pitch Anode material for Li-ion batteries, carbon/carbon composites
Special pitches Refractories, carbon paste, paints/ultramarine blue and water proofing, among others
Naphthalene
Dyes and dyestuff intermediates, tanning agents, super plasticiser manufacture, pharmaceuticals, disinfectants
Light creosote oils Paints and asphalt liquefying, manufacture of phenolic disinfectants
Wood preservative oil Benzole extraction from the coke oven gas and as a wood preservative
Anthracene oil/Carbon black oil
Carbon black manufacture as a feedstock and in coal tar enamel manufacture
Business Overview A Wide Array of High-Demand Products
6
Category Products Applicability/developments
Carbon Black
Carbon black Reinforcing agent for rubber, abrasion-resistant, tear-resistant, improving fracture behaviour with improved dynamic mechanical properties
Advanced carbon
material
SSG (Standard synthetic graphite)
Li-ion batteries for mobile devices, laptops and other electronic appliances
HPG (High power graphite)
Li-ion batteries for automobiles, power tools, EV and HEV
Carbonised pitch Intermediate product graphitised for final use as anode material
Corrosion protection
Himcoat enamel Anti-corrosion protection to underground and off-shore pipelines
Himcoat Primer-B Oil & gas, water and sewage pipelines, tanks, underground structures and fittings
Himtape Oil & gas, tanks, underground structures and fittings
Himwrap Protection to underground pipelines by protecting the enamel against soil stress, pipe shift, moisture, bacteria and root growth
SNF Beton SP-011–liquid and powder form
Used in Admixture, Dyes and Pigments, Agrochemicals, Leather and Rubber
Power Power Commissioned 12 MW and 8 MW power plants under IPP and CPP modes respectively
Business Overview A Wide Array of High-Demand Products
7
Synchronised and Forward-Integrated Process of Production
8
Business Overview
Advance Carbon Material
Coal Coke Ovens
Coal Tar
Chemical Oils/ Napthalene
Creosote Oil
Dedicated Logistical Support
Coke
Carbon Pitch
Distillation Tower
SNF, Corrosion protection
Products and Naphthalene
Aluminium Smelters
Graphite Electrode Mfgrs.
Pipe Mfgrs.& Dyes and Organic Compound Mfgrs.; Super Plasticizers, Construction
admxture and agro-chemicals
Carbon Black Mfgrs.(Feed stock for Tyre Industry)
Distillation Process
Feed stock for tyre, Rubber Hose, Conveyor Belt & Printing
Industry
User Industry Operations Feedstock Supply
• Coal Tar is a by-product generated through the processing of Coal into Coke in Steel manufacturing
• Coal Tar is then distilled to derive a variety of intermediate chemical products such as Coal Tar Pitch (~54%), Creosote Oils (~26%) and Chemical Oils (~12%)
• Forward integration by using byproducts to manufacture Carbon Black and SNF
Power Plant
Carbon Black
Lithium-Ion Batteries
Power
Business Overview Strategically Placed Manufacturing Locations – Seven in India and One in China
9
Coal Tar Distillation (CTP) (2) Multiple Products (2)
Pitch Processing (1)
SNF (1)
Hooghly, West Bengal
Howrah, West Bengal (2)
Korba, Chattisgarh
Visakhapatnam, Andhra Pradesh
Vapi, Gujarat
Plant Location
Longkou , Shandong Province
Products Coal Tar Pitch
Production Capacity
50,000 TPA 50,000 TPA (Planned)
Liquid Pitch Terminal – Owned Property
24,000 Tonnes
China Facility
Advanced Carbon Material (1)
Falta, West Bengal
SNF
Business Overview Strong and Long-term Customer Relationships
10
Carbon Black
Coal Tar Pitch
Normat India Pvt Ltd
Business Overview Strategic and Technological Advantages in Several Areas
11
Product • One of the few companies globally which manufacture Zero QI
Impregnating Coal Tar Pitch
Storage & Distribution
• Plants well-connected through various transportation modes (like railways and roads)
• Raw material storage capacity of around 70,000 MT (~3.5 months)
• Liquid Pitch Capability: • Largest dedicated fleet of specially-designed 114
tankers in India to transport liquid pitch • Only company in India to export Liquid Pitch and having
Liquid Pitch terminal for exports
Procurement
• One of the largest purchaser of Coal Tar in India • Highest share of Coal Tar from nearly all domestic steel plants • Capability to source Coal Tar globally to take advantage of
global price movements
• Experienced R&D team with international experts in the field
• Plants certified with ISO 9001:2008 and ISO 14001:2004 • Equipped with statistical process control equipment for
quality consistency • Flexible manufacturing plants capable of switching between
any type and quality of raw material
R&D
Facilities
700-740
950-990
0
220
440
660
880
1100
2012 2015
(KTP
A)
CAGR = 10.4%
Industry Overview Favourable Long-term Industry Dynamics in India
12
• Coal Tar Pitch (CTP) is used as a binder in anode manufacturing for Aluminium production due to its high binding quality
• Coal Tar Pitch demand is derived by the Aluminium industry which is its largest customer, accounting for ~78% of demand globally
• Aluminium production in India is expected to grow at a CAGR of ~34% from 2012 to 2015
• Coal Tar Pitch has a direct impact on the cost of Aluminium production
• Trend of focus on high-quality Coal Tar Pitch seen in the Aluminium industry
Coal Tar Pitch Demand - India
Carbon Black Demand - India
• Carbon Black demand is majorly derived from the Tyre industry, which accounts for ~70% of the demand
• Tyre industry, in turn, is dependent on the Automobile industry for its production and has closely followed its growth in the past
• Automotive industry in India expected to grow 10-13 % between FY10 and FY15
Coal Tar Pitch Market
Carbon Black Market
Source: Management Estimates
151
365 39
60
0
200
400
600
2012 2015
(KTP
A)
Aluminium Industry Graphite Industry
CAGR = 31.6%
190
425
Board of Directors Strong Corporate Governance - Two-thirds Non-Executive Independent Directors
13
B.L. Choudhary
Managing Director
D.P. Choudhary
Chairman
B.P. Dhanuka
Former President, ICSI
B. Sen
Director, ITC
S.K. Banerjee
Former Chairman and MD, NALCO
S.K. Saraf
Member, Audit Committee
H.S. Mann
Former Chairman and
MD, MMTC
Krishnava Dutt
Managing Partner,
Udwadia, Udeshi & Argus
Partners
Pavninder Singh
Principal, Bain Capital
Non Executive Director
S.S. Choudhary
Executive Director
Rahul K. Yadav
Managing Director, CVCI,
Dubai
V.K. Choudhary
Executive Director
Non Executive and Independent Director
Ownership Trust and Confidence of Long-term Investors
14
Shareholding Pattern Market Data
• Outstanding Shares (Mn) 386
• Book Value Per Share (Rs.) (31-3-13) 22.99
• Bloomberg Ticker HCI:IN
• Reuters Ticker HMCH.NS
• BSE Ticker 500184
• NSE Ticker HCIL
Source: BSE as of March 31, 2013
Key
Inve
sto
rs
Promoters44.6%
DIIs0.3%
Bain Capital26.8%
Citi12.2%
Others16.1%
Financial Performance Consolidated Financial Performance
15
Revenue (Rs. Mn) EBITDA (Rs. Mn) and Margin (%)
Basic EPS (Rs.) Net Profit (Rs. Mn) and Margin (%)
1,263
1,827 1,9252,208
1,170
33.6%38.8%
27.5%
19.3%
8.6%
FY2009 FY2010 FY2011 FY2012 FY2013
Note: Net Profit and EPS calculation excludes foreign exchange fluctuations and other income
802983 1,086
774 (45)
21.4% 20.9%
15.5%
6.8%
(0.3)%FY2009 FY2010 FY2011 FY2012 FY2013
2.52
2.96 2.82
2.01
(0.12)
FY2009 FY2010 FY2011 FY2012 FY2013
3,755 4,7147,001
11,44813,533
FY2009 FY2010 FY2011 FY2012 FY2013
CAGR: 38%
Standalone Financial Performance
16
Revenue (Rs. Mn)
EBITDA (Rs. Mn) and Margin (%)
Gross Profit (Rs. Mn) and Margin (%)
Net Profit (Rs. Mn) and Margin (%)
Financial Performance
3,294
3,461
3,144
3,371
3,018
Q4 FY2012 Q1 FY2013 Q2 FY2013 Q3 FY2013 Q4 FY2013
847 825
586 655
492
27.8%25.7%
23.8%
18.6% 19.4%
Q4 FY2012 Q1 FY2013 Q2 FY2013 Q3 FY2013 Q4 FY2013
430489
276 282 241
13.1% 14.1%
8.8% 8.4% 8.0%
Q4 FY2012 Q1 FY2013 Q2 FY2013 Q3 FY2013 Q4 FY2013
222 (201)328
(160)269
6.8%
(5.8)%
10.4%
(4.7)%
8.9%
Q4 FY2012 Q1 FY2013 Q2 FY2013 Q3 FY2013 Q4 FY2013
Controlled Leverage Profile with Investment-grade Ratings
17
Leverage Position Net Debt (Rs. Mn) and Net Debt / EBITDA (x)
Net Debt / Equity (x)
(Rs. Mn) FY2013 FY2012
Long Term Borrowings 6,000 4,977
Short Term Borrowings 6,755 6,002
Total Debt 12,755 10,979
Less: Cash & Cash Equivalents
2,514 2,992
Net Debt / (Net Cash) 10,241 7,987
Net Worth 8,867 8,940
Financial Performance
Instrument Rating Comment
Short-term Debts
CARE A1+
Indicates very strong degree of safety regarding timely payment of financial obligations
Long-term Facilities
CARE AA- Indicates high degree of safety regarding timely servicing of financial obligations
Non-Convertible Debentures
CARE AA-
Credit Ratings (CARE)
1.03
0.27
0.57
0.89
1.16
FY2009 FY2010 FY2011 FY2012 FY2013
3,351
1,822
4,844
7,987
10,241
2.7x
1.0x
2.5x
3.6x
8.8x
FY2009 FY2010 FY2011 FY2012 FY2013
Strategic Outlook
18
Clearly-defined Group Strategy
Maintaining domestic leadership in Coal Tar Pitch
Key Growth Drivers
• Be among the top three producers of Coal Tar products globally
• Attain total capacity of 1 MTPA in India and China
• Set up world’s largest manufacturing base for Advanced Carbon Material
• Become the lowest cost producer of Coal Tar products in the world
• Become the preferred supplier of Coal Tar products globally
• Setting up of a specially-integrated carbon complex
Strategic Objectives
Entering into business of Carbon Black with Power
Focusing on marketing of SNF
Increasing portfolio of value-added products
Enhancing International sales
Developing new products and processes
Safety, Health and Environment (SHE) High Sensitivity to SHE Aspects
19
Safety Policy:
• To ensure a safe working environment for employees and act as a socially responsible citizen by adopting safe practices and providing engineering solutions to avoid hazard occurrences
• Accidents and risk to health are preventable through continual improvement in working environment and involvement of all employees creating thereby an accident-free work place
Health Policy:
• Treat health & safety of employees as of utmost importance
Environmental Policy:
• Conserve natural resources like water, fuel, energy and build environmental awareness among employees and other parties
• Maintain strict compliance with relevant environmental legislations and regulations
Corporate Social Responsibility Strong Commitment to Corporate Social Responsibility
20
Initiatives
• The Company runs a free dispensary for villagers and employees near its Mahistikry plant
• Organised health & eye camps along with blood donation drives and rescue and relief camps for flood affected villages.
• Cultural and sports programmes for economical, cultural and social betterment of the community
• Organized book and uniform distribution campaigns for students and the needy
• Commissioned tube wells to ensure hygienic water and has funded local schools in the various locations
• Initiatives in modernisation and expansion of schools (700-1,200 children) for economically weaker sections
• Food distribution camps are organised throughout the year
• Building pukka houses for BPL section of people
Contact Details:
Himadri Chemicals & Industries Limited
Ruby House, 8, India Exchange Place,
2nd Floor, Kolkata - 700 001, West Bengal
www.himadri.com
Anurag Choudhary
Himadri Chemicals & Industries Limited
+91 33 2230 4363
Deepak Balwani
Churchgate Partners
+91 22 3953 7444
