The Hindu Business Line : Deepak Fert sees value buying

Value buyers seem to be warming up for Deepak Fertilisers & Petrochemicals' this winter looking at the prospect of better harvest on account of its new isopropyl alcohol (IPA) plant at Taloja and its recently launched Ishanya speciality mall, a unique building materials and home-making retail outfit, at Pune. A leading mutual fund recently picked up 11 lakh shares and is understood to be looking for further mop up.

According to the management, the plant, at full capacity utilisation, could potentially contribute about Rs 300 crore to the topline. Market analysts reckon that the Rs 154-crore IPA plant, commissioned in August 2006 with 70,000 tpa capacity, largest in the country, may add at least Rs 50 crore to the company's bottom line and mall division is likely to jack up net profit by about Rs 30 crore in 2007-08.

Considering the domestic IPA market size of about 65,000 tpa and an annual growth rate varying between 6 per cent and 7 per cent, this cost-effective plant may not only meet the demand substituting import in the next few years, but also earn better margins through exports, according to industry insiders. Further, the plant as an asset has also gone up in value in the last couple of years. "The cost of this imported plant, at the current international prices, could be approximately Rs 400 crore," industry analysts said.

The principal business of the company - manufacture of nitrogenous fertilizers - has now overcome the problem related to gas availability through supply of LNG from the Dahej-Uran pipeline. The company is also going ahead with its project for integrated complex for nitric acid and ammonium nitrate in eastern region to tap the opportunities in the mining and infrastructure sector.

The stock price has been moving within a range between Rs 79 and Rs 89. The counter recorded an average traded quantity of 1.15 lakh shares on the BSE in the last fortnight.

Jayanta Mallick

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