The Hindu Business Line : GHCL: Buy

Investors can consider taking an exposure in the GHCL stock, which at the current price of Rs 120 trades at about 12 times its expected per-share earnings in FY-07 on a fully diluted basis. GHCL has adopted both the organic and the inorganic route to pursue expansion.

The recent acquisitions and the ongoing expansion plans of its Indian facilities have set GHCL on a high growth path.

A buoyant trend in the soda ash industry and GHCL's emergence as among the larger players in the home textiles business make the stock a good investment bet.

GHCL, which is among the larger manufacturers of soda ash in India, appears to be on a rapid growth path. The construction boom is likely to have a spin off on its soda ash business.

GHCL manufactures dense soda ash, which is used in the manufacture of float glass. The realty industry, which is among the large consumers of float glass, is likely to grow at about 15 per cent over the next four years.

GHCL also produces light soda ash, which is used in detergents. The growing affluence of the rural population would help sustain the trend in detergent powders, which use a large portion of soda ash.

GHCL plans to double its domestic soda ash capacity from the present six-lakh tonnes. Its captive lignite mining facility gives it an edge over other domestic soda ash producers.

GHCL is keen on expanding its presence in the European markets. In December 2005, the company, through its subsidiary, acquired a majority stake in S. C. Bega Upsom, which is among the large soda ash manufacturers in Romania.

The company is also close to acquiring another unit in Romania. These acquisitions would give GHCL access to the eastern and central European markets.

The company plans to acquire a soda ash producer in the US, which is among the larger soda ash markets.

Home Textiles

GHCL's textiles division contributes about 10 per cent of its revenue. With the commissioning of its home textiles plant in Vapi and its overseas acquisitions GHCL has become an integrated textiles manufacturer.

The company has acquired hundred per cent stake in Dan River, a textile major in the US. Dan River's clientele includes retailers such as JC Penny and Wal-Mart.

GHCL plans to use Dan River as a marketing arm while leveraging its Vapi facility to meet demand from the US market.

The company has also got a footing in the UK market by acquiring Rosebys in a $40-million deal.

Rosebys, which is a prominent player in the UK market, has a wide network. GHCL also plans to expand its spinning capacity by about 65 per cent to 1.4-lakh spindles.

FCCB

Though growth prospect appear bright, the FCCB offer is likely to expand its equity base by about 33 per cent.

There is, however, no cause for worry as the company is on a high growth path.

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