Bharat Fertiliser Industries Ltd-Value Unlocking in progress

Had written about Bharat Fertilizer Industries Ltd around 15 months back.

http://libraryequity.blogspot.in/2011/03/bharat-fertiliser-realty-ltd-high-risk.html

Current status update :

The company's name has been changed to Bharat Agri Fert & Realty Ltd. The new name is supposed to reflect the 3 lines of business of the company . Let us review each of them in terms of status / progress.

Agriculture:

1)      The company has 100 acres of land at Wada in Thane district. This land cannot be developed for a residential projectdue to land conversion restrictions. The current market value is conservatively approx 30-35 cr.

2)      The company has tied up with a company from Israel for technology for cultivation of seedless fruits and vegetables for export to the middle east and gulf.

3)      The company’s investment will be in terms of the land while the technical expertise would be provided by the partner.

Fertilizer:

1)      Existing conversion contract with RCF was mutually terminated.

2)      New tie up has been entered into with Chambal Fertlizer & Indian Potash Ltd for SSP/GSSP wherein Bharat will manufacture & Chambal & Indian Potash will market through their network.

3)      Fertilizer production has re-commenced from July 2012 & the July production was about 6000 tonnes. Prevailing realization was approximately  as follows for SSP:

Selling price Rs.7400 / ton + Rs.3670 / ton (Govt subsidy)

less

Rs .950   / ton (freight ) + Rs.150 / ton ( Chambal marketing margin)
less 
production cost

Approx revenue realization per ton should be about Rs.10,000

GSSP selling price is higher by about 8%

4)      Fertilizer revenue for 2011-12 expected to be around  35-40 cr.

5)      Fertilizer net margins expected to be around 12%

6)      The fertilizer plant at Wada ,though old, has been kept  in good condition through regular upkeep & upgradtions.

7)      Installed capacity is  1.32 lakh tones for SSP & 0.99 lakh tones for GSSP.

8)      At full capacity turnover can be about 150 cr.

9)      Key Raw Material – Rock Phosphate.Raw material linkage has been tied up with a Middle east supplier. Credit terms are favourable @ more than 120 days. On the other hand Chambal payment would be released in about 2 weeks so though the company has sanctioned W/C limits, it is unlikely to utilize them.

Realty:

1)      Project  A- Thane –Shiv Sai Paradise ( spread over 6.25 acres of land)

2)      Phase I – 3.20 lakh sft ready . Occupation certificate (OC) from Thane Municipal Corporation received.

Of the above, 2.10 lakh sft has been sold over the last 4 years and reflects on the P&L’s of those years. When the initially started bookings, the rate was about Rs.3000-3500 psf. The current rate is about Rs.7000 -8000 psf.

3)      For the Phase I , they’ve received 80 IB (10) tax benefit as the same was completed under 5 years.

4)      As of April 1,2012, approx 1.10 lakh sft was available for sale on a ready possession basis. Between April & July of 2012, they have sold another 0.22 lakh sft. So, as of August 1^st, approx, 0.88 lakh sft is available for sale. This should get sold over the next 18-24 months and translate into approx Rs.60 to 70 cr of revenue depending on the rate at which it gets sold.

5)      Phase II – 2.80 lakh sft. Project currently at the plinth level and expected to be completed over the next 36-48 months. Advance Bookings for this project have commenced.

6)      Phase II will not get tax beneifits. Also they’d need to purchase approx 1.30 lakh sft TDR which will entail an outgo of about Rs.40 cr. This is not expected to cause any cas flow mismatch as, the requirement will come into play only at a later stage of construction of Phase II and the company expects to fund this through Phase I balance inventory sale & partly Phase II bookings. 

6)   Realization from Phase II over the next 5 years shall be approx Rs.180 - 190 cr . Construction cost , excluding TDR will be approx  Rs.60-65 cr.

7)      Project B- Flora Fountain, Mumbai. The company is redeveloping a building which it owns. The building is free from any liabilities ( tenants ). Expected built up area is about 10,000-12,000 sft. Approvals are expected within the next 3-4 months and since it’s a small project, it should not take more than 15-18 months. Post completion, the company plans to rent out this site. Demand here is good as it is in close proximity to the High Court, BSE & ban in the centre of the original CBD. Expected rent is about Rs.3  cr per annum

 

The company is currently available at a price of around Rs.62 & a market cap of  about 32 cr. Total debt is around 4 cr of which 2.5 cr is  sanctioned but largely unused cash credit facility, 1.16 cr loan against keyman insurance policy, 0.28 cr Sales tax deferral loan and the rest FD's from directors.Contingnet liabilities are about 4 cr of which nearaly 3.5 cr are old / legacy ones  and balance 0.5 cr VAT on flats sold.

If anyone has had the patience to go through all of the above, i'd encourage them to do the simple math and take an informed call on the company.

At the time of writing this report, the author /his family have an investment interest in the stock mentioned above. Under no circumstance does the information in this report represent a recommendation to buy or sell the above-mentioned stock.  This report has been prepared and issued on the basis of publicly available information, internally developed data & other sources believed to be reliable. This is just a suggestion solely for information purposes and does not constitute a solicitation to any person to buy or sell a security. While the information contained therein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Readers using the information contained herein are solely responsible for their actions and are advised to satisfy themselves before making any investments.