STARCH - Poised for Growth

S E C U R I T I E S P V T. L T D.

23rd July, 2010

Starch, one of the most present biomaterials has witnessed significant developments over the years. As a result, the
simple product now stands transformed into a valuable ingredient, offering varied application benefits in both food
as well as non-food industries. Earlier Starch being mainly used in the food & beverage industry is now used in its
raw or modified form in many applications in industries such as Paper, Pharmaceuticals, textiles, Food and Animal
Feeds across the globe.
After witnessing a temporary dip in growth in the year 2008 and 2009, the world market for starch, by consumption is expected to
recover and register healthy growth to reach 80 mn metric tonnes by 2015. Growth will primarily be driven by revival of demand
fundamentals, such as, improving income levels, and rising propensity to spend, and the subsequent increase in demand for a variety
of food & manufactured products in the country.

The Global Starch market is likely to get respite from deceleration in its market growth, with growth poised to receive a new lease of
life in the next few years, thanks to the growing consumption of liquid starches and modified starches. The modified starch market is
projected to be the fastest growing segment over the period 2007-2015. This growth in the modified starch segment is due to the
rising health awareness across the globe and growing functional and nutritional needs in global economies, which demands use of
innovative modified starches.

The US represents the largest geographic market for starch, having accounted for a share of about 51% in the total volume of starch
consumed in 2009. Given the country's large per-capita income, the demand for starch in the US has been steadily on the rise. Asia-
Pacific represents the fastest growing market over the period 2007-2015. Growing employment opportunities, and subsequent
increase in per-capita income over the last few years, particularly in China and India, have been driving the growing demand for
starch in the region. (“Starch: A Global Strategic Business Report May 2010” report by Global Industry Analysts, Inc)

“Our reports are available on Bloomberg at AASL IN“ 1

Research Desk INDIA STARCH SECTOR

INDIAN STARCH INDUSTRY

The Indian Starch industry is still at a nascent stage and derives about 40 products from corn whereas more than 500 products of
starch and starch derivatives are being derived in the international arena. The size of the industry is also negligible compared to
international market. However, profit may tend to fluctuate from year to year due to erratic availability of basic raw material corn
being an agri-product and depends on natural vagaries.
Currently, the Indian starch industry produce starch at ~1800 crs tonnes and about 65% of the total production comes from
organized sector whereas remaining 35% by unorganized players. Organized sector comprises of 6 players namely Anil Products Ltd,
Riddhi Siddhi Gluco Biols Ltd, Sukhjit Starch and Chemicals Ltd, Tirupati Starch & Chemicals, Universal Starch-Chem Allied Ltd, Gayatri Bio-
Organics Ltd.

All financials are for FY2010 (Rs. In Crs)

Peer Group Mkt EBITDA PAT P/E P/BV EV/Sales EV/ M.Cap/
Cap Sales EBITDA Margin PAT Margin (x) (x) (x) EBITDA (x) Sales (x)
Anil Products Ltd 163.3 374.1 52.0 13.9% 24.0 6.4% 6.8 2.28 0.69 4.99 0.44
Riddhi Siddhi Gluco 314.5 745.62 119.9 16.1% 39.2 5.3% 8.0 1.74 0.76 4.74 0.42
Sukhjit Starch 124.6 258.5 31.2 12.1% 14.7 5.7% 8.5 1.52 0.68 5.66 0.48
Tirupati Starch 6.8 46.51 3.34 7.2% 1.52 3.3% 4.5 1.67 0.34 4.72 0.15
Universal Starch 12.9 84.17 1.04 1.2% 0.71 0.8% 18.2 1.47 0.48 39.11 0.15
Gayatri Bio-Org. 44.9 61.64 4.66 7.6% 1.49 2.4% 30.1 -0.95 0.79 10.42 0.73
Source: Capitaline, AASPL Research
CMP as on 22nd July 2010

900

800

700
Anil Products Ltd.
Sales (Rs. Crs)

600

500 Riddhi Siddhi Gluco

400 Sukhjit Starch

300 Tirupati Starch

200 Universal Starch

100 Gayatri Bio-Org.

0
0.0 100.0 200.0 300.0 400.0
Mkt. Cap (Rs. Crs)
Source: Capitaline, AASPL Research

Indian Starch industry mainly consumes Corn (Maize) as input raw material.
Maize (Yellow Corn) is present in one form or other in Food, Milk, Chocolates/Biscuits, Clothes, Paper and Medicines. Corn contains
about 70% starch, other components being protein, fibers and fat. The basis of the corn milling process is the separation of the maize
(yellow corn) kernel into its different parts. Corn starch is produced by the wet milling process, which involves grinding of softened
corn and separation of corn oil seeds (germs), gluten (proteins), fibers (husk) and finally pure starch.

BY-PRODUCTS FROM CORN

The by-products from corn based industries find various applications:
i. Corn Steep Liquor: It contains amino acids and proteins are used by antibiotics drugs manufacturers. Also it is a large source of
biogas, which is being used as fuel for driers, boilers etc.
ii. Corn Gum: Corn Oil is produced by expelling oil from the germs. Corn Oil finds applications in food and other chemical
industries. Corn oil cake obtained after expelling oil is used as cattle and poultry feeds.
iii. Corn Gluten: Corn Gluten contains high protein content and it is used as cattle and poultry feeds.
iv. Corn Husk: It contains starch, protein and fat as minor components and mainly consumed as cattle feed.

2
Research Desk INDIA STARCH SECTOR

USES OF CORN STARCH

Starches, which are classified as food starches or industrial starches, are used in the production of consumer products like cereals,
puddings, cakes, cookies and crackers. Industrial starches primarily are used in the production of paper, corrugating boxes and
textiles. Dextrose, which is also in the sweetener category, is used as a fine chemical in pharmaceuticals.

Corn starch forms viscous, relatively short and opaque paste with cereal flavor. Its paste sets to stiff gels and is widely used for
thickening sauces, gravies, puddings and pie fillings. Corn starch finds numerous uses in the baking industry for the production of
cakes, cookies, in ice-cream preparations etc.

Modified starch is used in the manufacturing of chewing gum. In jellies, this replaced gelatine (a non-vegetarian base). This not only
helped in cutting of cost but also produced a 100% vegetarian product. The modified starches were also used in biscuits, cookies,
breads and cakes. It improves stiffness and crispness in biscuits and cookies and increased the volume in cakes. Dextrose (starch)
offers better consistency in jams than sugar.

In Paper industry a large quantity of starch is consumed as a surface-sizing agent, as a binder, as a paper coating agent etc.
In textile industry, starch is used in sizing to strengthen the warp yarn, in finishing and changing the appearance of fabric after it is
bleached, dyed or printed, in printing and increase the consistency of printing pastes. Also starch is used as a component in finishing
agent to glaze and polish sizing thread.

High-speed weaving required enhanced quality inputs like starch for sizing activity (preparatory weaving process in which yarn used
for weaving would be processed by using starch).

With global economy showing signs of recovery, consumer’s willingness to spend more and demand picking up, demand for products like
starch & glucose is also likely to pick up. Also, FMCG companies have continued to grow by volume and thereby would in turn increase the
demand for raw materials/inputs used in bakery & confectionery products.

A. Corn Starch Derivatives

Starch when cooked, forms high viscous gels and this property limit its applications. But by acid and other chemical treatments at
varying temperatures the characteristics of the native starch is modified to suit various end users.

These products are partly soluble in water and find several applications in food industry as:
 Thickner in Sauces and Soups
 Gel Former in Puddings
 Suspension Stabilizer
 Bodying agent in Baking
Modified Starches such as oxidised starch, pregelatinized starch and cationic starch find wide applications in paper industry, textile
industry, Confectionary etc.

B. Starch Sweeteners
Starch based sweeteners are other class of products manufactured in starch industries. A variety of sweeteners for very specific end
users are produced by acid/enzyme hydrolysis of starch. Following starch sweeteners are available in the market: Malto dextrin,
Liquid glucose, Dextrose monohydrate, High Maltose syrup, Liquid Sorbitol.

These starch based sweeteners find various end users, a few are mentioned below:
 Maltodextrin: In syrup and powder form used in food, baby food and medical preparations as a non sweet, nutritive agent.
 Liquid Glucose: Widely used in the confectionary bakery, jam, canning and leather industries.
 Liquid Dextrose: In fermentation industries for the manufacture of dextrose monohydrates, fructose and Sorbitol syrups.
 Dextrose Monohydrates: A crystalline free flowing product used in food and pharmaceutical industries for Glucose-D, Glucose-
C manufacture etc.
 High Maltose Syrup: As a malt replacement in brewing industry, in confectionary for Candy making.
 Sorbitol Syrup: It is hydrogenated dextrose syrup not having any reducing sugars widely used by tooth paste, pharmaceuticals,
cosmetics and tobacco industries.

3
Research Desk INDIA STARCH SECTOR

STATE-WISE LIST OF STARCH COMPANIES IN INDIA:

FY10 - Rs. in Cr.
State Location Company Name Capacity Sales PAT
Gujarat Ahmedabad Anil Products Ltd 500 TPD 374.1 24.0
Ahmedabad Corn Products Ltd
Ahmedabad Gujarat Ambuja Starch Products Ltd
Bharuch Gulshan Polyols Ltd

Karnataka Belgaum Riddhi Siddhi Gluco Biols Ltd 1500 TPD 745.6 39.2

Maharashtra Miraj Sahyadri Starch & Industries Ltd

Dhule Universal Starch Chem Allied Ltd 691 TPD 84.2 0.71
Sangli Yaswant Glucose Ltd
Dhule Kisaan Starch Ltd

Madhya Pradesh Indore Tirupati Starch Products Ltd 27900 TPA 46.5 1.52
Rajnandgaon Rajaram Maize Products Ltd

Tamil Nadu Salem Santhos Corn & Industries Ltd

Salem Varalaxmi Starch Ltd
Coimbatore Kamala Sugars Ltd

Andhra Pradesh Hyderabad Gayatri Bio-Organics Ltd 53550 TPA 61.6 1.49
Samalkot Vensa Biotek Ltd

Punjab Phagwara Sukhjit Starch & Chemicals Ltd 150750 TPA 258.5 14.67

Haryana Haryana # Bharat Starch Products Ltd

Source: Capitaline, AASPL Research
MTPA: Million Tonnes per Annum, TPD: Tonnes per Day
# Bharat Starch Products Ltd has been taken over by English Indian Clay Ltd in the year 2002.

MAJOR END-USERS OF STARCH AND STARCH BASED PRODUCTS

Hindustan Lever Ltd, Colgate Palmolive Ltd, Lotte India Ltd, Perfetti Vanmelle India Ltd, Nutriene Confectionary Ltd, ITC Limited,
Wrigley India Ltd, Cadbury India Ltd, Aviat Chemicals Ltd, Hindustan Latex Ltd, Glaxo Smithkline Ltd, Merck India Ltd, Kamani Oil
Mills, Wardex Laboratories Ltd, Griffon Labs Ltd, Emcure Pharma Ltd, Britannia India Ltd, Godrej Agrovet Ltd, Modern Food
Industries Ltd, Nestle India Ltd, Heinz India Ltd, Campco Ltd, Bombay Dyeing Ltd, Kissan Foods Ltd, Marico Industries etc.

DEMAND DRIVERS FOR CORN STARCH

• India’s per capita starch consumption is still less than 1 kg, compared with the US (64 kg) and the global average (6 kg).
• There are more than 1000 downstream applications of starch (cornstarch), of which a mere ~40 applications have been
commericalised until now.
• Use of starch in the manufacture of ethanol and biodegradable plastics – can potentially transform the starch industry's size and
prospects.
• The removal of 5% export rebate on corn starch by China is expected to act as a trigger for Indian corn starch and allied products
manufacturers as there will be tremendous export opportunity.

4
Research Desk INDIA STARCH SECTOR

CORN / MAIZE OVERVIEW

Corn represents the key input in corn starch manufacture, as it accounts for around 62-65% of the total operating cost. Therefore,
efficiency in collection immediately translates into a lower material cost and a higher corresponding margin or vice-versa in other
situation.
The monsoon is forecasted to be normal during current year; the total production of maize in the country is expected to increase
significantly as compared to last year. Based on international and national scenario of corn (maize), the prices of corn are expected to
remain stable during the coming season. Area, production and yield of maize in India had been increasing for the last five decades
and India had reached near self sufficiency in production. Production of maize, mainly grown during kharif largely depends upon
monsoon rains.
India Corn Production

20000 India Corn Production (1000 MT)

18000
16000
14000
12000
10000
8000
6000
4000
2000
0
1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008
Source: United States Dept of Agriculture

Despite industry challenges like uncertainties of the monsoons and higher farmer returns, overall corn availability is expected to grow
at about 6% annually based on past trends, leading to an overall production of around 23.4 million tonnes by 2011-12.

India Corn Consumption

18000
India Corn Consumption (1000 MT)
16000
14000
12000
10000
8000
6000
4000
2000
0
1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Source: United States Dept of Agriculture

5
Research Desk INDIA STARCH SECTOR

Maize Price Movement

Maize Price (Rs./Tonne)

12000

10000

8000

6000

4000

2000

0
Mar’09

Apr’09

May’09

Jun’09

Jul’09

Aug’09

Sep’09

Oct’09

Nov’09

Dec’09

Jan’10

Feb’10

Mar’10

Apr’10

May’10

Jun’10
Source: Bloomberg, AASPL Research

The corn (maize) prices during current year are expected to prevail in the range of Rs.8500-9500 per tonne in September-October
and are likely to increase by Rs.500-1000 per tonne afterwards. (Source: Agricultural Market Intelligence Centre)

6
 RESEARCH
NOTE
ANIL PRODUCTS LTD
S E C U R I T I E S P V T. L T D.

CMP: Rs. 167 BUY Upside: 72% Target: Rs. 288

23rd July, 2010 COMPANY PROFILE

Anil Products Limited (APL) is an Ahmedabad-based 70 years old company engaged in
Key Share Data manufacturing starches and its derivatives. The Company produces a range of starches
BSE Code 532910 from basic corn starches, modified starches, specialty starches, enzymes and related
NSE Code NA downstream products, such as liquid glucose (corn syrup).
Bloomberg ANPR IN
Reuters ANLP.BO PRODUCT CATERS TO KEY USER INDUSTRIES
Industry Starch
APL is a pioneer in the introduction and manufacture of various starch based products for
Sensex 18113.2
user industries in India. APL’s products cater to basically 5 industries, such as Paper,
Nifty 5442.0
Pharmaceutical, Textile, Food and Animal feeds.
Equity (Rs.Cr) 9.77
F.V (Rs.) 10
M.Cap (Rs. Cr) 163 Paper Industry: Starch is widely used in surface sizing to enhance appearance and has
52 Wk H/L 182/86 the ability to increase paper strength and stiffness.
Avg Daily Volume 24,605
Pharmaceuticals Industry: Starch is used in tablet coating and drug formulation amongst
Absolute Returns (%) other applications in the pharmaceutical industry. Liquid glucose is an essential ingredient
in the manufacture of a variety of syrups, antacid suspensions and other mixtures as it has
1m 3m 12m a unique property of balanced sweetness.
Absolute 22.4% 41.6% 41.2%
Rel. to Sensex 20.4% 39.2% 22.2%
Textiles Industry: Basic Starch is of paramount importance in the areas of sizing, finishing
and printing the Textile industry. Modified starch is also used as a printing thickener in the
Shareholding Pattern (%): (30th June ‘10) textile industry.

Promoters 68.9%
FII & Institutions 6.5% Food Industry: Basic Starch is basically used for thickening sauces, pudding and gravies.
Public & Others 24.6% It is also used in bakeries and for preparing ice cream cones.

Relative Price Movement Animal Feeds: By-products is useful in cattle and poultry feeds as it activates weight
increase in animals and table birds. Gluten (by products) is a rich source of protein and is
150 used in Poultry feed as it contains 65% protein.
130

110
MANUFACTURING FACILITIES
90

70 Manufacturing Facility Year of Commissioning

50
Corn wet milling 1941
Jul-09
Aug-09
Aug-09

Jul-10
Jul-10
Sep-09
Sep-09
Sep-09

Jan-10
Jan-10
Feb-10
Feb-10

Apr-10
Apr-10

Jun-10
Jun-10
Nov-09
Nov-09
Dec-09
Dec-09

Mar-10
Mar-10
Mar-10

May-10
May-10
Oct-09
Oct-09

Corn syrup (Liquid Glucose) 1943

APL Sensex
Calcium Gluconate 1951
Dextrose 1959
Enzymes 1967
Anhydrous dextrose 1970
Sorbitol 1976
Source: Company
Head of Research: Nirav Asher
[email protected] APL was the first to manufacture Corn Syrup (Liquid Glucose), Calcium Gluconate and
Dextrose.
Research Analyst: Jyotiranjan Das
[email protected]

7
Research Desk ANIL PRODUCTS LTD

CAPACITY EXPANSION TO DRIVE REVENUE

APL has grown from 1 tonne per day (TPD) to 500 TPD and currently produces a complete range of starch products. APL plans to
increase its current capacity of ~500 TPD to 1500 TPD in next 2-3 years. The current facility of the company is spread over 1.5 mn sqr
meters including 20-23 small process units. For expansion, the company has acquired 100-150 acres of land near Baroda, Savli.

Product Group Capacity (TPA)

Grind 1,60,000
Starch 48,000
Modified Starches 15,000
Liquid Glucose 24,000
Dextrose Monohydrate (DMH) 17,500
ANH Dextrose (AD) 6,000
Sorbitol 3,250
Hydroxy Ethylated Biopolymer 1825
Other Modified Starches 4000
Source: Company

MARGINS EXPECTED TO IMPROVE FURTHER

402 16.0%

339 12.0%

276 8.0%
Rs. Crs

213 4.0%

150 0.0%
FY06 FY07 FY08 FY09 FY10

Net Sales (LHS) EBITDA Margin (RHS) PAT Margin (RHS)

Source: Company, AASPL Research

FY2010-11E GUIDANCE:
 Sales target of ~Rs.500 Cr (vs. Rs.374 Cr in FY10) – 70% contribution will be from Value added products.
 Revenue from By-products increased from Rs. 3 Cr in FY08 to Rs.17 cr in FY10. The company is expecting revenues of Rs.65 Cr
in FY’11E and about Rs.300 Cr by FY14E.
 Till March 2011, the current capacity has been already booked.
 EBITDA margin to improve to 17-18% in FY11E as compared to 14% in FY10 on account of higher contribution from Value
added products.
 Net profit margin to be in the range of 7-8% which will translate into PAT of ~Rs.35 Cr in FY11E.
 Target growth for the next 2-3 years to be in the range of 30-35% in revenue.
 The focus of the company will be Food and Agro related Industries.
 The company has added 23 countries to its exports list in FY10 and plans to add another ~20 countries by this year end.

8
Research Desk ANIL PRODUCTS LTD

VALUATION
The Stock at Rs.167 quotes at P/E multiple of 4.66x FY’11E EPS of Rs.35.82.
We recommend BUY on the stock with a price target of Rs.288, an upside of 72% from the current levels over a period of
12-18 months.
FINANCIALS
Profit & Loss A/c (Rs in Cr.) FY06 FY07 FY08 FY09 FY10

Net Sales 171.6 202.8 225.0 276.3 374.1

Y-o-Y 18.2% 11.0% 22.8% 35.4%
Total Expenditure 160.1 185.6 204.6 249.0 322.2
EBITDA 11.5 17.1 20.4 27.4 52.0
Margin 6.7% 8.5% 9.1% 9.9% 13.9%
Depreciation 2.4 2.7 3.7 4.2 5.2
EBIT 9.1 14.5 16.8 23.1 46.8
Interest 5.5 7.4 10.0 10.4 15.9
Other Income 0.7 1.7 5.5 2.7 0.5
PBT 4.3 8.8 12.3 15.4 31.3
Tax 0.6 1.5 3.5 3.0 6.0
Tax rate 14.4% 17.3% 28.7% 19.4% 19.2%
Fringe Benefit Tax 0.1 0.1 0.1 0.1 -
Deferred Tax 1.6 1.7 1.4 1.8 1.3
PAT 2.0 5.5 7.2 10.5 24.0
Margin 1.2% 2.7% 3.2% 3.8% 6.4%
Y-o-Y 170.0% 32.1% 45.3% 128.1%
EPS (Rs.) 2.7 7.4 9.8 14.2 24.6
Source: Company, AASPL Research

9
 RESEARCH
NOTE
RIDDHI SIDDHI GLUCO BIOLS LTD (RSGBL)
S E C U R I T I E S P V T. L T D.

23rd July, 2010 CMP: Rs. 282

COMPANY PROFILE
Key Share Data
Incorporated in 1990, Riddhi Siddhi Gluco Biols Limited (RSGBL) an Ahmedabad-based
BSE Code 524480 company is India’ largest starch and starch derivatives manufacturer. With 4 production
NSE Code NA units strategically located across the country and 1500 TPD capacity, RSGBL enjoys
Bloomberg RDSD IN market share of about 35%. The Company has manufacturing plants located in
Reuters RSGB.BO Viramgam (Gujarat), Gokak (Karnataka), Pantnagar (Uttarakhand) and Puducherry
Industry Starch (Union Territory).
Sensex 18113.2
Nifty 5442.0 The product portfolio of RSGBL includes various grades of corn starch powder, modified
Equity (Rs.Cr) 11.14 starches, liquid glucose, high maltose corn syrup (HMCS), dextrose monohydrate,
F.V (Rs.) 10 maltodextrine, dextrose syrup and related by-products.
M.Cap (Rs. Cr) 314
52 Wk H/L 304/119 LARGEST CORN PROCESSING CAPACITY
Avg Daily Volume 11,556 The Company's cumulative 1,500 TPD corn wet milling capacity is the largest in the
domestic industry.
Absolute Returns (%)
Year of Corn Processing
Unit Location Land
1m 3m 12m Commencement Capacity
Absolute 4.6% 23.6% 127.1%
Viramgam, Gujarat 1993-1994 250 TPD 50 Acres
Rel. to Sensex 2.5% 21.3% 108.2%
Gokak, Karnataka 1995-96 750 TPD 100 Acres
Pantnagar, Uttarakhand 2007-08 500 TPD 31 Acres
Shareholding Pattern (%): (30th June ‘10)
TOTAL 1500 TPD
Promoters 43.1% Puducherry, Union Territory 2005-06 8000 MT/year*
FII & Institutions 46.6%
# Puducherry unit is into modified starch.
Public & Others 10.3% Source: Company

Gokak (Karnataka) unit is India's single largest corn wet milling plant, followed by the
Relative Price Movement Pantnagar plant, which is the second largest in the country.
250
RSGBL has expanded its capacity during the year from 325000 tonnes in FY’09 to
200 440000 tonnes in FY’10 and there is no major expansion plans and capex lined up in
FY11E.
150

100 REPUTED CLIENTELE BASE

50 RSGBL's clients comprise prominent brands like Nestle, Heinz, Perfetti, Cadbury and ITC,
Aug-09

Apr-10
Sep-09

Oct-09

Nov-09

Dec-09

Feb-10

Jun-10
Jul-09

Jan-10

Mar-10

May-10

Jul-10

among others and the Company's business from long-standing customers accounted for
~60% of revenues in FY09.
RSGBL Sensex

ENJOYS HIGHEST MARKET SHARE

RSGBL commands a healthy market share of ~35% in Indian starch industry and is the
undisputed leader of the industry enjoying considerable goodwill. Nestle, Cadbury,
Uniliver, Britannia, Ranbaxy, Novartis, Wockhardt, Dabur, BILT, ITC, JK, Grasim, Indian
Rayon, Amul, Hindalco, Emami, UB, Venky's, etc. are some amongst the ever-expanding
client-list of Riddhi.

Head of Research: Nirav Asher CONTINUOUS PRODUCT DEVELOPMENT:

[email protected] The Company has a strong research and development team for product development and
Research Analyst: Jyotiranjan Das process up-gradation. This resulted in the successful launch of over 10 products of
[email protected] different grades in the last three years, totalling ~40 different products, enabling the

10
Research Desk RIDDHI SIDDHI GLUCO BIOLS LTD (RSGBL)

STRATEGIC ALLIANCE WITH ROQUETTE FRERES

In February 2006, Riddhi Siddhi had made preferential allotment of 15,78,100 shares amounting to 14.93% to French company
Roquette Freres at a price of Rs 200/- per share. Roquette Freres is among the world’s leading makers of starch derivatives, used in
foodstuff, adhesives and medicines, as well as the largest producer of polyols, used to make a wide range of products like chewing
gum, candy and ice-cream.

RSGBL strategic alliance with a Roquette Freres will facilitate the company in the transfer of technology know how which is likely to
help in enhance its standards and technology leadership in the industry.

There was also news that Roquette Freres is in advanced talks to buy RSGBL by raising its stake to 51% from 15%. Roquette is likely to
pay nearly Rs.150 crore for the ~36% stake, a premium of up to 30% over the then current market price of Rs.265. Roquette will then
have to launch an open offer to buy 20% more in RSGBL, which may cost another Rs.75 crore. However, the management clarified
later that it’s just a speculation and they don’t want to comment on speculations.

CONSISTENT PERFORMANCE

800 18.0%

650 13.5%

500 9.0%
Rs. Crs

350 4.5%

200 0.0%
FY06 FY07 FY08 FY09 FY10
Net Sales (LHS) EBITDA Margin (RHS) PAT Margin (RHS)

Source: Company, AASPL Research

ROBUST 1QFY11 RESULT

Profit & Loss A/c (Rs in Cr.) 1Q10 4Q10 1Q11 Y-o-Y Q-o-Q

Net Sales 156.33 231.26 202.08 29.3% -12.6%

Total Expenditure 137.62 182.16 157.79 14.7% -13.4%
EBITDA 18.71 49.1 44.29 136.7% -9.8%
Margin 12.0% 21.2% 21.9%
Depreciation 4.95 10.38 5.49 10.9% -47.1%
EBIT 13.76 38.72 38.80 182.0% 0.2%
Interest 6.06 4.09 4.52 -25.4% 10.6%
Other Income 0 0.78 5.07 550.2%
PBT 7.7 35.41 39.35 411.1% 11.1%
Tax 1.31 8.16 8.18
Deferred Tax 1.25 15.11 0
PAT 5.14 12.14 31.17 506.4% 156.8%
Margin 3.3% 5.2% 15.4%
EPS (Rs.) 4.61 10.90 27.98
Source: Company, AASPL Research

11
 Research Desk RIDDHI SIDDHI GLUCO BIOLS LTD (RSGBL)

VALUATION
The Stock at Rs.282 quotes at P/E multiple of 4.2x FY’11E EPS of Rs.67.3.
FINANCIALS

Profit & Loss A/c (Rs in Cr.) FY06 FY07 FY08 FY09 FY10

Net Sales 243.13 332.99 332.4 533.99 745.62

Y-o-Y 37.0% -0.2% 60.6% 39.6%
Total Expenditure 210.12 278.92 277.82 472.47 625.69
EBITDA 33.01 54.07 54.58 61.52 119.93
Margin 13.6% 16.2% 16.4% 11.5% 16.1%
Depreciation 8.22 10.87 12.62 14.73 24.23
EBIT 24.79 43.2 41.96 46.79 95.70
Interest 11.9 10.91 12.49 27.17 20.83
Other Income 0 0 0.49 1.92 1.58
PBT 12.89 32.29 29.96 21.54 76.45
Tax 1.16 3.89 3.57 2.81 22.12
Tax rate 9.0% 12.0% 11.9% 13.0% 28.9%
Fringe Benefit Tax 0 0 0 0.19 0
Deferred Tax 0.39 1.63 6.5 4.55 15.11
PAT 11.34 26.77 19.89 13.99 39.22
Extra-ordinary Items 0 -0.02 -0.03 0 0
Adj. PAT 11.34 26.79 19.92 13.99 39.22
Margin 4.7% 8.0% 6.0% 2.6% 5.3%
Y-o-Y 136.2% -25.6% -29.8% 180.3%
EPS (Rs.) 13.42 25.39 17.88 12.56 35.21
Source: Company, AASPL Research

12
 RESEARCH
NOTE
SUKHJIT STARCH AND CHEMICALS LTD
S E C U R I T I E S P V T. L T D.

23rd July, 2010 CMP: Rs. 169

COMPANY PROFILE
Key Share Data
Incorporated in 1943, Sukhjit Starch and Chemicals Limited (SSCL) a Punjab based
BSE Code 524452 company is primarily engaged in the manufacture of corn (maize) starch, dextrins,
NSE Code NA modified starches and its by-products, and derivatives like gluten, maize oil cake, maize
Bloomberg SHSC IN oil, dextrose monohydrate, dextrose anhydrous, sorbitol and maltodextrin (liquid and
Reuters SSCL.BO powder).
Industry Starch
Sensex 18113.2 It has four segments: starch & its derivatives, readymade garments, leasing hire purchase
Nifty 5442.0 financing and manufacturing of heavy machinery. The Company’s subsidiaries include
Equity (Rs.Cr) 7.38 The Vijoy Steel & General Mills Co. Ltd., Sukhjit Finance Ltd. and Scott Industries Ltd.
F.V (Rs.) 10
M.Cap (Rs. Cr) 125 LOCATION OF PLANTS:
52 Wk H/L 178/88
Avg Daily Volume 7,217 (i) Sarai Road, Phagwara (Punjab.)

(ii) Armour Road, Mubarak Nagar, Nizamabad (A.P.)

Absolute Returns (%)
1m 3m 12m (iii) WBIIDC Growth Centre, N.H. 34, Narayanpur, MALDA (W.B.)
Absolute 10.5% 35.6% 69.7%
Rel. to Sensex 8.5% 33.3% 50.8% (iv) Village Gurplah, Tehsil Haroli, Distt. UNA (H.P.)

PRODUCT-WISE CAPACITIES
Shareholding Pattern (%): (30th June ‘10)
Licensed Installed Production Sales Capacity
Promoters 56.9% Product Capacity (MT) Capacity (MT) (MT) (MT) Utilised
FII & Institutions 3.0%
Public & Others 40.1% Maize Starch 101500 95000 94279 36384# 99%
Glucose 48637 36000 43711 43339 121%
Relative Price Movement
Sorbitol 12000 9500 7614 7535 80%
200
180
Dextrine & Textilose 10250 10250 6381 6359 62%
160
140 # Out of 94279 MT of production, Captive consumption was 58604 MT
120 All figures are for FY09
100
80
Source: Company
60
40
20
0
CLIENTELE LIST
Aug-09

Apr-10
Jun-09
Jun-09

Sep-09
Sep-09
Oct-09
Nov-09
Nov-09
Dec-09

Feb-10
May-09

Jul-09

Jan-10
Jan-10

Mar-10
Mar-10

May-10

SSCL's clients comprise prominent brands like Wrigley India ltd, Dabur India Ltd, Perfetti,
SRSL
SRSL
SENSEX
Sensex Godrej, Parle, Hindalco, Cadbury, and Ballarpur Industries among others.

PLANS Rs.50 Crs CAPEX AT MALDA

SSCL has planned a capital expenditure of Rs.50 crore at its unit at Narayanpur Industrial
Estate, in Malda district of West Bengal for manufacturing maize starch, liquid glucose
and its derivatives. The company plans to setup an additional unit with a maize grinding
capacity of 300 tonnes per day (TPD) in the existing premises of the Malda Unit. Besides
this, the company will also setup a 50 TPD capacity Dextrose plant and High Malto Syrup
Head of Research: Nirav Asher plant with 30 TPD capacity. The expansion will be funded partly through term loan/ECB of
[email protected]
Rs.32 crore & balance Rs.18 crore through internal accruals.
Research Analyst: Jyotiranjan Das
[email protected]

13
 Research Desk SUKHJIT STARCH AND CHEMICALS LTD

FLUCTUATING MARGINS A BIG CONCERN

300
19.0%
17.0%
250 15.0%
13.0%

200 11.0%

Rs. Crs
9.0%
7.0%
150
5.0%
3.0%
100 1.0%
FY06 FY07 FY08 FY09 FY10

Net Sales (LHS) EBITDA Margin (RHS) PAT Margin (RHS)

Source: Company, AASPL Research

VALUATION
The Stock at Rs.169 quotes at P/E multiple of 6.8x FY’11E EPS of Rs.24.97.
FINANCIALS

Profit & Loss A/c (Rs in Cr.) FY06 FY07 FY08 FY09 FY10

Net Sales 122.29 161.79 179.62 202.62 258.54

Y-o-Y 32.3% 11.0% 12.8% 27.6%
Total Expenditure 108.92 131.45 150.03 178.87 227.33
EBITDA 13.37 31.28 31.09 24.83 31.95
Margin 10.9% 19.3% 17.3% 12.3% 12.4%
Depreciation 2.66 2.91 3.64 5.11 5.94
EBIT 10.71 28.37 27.45 19.72 26.01
Interest 3.1 3.3 4.73 5.4 7.1
Other Income 0.6 0.94 1.5 1.08 0.74
PBT 8.21 26.01 24.22 15.4 19.65
Tax 1.14 3.86 2.66 2.71 4.24
Tax rate 13.9% 14.8% 11.0% 17.6% 21.6%
Fringe Benefit Tax 0.08 0.06 0 0 0
Deferred Tax -0.14 0.73 0 0 0
PAT 7.13 20.42 20.06 11.61 14.67
Margin 5.8% 12.6% 11.2% 5.7% 5.7%
Y-o-Y 186.4% -1.8% -42.1% 26.4%
EPS (Rs.) 19.32 27.67 27.18 15.73 19.88
Source: Company, AASPL Research

14
Research Desk SUKHJIT STARCH AND CHEMICALS LTD

S E C U R I T I E S P V T. L T D.

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124 Viraj, S.V.Road, Khar (W), Mumbai – 400 052
Tel: 022 2649 7997 Fax: 022 2649 7997 Email: [email protected]

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