Friday, August 21, 2009

Balaji Amines - Scuttlebutt Winner, Will Stockmarket Recognition Follow ?

The great value investor Philip Fisher made famous an approach known as the “scuttlebutt”. He said that there was a lot of knowledge about a company that could give insight into its investment merits if the investor could merely find it out and synthesize it into a somewhat accurate and cohesive view of an entire corporation.

This author has polled views of several people with knowledge of the chemicals & pharmaceutical industry regarding Balaji Amines Ltd (BAL) & got uniformly good opinions about the company. So the scuttlebutt is certainly on the side of this scrip, but will stockmarket recognition follow ?

To summarize the scuttlebutt :-

  • BAL is a leader in Amines & Specialty Chemicals industry in India
  • Management of BAL is honest, intelligent , committed & professional
  • Products are noted for highest quality
  • The company continuously tries to introduce new products in the market , and to improve and optimise it's manufacturing processes
  • Ongoing expansion plans : They have completed backward integration for NMP, commercial production of GBL has started . Production of PVPK-30, another import substitute, is also likely to start soon.
  • Captive power plant will soon be operational , leading to savings in costs.
  • More than decent track record, good results during downturn, monopolistic position in some products.

Background (from company website) :
Balaji Amines Ltd (BAL) , an ISO 9001: 2000 certified company, specialises in manufacturing Methylamines, Ethylamines, Derivatives of Specialty Chemicals and Natural Products.

BAL , one of the leading manufacturers of Aliphatic Amines in India was set up in the year 1988 to cater to the growing requirements of value based Specialty Chemicals. BAL commenced manufacture of Methyl Amines in the year 1989 and subsequently added facilities for manufacture of Ethyl Amines and other derivatives of Methyl Amines and Ethyl Amines. BAL has been consistently adding capacities and fine tuning processes to provide quality products at lowest cost to the customers.

World over, Amine technology is a closely guarded process with only a few handful companies having access to such technology. BAL for the first time in India tested on an indigenously developed technology and developed it further over a period of time.Today, BAL‘s products are accepted in international markets and have gained the distinct export quality status, which makes it one of the few companies in India having the potential to match the stringent international quality standards for which BAL has been awarded ISO-9001: 2000 Certification .

BAL has state-of-the-art manufacturing facilities at Tamalwadi & Chincholi, Solapur , Maharashtra , as well as at Medak, Andhra Pradesh.

Company website :

CMP : 91.40 (Closing on BSE, 19th Aug , 2009)
Latest EPS : 23.65 Rs (FY09). EPS for FY08 was 20, for FY07 was 16.

Recommendation : Accumulate , preferably below Rs 90/- . Though the chemicals industry is a highly competitive industry, the company has put together a very impressive & consistent track record . This, coupled with good market feedback about the quality of it's products, and it's highly professional approach in dealing with customers & suppliers, inspires confidence that BAL has the management & processes in place to weather any storm & preserve and enhance shareholder value.

Disclaimer/Disclosure : At the time of writing this article the author has a position in the stock covered by this report. The author or any of his dependent family members may make purchases or sales of the securities mentioned in the report while the report is in circulation. Readers/recipients of this report are strongly advised to do their strict due diligence, and should be aware that the value of investments can go down as well as up. The author shall not be liable for any direct or indirect losses arising from the use of the contents of this report, and readers are therefore cautioned to use the information contained herein at their own risk. In fact, readers would do well to seek the advice of a qualified independent advisor. The author certifies that all of the views expressed in this report accurately reflect his personal views about the subject company at the time of writing this report. Feedback / brickbats may be hurled at the author at .