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Nirmal Bang Report
We visited Dahej special economic zone plant of Tatva Chintan Pharma Chem Ltd. after commercialisation of the new capacity (capex Rs 1.5 billion) and interacted with the management.
While SDAs are expected to grow in FY24 on a favorable base, ex-structure directing agent portfolio is under pressure due to subdued demand and pricing as most of customers are cutting down inventory levels. Prices of select key raw material are back to 1998 levels, as per management. After ~50% cut in majority of the basket over last six months, prices are expected to stabilise at current levels. Increase in power costs by Rs 2/unit in Dahej and shift from light diesel oil to pipe gas would have an incremental bearing on Ebitda.
Delay in commercialisation of Monogylme continues: Management indicated that commercialisation of Monogylme is getting delayed due to availability and quality issues while sourcing a catalyst from outside at the pilot stage. Conversion ratio by using the outsourced catalyst is significantly lower than the desired level and hence Tatva Chintan is planning to manufacture it inhouse for the pilot scale. For the commercial scale, catalyst would be sourced externally.
Capacity expansion plans: Management expects existing Dahej capacity to be fully utilised during FY25. In the existing premise, there is a scope to build another multi purpose plant. Tatva Chintan has recently bought a land parcel for Rs 200 million in the nearby vicinity wherein capex would be in phased manner (first phase could entail a capex of Rs~3 billion). Total revenue potential from the entire project could be to the tune of Rs 10 billion, as per management.
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