Description
We initiate coverage on Pidilite with a Buy recommendation and
price target of `178. Pidilite is the market-leader in adhesives and
sealants, with an outstanding sub-segmentation and branding
strategy. Its pricing power helps maintain margins. We expect
Pidilite to report FY10-13e earnings CAGR of 22%.
Anand Rathi Share and Stock Brokers Limited, its affiliates and subsidiaries, do and seek to do business with companies covered in its research reports. Thus,
investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision. Disclosures and analyst certifications are located in Appendix 1.
Anand Rathi Research India Equities
India I Equities
Key financials
YE 31 Mar FY09 FY10 FY11e FY12e FY13e
Sales (`m) 19,863 21,916 25,831 30,250 35,476
Net profit (`m) 1,105 2,680 3,430 3,954 4,815
EPS (`) 2.2 5.3 6.8 7.8 9.5
Growth (%) (35.8) 142.5 28.0 15.3 21.8
PE (x) 67.8 28.0 21.8 18.9 15.6
PBV (x) 10.2 8.2 6.3 5.0 4.0
RoE (%) 15.8 32.5 32.7 29.6 28.7
RoCE (%) 12.0 22.7 28.4 27.5 29.1
Dividend yield (%) 0.6 1.0 0.8 1.0 1.2
Net gearing (%) 57.5 17.1 (5.2) (23.5) (37.9)
Source: Company, Anand Rathi Research
Consumer
Initiating Coverage
1 April 2011
Pidilite Industries
Market leader in niche segments; initiate with Buy
We initiate coverage on Pidilite with a Buy recommendation and
price target of `178. Pidilite is the market-leader in adhesives and
sealants, with an outstanding sub-segmentation and branding
strategy. Its pricing power helps maintain margins. We expect
Pidilite to report FY10-13e earnings CAGR of 22%.
? Focus on brand creation. Pidilite focuses on creating strong
brand awareness in low-involvement categories by educating
intermediary users (carpenters, plumbers, civil contractors) as well
as via advertisements (Dr Fixit). Also, it has created strong brands
in niche segments such as adhesives for rubber products, crockery,
kitchen appliances and tiles.
? Market leader in niche segments. Pidilite is the market leader in
niche sub-segments – adhesives, sealants and construction
chemicals. Presence of only unorganized players and lack of MNC
interest in these sub-segments help the company maintain steady
growth and margins.
? Strong pricing power. The company has strong pricing power in
all the sub-segments it operates in and is thereby able to pass on
higher raw material costs to end-consumers via price hikes. Also,
consumer uptrading has improved its profitability and margins.
? Valuation and risks. We value the stock at price target of `178
based on DCF valuation (Rf: 9%, Rm: 14%). At our target price, it
would trade at PE of 23x FY12e earnings. Risks: higher raw
material prices and keener competition.
Rating: Buy
Target Price: `178
Share Price: `148
Key data PIDI IN/PIDI.BO
52-week high/low `160/`106
Sensex/Nifty 19445/5834
3-m average volume US$0.4m
Market cap `75bn/US$1.7bn
Shares outstanding 506m
Free float 29.4%
Promoters 70.6%
Foreign Institutions 10.3%
Domestic Institutions 8.0%
Public 11.1%
Relative price performance
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1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 2
Quick Glance – Financials and Valuations
Fig 1 – Income statement (`m)
Year end 31 Mar FY09 FY10 FY11e FY12e FY13e
Net sales 19,863 21,916 25,831 30,250 35,476
Sales growth (%) 16.3 10.3 17.9 17.1 17.3
- Op. expenses 17,758 18,146 20,761 24,352 28,552
EBITDA 2,105 3,770 5,070 5,898 6,924
EBITDA margin (%) 10.6 17.2 19.6 19.5 19.5
- Interest 361 329 244 244 167
- Depreciation 588 666 765 925 990
+ Other income 119 335 365 407 487
- Tax 167 408 996 1,181 1,438
PAT 1,108 2,703 3,430 3,954 4,815
PAT growth (%) (35.4) 143.8 26.9 15.3 21.8
Consolidated PAT 1,105 2,680 3,430 3,954 4,815
FDEPS (`/share) 2.2 5.3 6.8 7.8 9.5
CEPS (`/share) 3.3 6.6 8.3 9.6 11.5
DPS (`/share) 0.9 1.5 1.3 1.5 1.8
Source: Company, Anand Rathi Research
Fig 2 – Balance sheet (`m)
Year end 31 Mar FY09 FY10 FY11e FY12e FY13e
Share capital 253 506 506 506 506
Reserves & surplus 7,122 8,630 11,326 14,400 18,188
Shareholders’ fund 7,375 9,136 11,832 14,906 18,694
Debt 6,089 4,686 4,686 4,686 2,491
Minority interests 7 2 2 2 2
Capital employed 13,470 13,824 16,520 19,594 21,187
Fixed assets 8,331 8,390 8,624 8,699 8,709
Investments 254 2,678 4,678 6,928 7,428
Working capital 3,285 2,308 2,596 2,710 2,908
Cash 1,601 449 623 1,258 2,142
Capital deployed 13,470 13,824 16,520 19,594 21,187
No. of shares (m) 506 506 506 506 506
Net Debt/Equity (%) 57.5 17.1 (5.2) (23.5) (37.9)
W C turn (days) 16.5 10.5 10.0 9.0 8.2
Source: Company, Anand Rathi Research
Fig 3 – Cash flow statement (`m)
Year end 31 Mar FY09 FY10 FY11e FY12e FY13e
Consolidated PAT 1,105 2,680 3,430 3,954 4,815
+ Depreciation 588 666 765 925 990
Cash profit 2,162 3,038 4,195 4,880 5,805
- Incr/(Decr) in WC 218 681 (288) (114) (199)
Operating cash flow 2,379 3,719 3,908 4,766 5,607
- Capex (2,011) (854) (1,000) (1,000) (1,000)
Free cash flow 368 2,866 2,908 3,766 4,607
- Dividend (513) (519) (734) (881) (1,027)
+ Equity raised (29) - - - -
+ Debt raised 275 (1,119) - - (2,195)
- Investments (220) (2,380) (2,000) (2,250) (500)
- Misc. items - - - - -
Net cash flow (118) (1,152) 174 635 884
+ Opening cash 1,718 1,601 449 623 1,258
Closing cash 1,601 449 623 1,258 2,142
Source: Company, Anand Rathi Research
Fig 4 – PE Band
6x
14x
22x
31x
40x
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Source: Bloomberg, Anand Rathi Research
Fig 5 – Mean PE(x) and standard deviations
Mean
+1SD
+2SD
-1SD
-2SD
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Source: Bloomberg, Anand Rathi Research
Fig 6 – Pidilite vs. BSE FMCG
Pidilite
BSE FMCG
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Source: Bloomberg
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 3
Investment Argument and Valuation
We initiate coverage on Pidilite with a Buy recommendation and
price target of `178. Pidilite is the market-leader in adhesives and
sealants, with an outstanding sub-segmentation and branding
strategy. Its pricing power helps maintain margins. We expect
Pidilite to report FY10-13e earnings CAGR of 22%.
Pidilite Industries, a company promoted by the Parekh family, is an
established player in adhesives, sealants and construction chemicals in
India. The company’s major brands include Fevicol, Fevikwik, M-Seal and
Dr Fixit. Further, Pidilite derives ~12% of revenues from international
markets.
Focus on brand creation
Pidilite focuses on creating brands in ‘low-involvement’ categories, where
end-customer engagement is low or nil. Globally, branding is limited in
such niche sub-segments (such as adhesives and sealants). The company
has increased awareness of its brand by educating intermediary users
(carpenters, plumbers, civil contractors) as well as via advertisements (Dr
Fixit).
Hence, it effectively utilizes the ‘prescription’ route (i.e., via carpenters,
plumbers etc) to push its brands and generate brand-loyalty, promoting
Fevicol, M-Seal and Dr Fixit via educating carpenters, plumbers and
construction workers (via training programs, pamphlets etc) at the in-
house ‘Dr Fixit Institute’.
Fig 8 – Prescription route of Pidilite
Segment Middle men Brands
Adhesives Carpenters Fevicol
Sealants Plumbers M-Seal
Art materials Teachers Fevicryl
Construction chemicals Construction workers Dr Fixit
Source: Anand Rathi Research
Focus on creating leading brands in
niche sub-segments
Fig 7 – Revenue breakdown (FY10)
Segmental
Others
1%
Organic Pigment
& Preparation
6%
Industrial Resins
8%
Industrial
Adhesives
8%
Art & Materials
10%
Construction &
Paints Chemicals
18%
Adhesives &
Sealants
49%
Geographical
India
88%
North America
5%
South East Asia
1%
Middle East &
Africa
1%
South America
5%
Source: Company
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 4
Market leader in niche segments
Pidilite focuses on the niche sub-segments of adhesives and sealants.
There being only a few players in these sub-segments helps Pidilite
develop strong brands without much competition. The company does not
target launching products in the competitive consumer segments or
products in the well-penetrated segments. Hence, its focus on only niche
sub-segments has resulted in it developing market-leading brands Fevicol,
Dr Fixit and M-Seal. As there are no competing products in these sub-
segments, it has developed products that now enjoy more than 80%
market share.
Fig 9 – Pidilite: Competitive positioning of brands
Brand Segment Competing products
Fevicol Adhesives No major product
Fevikwik Adhesives No major product
Fevistik Adhesives Kores Glue
M-Seal Sealants No major product
Dr Fixit Water proofing Local products
Steelgrip Electric insulation Various smaller products
Roff Tiling solutions No major product
Source: Anand Rathi Research
Enjoys strong pricing power
The company enjoys strong pricing power in all sub-segments it has
presence in, with a market share of over 80% in each. It has been able to
pass on any rise in raw material costs to end-consumers, though after a lag.
Its EBITDA margin remains slightly volatile due to the lag effect of price
hikes, but we expect the company to maintain its margins.
Fig 10 – Price hikes
-30
-20
-10
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Source: Company, Anand Rathi Research
Valuation
Our DCF-based target price stands at `178 (Rf. 9%, Rm. 14%). At our
price target, the stock will trade at target PE of 23x FY12e earnings. In the
past ten years, the stock has traded at par with the 12m-forward Nifty PE.
With better profitability and a higher growth trajectory, we expect the
premium over 12-month forward Nifty PE to expand.
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 5
Fig 11 – Premium/discount to the 12-month forward Nifty PE
Pidilite
Nifty
Average
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120
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Fig 12 – DCF-based valuation
`m FY11e FY12e FY13e FY14e FY15e FY16e FY17e FY18e FY19e FY20e
Net Sales 25,831 30,250 35,476 41,507 48,563 56,818 66,478 77,779 91,001 106,471
Growth in Revenues (%) 17.9 17.1 17.3 17.0 17.0 17.0 17.0 17.0 17.0 17.0
EBITDA Margin 19.6 19.5 19.5 19.0 19.0 19.0 19.0 19.0 19.0 19.0
EBITDA 5,070 5,898 6,924 7,886 9,227 10,795 12,631 14,778 17,290 20,230
Depreciation 765 925 990 1,159 1,356 1,586 1,856 2,171 2,540 2,972
Other Income 365 407 487 570 667 781 913 1,069 1,250 1,463
Interest Expenses 244 244 167 100 50 - - - - -
PBT 4,426 5,136 6,253 7,198 8,488 9,990 11,688 13,675 16,000 18,720
Income Taxes 996 1,181 1,438 1,727 2,122 2,597 3,156 3,829 4,640 6,178
PAT 3,430 3,954 4,815 5,470 6,366 7,393 8,532 9,846 11,360 12,543
Increase in Working Capital (288) (114) (199) (827) (635) (743) (869) (1,017) (1,190) (1,392)
Capex (1,000) (1,000) (1,000) (1,170) (1,369) (1,602) (1,874) (2,192) (2,565) (3,001)
Free Cash Flows 2,908 3,766 4,607 4,632 5,718 6,634 7,645 8,808 10,145 11,121
Discounted Free Cash Flows 33,363
Terminal Growth Rate (%) 4
Terminal Value 152,185
Discounted Terminal Value 56,675
Net Value to Shareholders 90,038
No. of Shares (m) 506
Value Per Share (`) 178
Discounting Factor (%)
Risk Free Rate 9.0
Beta 0.5
Market Return 14.0
Cost of Equity 11.6
Source: Anand Rathi Research
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 6
Fig 13 – India Consumer: Relative valuation matrix
RoE RoCE FY10-12e CAGR (%) PE
Company Target price
(`)
FY12e (%) FY12e (%) Revenues EPS FY12e (x)
Pidilite 148 29.6 27.5 17.4 21.4 18.9
ITC 181 34.0 45.7 14.3 20.1 23.0
HUL 285 71.9 70.6 8.0 4.0 27.4
Nestlé 3,650 96.7 124.9 19.7 22.1 34.4
Asian Paints 2,530 42.2 52.8 17.0 21.5 21.4
Dabur 96 49.1 51.2 18.4 22.6 22.2
Colgate 815 120.3 124.7 17.0 14.4 20.0
Marico 139 39.1 33.0 17.1 26.9 20.4
GCPL 365 26.4 31.4 32.3 21.0 22.7
GSKCH 2,240 37.8 39.7 19.3 27.4 24.9
Britannia 670 47.9 24.7 17.7 18.8 42.6
Emami 400 34.8 29.9 18.3 30.3 19.6
Agro Tech 373 22.7 24.2 13.7 40.7 18.3
Bajaj Corp 496 34.5 36.1 15.8 8.7 12.5
Jyothy Labs 220 13.7 13.8 18.9 9.8 19.0
VST Inds 640 30.3 31.6 10.9 5.9 12.4
Zydus Wellness 597 48.2 59.0 27.1 34.1 27.3
Source: Bloomberg, Anand Rathi Research Prices as of 31 Mar ’11
Key risks
? Delay in commissioning of the elastomer monomer plant: The
company acquired an elastomer monomer plant in FY08 to foray a
new segment – synthetic rubber, which is used by various
manufacturing units such as auto and adhesives. However, Pidilite has
not yet been able to commission the plant. It expects to incur capex of
`1.5bn in the next three years for this project. We believe delay in
commissioning of the plant may hamper stock price performance.
Though we have factored capex in our estimates, we have not
assumed any revenue or earnings from the business.
? Lower growth in the industrial sector may impact demand for
industrial products.
? Keener competition.
? Higher raw material prices.
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 7
Focus on creating brands
Pidilite focuses on creating strong brand awareness in low-
involvement categories by educating intermediary users (carpenters,
plumbers, civil contractors) as well as via advertisements (Dr Fixit).
Also, it has created strong brands in niche segments such as
adhesives for rubber products, crockery, kitchen appliances and
tiles.
Creating brands in low-involvement categories
Pidilite focuses on creating brands in ‘low-involvement’ categories, where
end-customer engagement is low or nil. Globally, branding is limited in
such niche sub-segments (such as adhesives and sealants). The company
has increased awareness of its brand by educating intermediary users
(carpenters, plumbers, civil contractors) as well as via advertisements (Dr
Fixit).
Case study: Intel Pentium
Pidilite’s products are used by intermediaries and not directly by the end-
customer. However, if a carpenter (the intermediary) uses an adhesive
other than brand Fevicol, the end-customer tends to get wary of the
product quality.
For example, Pentium micro-processors are used by computer
manufacturing companies. However, as Intel has been able to create a
brand around Pentium, the ‘Intel Inside’ sticker increases a computer’s
brand-worthiness.
Creation of brands through education
The company pushes its brands via educating users and intermediaries. To
this effect, it conducts training classes for carpenters and water-proofing
workers at the in-house ‘Dr Fixit Institute’. It promotes products through
carpenters. The prescription route has been successful for various
consumer products in India, used extensively by pharma and over-the-
counter (OTC) product companies. Companies such as Nestlé India have
used it to promote infant food products. Navneet Publications has utilized
this means to promote its school guides and stationery.
Fig 14 – Successful prescription route in India
Segment Company Medium Products
Paints Asian Paints Painters Paints
Oral care Colgate Dentists Toothpastes & toothbrushes
Infant foods Nestlé Doctors Cerelac
Educational guides Navneet Teachers Educational books
OTC medicines GSK, Dabur Doctors Crocin, Eno, Iodex, Pudin Hara
Low calorie sweeteners Zydus Wellness Doctors Sugar Free
Source: Anand Rathi Research
Following the prescription route
Pidilite, too, uses the prescription route. For example, it pushes Roff tile
fixing solutions through construction workers. Products such as M-Seal
and Dr Fixit are promoted through plumbers. The company uses
carpenters to promote Fevicol. We believe this helps the company
promote brands and develop brand loyalty.
Ability to create strong brands in
low-involvement categories
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 8
Fig 15 – Pidilite: Prescription route
Segment Middle men Brands
Adhesives Carpenters Fevicol
Sealants Plumbers M-Seal
Art materials Teachers Fevicryl
Construction chemicals Construction workers Dr Fixit
Source: Company
Creating products for segments
The company develops products in new (non-existent) sub-segments. It
has created brands such as M-Seal to stop leaks in pipes (where earlier,
pipes were replaced). Also, it has created sub-segments for tiling, where
broken tiles were earlier discarded. Its products to mend crockery and
utensils have also created a new sub-segment. We believe that developing
sub-segments and brands in such space has been Pidilite’s strength.
Fig 16 – Segments created by Pidilite
Segment Brand
Leakage in pipes M-Seal
Sticking of marine products Fevicol Marine
Crockery Fevikwik
Leakage in walls Dr. Fixit
Tiling solutions Roff
Art materials Fevicryl
Source: Company
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 9
Market leader in niche segments
Pidilite is the market leader in niche sub-segments – adhesives,
sealants and construction chemicals. Presence of only unorganized
players and lack of MNC interest in these sub-segments help the
company maintain steady growth and margins.
Focus on niche segments
The company focuses on niche sub-segments such as adhesives and
sealants. Since there are only few players in such segments, Pidilite can
develop strong brands without much competition. It is not seeking to
launch products in competitive consumer segments nor products in well-
penetrated segments. Its focus on niche sub-segments allows it to develop
market-leading brands such as Fevicol, Dr Fixit and M-Seal. Hence, the
company is able to dominate the market with overall share of +80%.
Fig 17 – Competitive positioning on current brands
Brand Segment Competing products
Fevicol Adhesives No major product
Fevikwik Adhesives No major product
Fevistik Adhesives Kores Glue
M-Seal Sealants No major product
Dr Fixit Water proofing Local products
Steel grip Electric insulation Various smaller products
Roff Tiling solutions No major product
Source: Company
No major competitor in niche sub-segments
The company’s major competitors in the niche sub-segments it has created
are local players, who lack management or financial strength to create
brands. As such players do not invest in R&D or sub-segmentation, they
are losing market share to Pidilite.
Adhesives is not a consumer segment in international markets, and there
are no brands in such a segment. Minnesota Mining & Manufacturing
Company (3M), Henkel and AkzoNobel are major global players in
adhesives. However, they cater to institutions and do not have branded
products for retail. Also, there are no products like adhesives developed by
modern trade players.
Competitive positioning of global players in India
Fig 18 – Global players and their products in India
Company Status in India
3M India Not in branded adhesives
AkzoNobel Only paints
Henkel Not in branded consumer adhesives
Source: Anand Rathi Research
Strong sub-segmentation strategy in place
The company has developed a strong sub-segmentation strategy to create
products for all consumers. In adhesives, it has products for furniture,
paper, marine products, crockery etc. Each adhesive has different
characteristics and targets various types of consumers.
Pidilite focuses on creating brands in
niche segments where competitive
pressures are low
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 10
Apart from the different products, the company has created various SKUs.
Besides price-point-based SKUs (`5, `10 etc), it also has large packs (in
tins and plastic bags). This helps it attract various kinds of consumers.
Fig 19 – Sub-segmentation strategy
Fevicol
Fevicol
(Carpenter,
Household products,
Marine products
Fevikwik
(Plastic,
Rubber, Crockery)
Fevistik
(Paper)
Fevicryl
(Art materials)
Fevibond
(Stone materials)
Source: Company
Fig 20 – Portfolio across price points
Price points Products available
`5 Fevikwik, Fevistik, Fevicol
`10 Fevikwik, Fevistik, Fevicol
`15 Fevikwik, Fevistik, Fevicol
`20 Fevikwik, Fevistik, Fevicol
`20 and upwards Dr Fixit, M-Seal
Source: Anand Rathi Research
Strong distribution network to drive growth
The company’s strong and well-established distribution network for the
products in all sub-segments helps drive revenue. It markets through
stationery, hardware, kirana stores, modern trade, medical stores and
furniture stores. Also, it sells some of its products directly to end-
consumers. Operating through such varied distribution channels helps it
increase cross-selling.
Fig 21 – Strong distribution network
Segment Distribution channel
Fevicol Kirana stores, stationery, pharmacies, furniture shops
Fevikwik Kirana stores, stationery, pharmacies
Fevistik Kirana stores, stationery, pharmacies
Fevibond Kirana stores, hardware shops
M-Seal Hardware shops, kirana stores
Dr Fixit Construction material stores
Source: Anand Rathi Research
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 11
Strong pricing power in a volatile raw
material scenario
The company has strong pricing power in all the sub-segments it is
present in and is thereby able to pass on any rise in raw material
costs to end-consumers via price hikes. Also, consumer uptrading
has improved its profitability and margins.
Enjoys strong pricing power
The company enjoys strong pricing power in all sub-segments it operates
it, with a market share of over 80% in each. It has been able to pass on the
higher raw material costs to end-consumers, though after a lag. Its
EBITDA margin remains slightly volatile due to the lag effect of price
hikes, but we expect the company to maintain its margins.
Fig 22 – Price hikes
-30
-20
-10
0
10
20
30
F
Y
0
2
F
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3
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e
F
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2
e
F
Y
1
3
e
(%)
Source: Company, Anand Rathi Research
Backward integration for VAM
Pidilite received the VAM (Vinyl Acetate Monomer) manufacturing unit
post the latter’s demerger from Vinyl Chemicals. Hence, via VAM, Pidilite
is the only player in India that enjoys backward integration. This helps it
source raw materials at lower prices than the competition; it also aids the
company to manage the volatile VAM prices.
Higher raw material prices
The company’s major raw materials are linked to crude oil. With higher
crude oil prices, we expect prices of crude oil derivatives to rise. The
company follows the hedging strategy and also keeps inventory. This
protects it from margin erosion.
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 12
Changing revenue mix driving margins
The company’s revenue mix is shifting in favor of consumer products,
which constituted 79% of sales in FY10 compared with 70% in FY01.
With this changing consumer mix (towards high-margin sub-segments), we
expect margins to expand.
Fig 24 – Change in revenue mix
Change in revenue mix (%) FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10
Industrial adhesives 8 8 8 8 8 7 7 8
Organic pigments & preparations 9 8 8 7 6 6 6 6
Industrial resins 10 10 11 9 10 8 8 8
Art & Materials 5 5 5 5 6 6 6 10
Construction & paint chemicals 13 13 14 16 16 15 17 18
Adhesives & sealants 54 56 54 55 54 51 50 49
Others 1 0 0 0 0 7 6 1
Total 100 100 100 100 100 100 100 100
Source: Company
Fig 23 – Prices of packaging material and VAM
Packaging material
45
55
65
75
85
95
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(`/kg)
VAM
800
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(US$/MT)
Source: Bloomberg, Company Note: VAM = Vinyl acetate monomer
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 13
Financials
We expect Pidilite to report 17% revenue CAGR over FY10-13e,
through volume growth of 12 percentage points (pps) and price
hikes of 5pps. We expect the EBITDA margin to be ~19.5% through
FY11-13e. We estimate 21.6% net profit CAGR over FY10-13.
Steady revenue growth
We expect Pidilite to register 17% revenue CAGR over FY10-13e, with
volumes contributing 12pps and price hikes 5pps. The company has not
increased prices for the past two years (as crude oil prices have been
weak). However, it has the ability to raise prices to pass on any increase in
raw material costs.
Fig 25 – Revenue and revenue growth
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
F
Y
9
3
F
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9
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1
2
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F
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1
3
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6
12
18
24
30
36
42
48
Revenues Growth (RHS)
(`m) (%)
Source: Company, Anand Rathi Research
EBITDA margin to remain at ~19.5%
We expect EBITDA margin to be maintained at ~19.5% owing to the
company’s strong pricing power that enables it to pass on additional raw
material costs.
Fig 26 – EBITDA margins to remain at ~19.5%
0
1,600
3,200
4,800
6,400
F
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1
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10
13
16
19
22
EBITDA EBITDA Margin (RHS)
(`m) (%)
Source: Company, Anand Rathi Research
Strong revenue growth over the past
two decades
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 14
Net profit CAGR of 21.6% over FY10-13e
We expect 21.6% net profit CAGR during FY10-13e. A strong operational
performance would drive growth. We expect other income to grow faster
and do not see any major changes in tax rate. We expect the tax rate,
which has risen to 23% in FY11 to sustain during FY12-13. However, our
earnings estimates would change after any performance update regarding
its elastomer monomer project.
Fig 27 – Stable net profit growth
0
1,000
2,000
3,000
4,000
5,000
6,000
F
Y
9
3
F
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4
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-40
-10
20
50
80
110
140
170
200
230
Net profit Growth (RHS)
(`m) (%)
Source: Company, Anand Rathi Research
Return ratios
Though the company plans to invest in an elastomer monomer project
over the next three years, its improving profitability and better working
capital management would help maintain RoCE of ~28% over FY10-13e.
Fig 28 – Return ratios stable over the past two decades
10
15
20
25
30
35
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2
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F
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1
3
e
RoE RoCE
(%)
Source: Company, Anand Rathi Research
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 15
Fig 29 – Income statement (`m)
YE 31 March FY09 FY10 FY11e FY12e FY13e
Gross Sales 21,326 22,842 26,924 31,529 36,976
Less: Excise Duty 1,462 927 1,092 1,279 1,500
Net Sales 19,863 21,916 25,831 30,250 35,476
Growth (%) 16.3 10.3 17.9 17.1 17.3
Expenditure
Cost of Goods Sold 11,663 11,391 12,818 14,974 17,555
Staff Cost 2,205 2,525 2,841 3,327 3,902
Advt & Sales Promotion 582 718 969 1,210 1,419
Processing & Packaging 314 314 362 423 497
Clearing, Forward & Octroi 881 933 1,111 1,301 1,525
Other Expenses 2,114 2,266 2,661 3,116 3,654
EBITDA 2,105 3,770 5,070 5,898 6,924
Growth (%) (12.7) 79.1 34.5 16.3 17.4
EBITDA Margin (%) 10.6 17.2 19.6 19.5 19.5
Depreciation 588 666 765 925 990
EBIT 1,517 3,104 4,305 4,973 5,933
Interest Expense 361 329 244 244 167
Other Income 119 335 365 407 487
Profit Before Tax 1,275 3,111 4,426 5,136 6,253
Total Taxes 167 408 996 1,181 1,438
Income Taxes 167 408 996 1,181 1,438
Deferred Taxes - - - - -
Income Tax rate (%) 13 13 23 23 23
Profit After Tax 1,108 2,703 3,430 3,954 4,815
Share of Profit From Associates 4 24 - - -
Pref. Dividends/Minority Interest 7 (1) - - -
Profit Before X/O 1,105 2,680 3,430 3,954 4,815
Growth (%) (35.8) 142.5 28.0 15.3 21.8
PAT Margin (%) 5.6 12.2 13.3 13.1 13.6
Extraordinary Items - 44 - - -
Profit for Shareholders 1,105 2,723 3,430 3,954 4,815
Number of Shares (m) 506 506 506 506 506
Earnings Per Share Bef X/O (`) 2.2 5.3 6.8 7.8 9.5
Earnings Per Share Aft X/O (`) 2.2 5.4 6.8 7.8 9.5
Source: Company, Anand Rathi Research
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 16
Fig 30 – Balance sheet (`m)
YE 31 March FY09 FY10 FY11e FY12e FY13e
Sources of Funds
Share Capital 253 506 506 506 506
Reserves and Surplus 6,688 8,213 10,910 13,983 17,771
Deferred Tax Liability 434 417 417 417 417
Net Worth 7,375 9,136 11,832 14,906 18,694
Net Worth Net of Rev. Res. 7,375 9,136 11,832 14,906 18,694
Pref.Capital/Minority Interest 7 2 2 2 2
Secured Loans 3,001 2,627 2,627 2,627 432
Unsecured Loans 3,088 2,059 2,059 2,059 2,059
Total Loans 6,089 4,686 4,686 4,686 2,491
Total 13,470 13,824 16,520 19,594 21,187
Application of Funds
Fixed Assets Gross Block 9,273 9,808 13,736 14,736 15,736
Less: Depreciation 3,761 4,346 5,111 6,037 7,027
Net Block 5,512 5,462 8,624 8,699 8,709
Capital WIP 2,819 2,928 - - -
Gross Block-Brand value 9,273 9,808 13,736 14,736 15,736
Goodwill - - - - -
Liquid Investments 254 2,678 4,678 6,928 7,428
Other Investments - - - - -
Current Assets 8,286 7,432 8,514 10,168 12,323
Inventories 2,798 2,979 3,358 3,781 4,346
Sundry Debtors 2,876 2,959 3,487 4,084 4,789
Cash & Bank Balances 1,601 449 623 1,258 2,142
Loans & Advances 1,011 1,046 1,046 1,046 1,046
Current Liabilities 3,401 4,675 5,295 6,201 7,273
Liabilities 2,804 3,696 4,262 4,991 5,853
Provisions 597 980 1,033 1,210 1,419
Net Current Assets 4,885 2,757 3,218 3,967 5,050
Total 13,470 13,824 16,520 19,594 21,187
Source: Company, Anand Rathi Research
Fig 31 – Cash flow statement (`m)
YE 31 March FY09 FY10 FY11e FY12e FY13e
OCF before W/C changes 2,162 3,038 4,195 4,880 5,805
W/c Changes 218 681 (288) (114) (199)
OCF After W/C Changes 2,379 3,719 3,908 4,766 5,607
Cash Flow from Investing
Capital Expenditure (2,025) (865) (1,000) (1,000) (1,000)
Disposal 14 11 - - -
Investments (220) (2,380) (2,000) (2,250) (500)
Acquisitions - - - - -
Net Cash used in Investing (2,231) (3,234) (3,000) (3,250) (1,500)
Cash Flow from Financing
Changes in Share Capital (29) - - - -
Changes in Loans 275 (1,119) - - (2,195)
Dividends (513) (519) (734) (881) (1,027)
Net Cash used in Financing (266) (1,638) (734) (881) (3,222)
ExtraOrdinary Items - - - - -
Changes in Cash & Equivalents (118) (1,152) 174 635 884
Opening Cash & Equivalents 1,718 1,601 449 623 1,258
Closing Cash & Equivalents 1,601 449 623 1,258 2,142
Free Cash Flow 368 2,866 2,908 3,766 4,607
Source: Company, Anand Rathi Research
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 17
Fig 32 – Ratio analysis
YE 31 March FY09 FY10 FY11e FY12e FY13e
Profitability ratios (%)
EBITDA Margin 10.6 17.2 19.6 19.5 19.5
EBIT Margin 7.6 14.2 16.7 16.4 16.7
PBT Margin 6.4 14.2 17.1 17.0 17.6
PAT Margin 5.6 12.3 13.3 13.1 13.6
Income Tax Rate 13.1 13.1 22.5 23.0 23.0
Excise Duty Rate 7.4 4.2 4.2 4.2 4.2
RoE 15.8 32.5 32.7 29.6 28.7
RoCE 12.0 22.7 28.4 27.5 29.1
Major Costs as % of Net Sales
Cost of Goods Sold 58.7 52.0 49.6 49.5 49.5
Staff Cost 11.1 11.5 11.0 11.0 11.0
Advt & Sales Promotion 2.9 3.3 3.8 4.0 4.0
Processing & Packaging 1.6 1.4 1.4 1.4 1.4
Clearing, Forward & Octroi 4.4 4.3 4.3 4.3 4.3
Other Expenses 10.6 10.3 10.3 10.3 10.3
Per Share Data (`)
Earnings Per Share 2.2 5.3 6.8 7.8 9.5
Growth (%) (35.8) 142.5 28.0 15.3 21.8
Book Value per Share 14.6 18.1 23.4 29.5 36.9
Growth (%) 12.0 23.9 29.5 26.0 25.4
Dividend Per Share 0.9 1.5 1.3 1.5 1.8
Growth (%) - 71.4 (16.7) 20.0 16.7
Sales Per Share 39.2 43.3 51.0 59.8 70.1
Growth (%) 16.3 10.3 17.9 17.1 17.3
Other ratios (%)
Net debt/Equity 57.5 17.1 (5.2) (23.5) (37.9)
Current Ratio 243.6 159.0 160.8 164.0 169.4
FCF/EPS 33.2 106.0 84.8 95.2 95.7
OCF/Sales 12.0 17.0 15.1 15.8 15.8
Div Payout Ratio 40.1 28.3 18.4 19.2 18.4
Source: Company, Anand Rathi Research
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 18
Company Background & Management
Concentrating on adhesives and sealants, Pidilite Industries is well-
established in construction chemicals and art materials. Promoted
by the Parekh family, it employs professionals in various positions.
Company background and business
An adhesives and sealants company, Pidilite Industries is also well
established in other countries: Brazil, the USA and the Caribbean islands.
Its strong brands are Fevicol, Fevikwik, Dr Fixit, M-Seal and Steelgrip.
The company has ventured into art and stationery materials, which bring
in ~10% of revenue. It also has an industrial adhesives business, which
makes up 17% of sales.
Fig 33 – Revenue breakdown (FY10)
Others
1%
Organic Pigment
& Preparation
6%
Industrial Resins
8%
Industrial
Adhesives
8%
Art & Materials
10%
Construction &
Paints Chemicals
18%
Adhesives &
Sealants
49%
Source: Company
Management
BK Parekh is Chairman; MB Parekh is the managing director. Though the
Parekh family owns a majority stake, it has inducted professionals in key
management positions. Sandeep Batra joined Pidilite as CFO after a
successful career at ICI India.
Fig 34 – Key management
Name Designation
BK Parekh Chairman
MB Parekh Managing Director
Sandeep Batra CFO
Source: Company
Though ownership is with the
Parekh family, the company has
inducted professionals for key
management positions
Appendix 1
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the
compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research
analyst(s) in this report.
The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking
revenues.
Anand Rathi Ratings Definitions
Analysts’ ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (US$1bn) >20% 5-20%
We initiate coverage on Pidilite with a Buy recommendation and
price target of `178. Pidilite is the market-leader in adhesives and
sealants, with an outstanding sub-segmentation and branding
strategy. Its pricing power helps maintain margins. We expect
Pidilite to report FY10-13e earnings CAGR of 22%.
Anand Rathi Share and Stock Brokers Limited, its affiliates and subsidiaries, do and seek to do business with companies covered in its research reports. Thus,
investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision. Disclosures and analyst certifications are located in Appendix 1.
Anand Rathi Research India Equities
India I Equities
Key financials
YE 31 Mar FY09 FY10 FY11e FY12e FY13e
Sales (`m) 19,863 21,916 25,831 30,250 35,476
Net profit (`m) 1,105 2,680 3,430 3,954 4,815
EPS (`) 2.2 5.3 6.8 7.8 9.5
Growth (%) (35.8) 142.5 28.0 15.3 21.8
PE (x) 67.8 28.0 21.8 18.9 15.6
PBV (x) 10.2 8.2 6.3 5.0 4.0
RoE (%) 15.8 32.5 32.7 29.6 28.7
RoCE (%) 12.0 22.7 28.4 27.5 29.1
Dividend yield (%) 0.6 1.0 0.8 1.0 1.2
Net gearing (%) 57.5 17.1 (5.2) (23.5) (37.9)
Source: Company, Anand Rathi Research
Consumer
Initiating Coverage
1 April 2011
Pidilite Industries
Market leader in niche segments; initiate with Buy
We initiate coverage on Pidilite with a Buy recommendation and
price target of `178. Pidilite is the market-leader in adhesives and
sealants, with an outstanding sub-segmentation and branding
strategy. Its pricing power helps maintain margins. We expect
Pidilite to report FY10-13e earnings CAGR of 22%.
? Focus on brand creation. Pidilite focuses on creating strong
brand awareness in low-involvement categories by educating
intermediary users (carpenters, plumbers, civil contractors) as well
as via advertisements (Dr Fixit). Also, it has created strong brands
in niche segments such as adhesives for rubber products, crockery,
kitchen appliances and tiles.
? Market leader in niche segments. Pidilite is the market leader in
niche sub-segments – adhesives, sealants and construction
chemicals. Presence of only unorganized players and lack of MNC
interest in these sub-segments help the company maintain steady
growth and margins.
? Strong pricing power. The company has strong pricing power in
all the sub-segments it operates in and is thereby able to pass on
higher raw material costs to end-consumers via price hikes. Also,
consumer uptrading has improved its profitability and margins.
? Valuation and risks. We value the stock at price target of `178
based on DCF valuation (Rf: 9%, Rm: 14%). At our target price, it
would trade at PE of 23x FY12e earnings. Risks: higher raw
material prices and keener competition.
Rating: Buy
Target Price: `178
Share Price: `148
Key data PIDI IN/PIDI.BO
52-week high/low `160/`106
Sensex/Nifty 19445/5834
3-m average volume US$0.4m
Market cap `75bn/US$1.7bn
Shares outstanding 506m
Free float 29.4%
Promoters 70.6%
Foreign Institutions 10.3%
Domestic Institutions 8.0%
Public 11.1%
Relative price performance
100
110
120
130
140
150
160
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Source: Bloomberg
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 2
Quick Glance – Financials and Valuations
Fig 1 – Income statement (`m)
Year end 31 Mar FY09 FY10 FY11e FY12e FY13e
Net sales 19,863 21,916 25,831 30,250 35,476
Sales growth (%) 16.3 10.3 17.9 17.1 17.3
- Op. expenses 17,758 18,146 20,761 24,352 28,552
EBITDA 2,105 3,770 5,070 5,898 6,924
EBITDA margin (%) 10.6 17.2 19.6 19.5 19.5
- Interest 361 329 244 244 167
- Depreciation 588 666 765 925 990
+ Other income 119 335 365 407 487
- Tax 167 408 996 1,181 1,438
PAT 1,108 2,703 3,430 3,954 4,815
PAT growth (%) (35.4) 143.8 26.9 15.3 21.8
Consolidated PAT 1,105 2,680 3,430 3,954 4,815
FDEPS (`/share) 2.2 5.3 6.8 7.8 9.5
CEPS (`/share) 3.3 6.6 8.3 9.6 11.5
DPS (`/share) 0.9 1.5 1.3 1.5 1.8
Source: Company, Anand Rathi Research
Fig 2 – Balance sheet (`m)
Year end 31 Mar FY09 FY10 FY11e FY12e FY13e
Share capital 253 506 506 506 506
Reserves & surplus 7,122 8,630 11,326 14,400 18,188
Shareholders’ fund 7,375 9,136 11,832 14,906 18,694
Debt 6,089 4,686 4,686 4,686 2,491
Minority interests 7 2 2 2 2
Capital employed 13,470 13,824 16,520 19,594 21,187
Fixed assets 8,331 8,390 8,624 8,699 8,709
Investments 254 2,678 4,678 6,928 7,428
Working capital 3,285 2,308 2,596 2,710 2,908
Cash 1,601 449 623 1,258 2,142
Capital deployed 13,470 13,824 16,520 19,594 21,187
No. of shares (m) 506 506 506 506 506
Net Debt/Equity (%) 57.5 17.1 (5.2) (23.5) (37.9)
W C turn (days) 16.5 10.5 10.0 9.0 8.2
Source: Company, Anand Rathi Research
Fig 3 – Cash flow statement (`m)
Year end 31 Mar FY09 FY10 FY11e FY12e FY13e
Consolidated PAT 1,105 2,680 3,430 3,954 4,815
+ Depreciation 588 666 765 925 990
Cash profit 2,162 3,038 4,195 4,880 5,805
- Incr/(Decr) in WC 218 681 (288) (114) (199)
Operating cash flow 2,379 3,719 3,908 4,766 5,607
- Capex (2,011) (854) (1,000) (1,000) (1,000)
Free cash flow 368 2,866 2,908 3,766 4,607
- Dividend (513) (519) (734) (881) (1,027)
+ Equity raised (29) - - - -
+ Debt raised 275 (1,119) - - (2,195)
- Investments (220) (2,380) (2,000) (2,250) (500)
- Misc. items - - - - -
Net cash flow (118) (1,152) 174 635 884
+ Opening cash 1,718 1,601 449 623 1,258
Closing cash 1,601 449 623 1,258 2,142
Source: Company, Anand Rathi Research
Fig 4 – PE Band
6x
14x
22x
31x
40x
-
50
100
150
200
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350
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Source: Bloomberg, Anand Rathi Research
Fig 5 – Mean PE(x) and standard deviations
Mean
+1SD
+2SD
-1SD
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Source: Bloomberg, Anand Rathi Research
Fig 6 – Pidilite vs. BSE FMCG
Pidilite
BSE FMCG
100
110
120
130
140
150
160
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Source: Bloomberg
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 3
Investment Argument and Valuation
We initiate coverage on Pidilite with a Buy recommendation and
price target of `178. Pidilite is the market-leader in adhesives and
sealants, with an outstanding sub-segmentation and branding
strategy. Its pricing power helps maintain margins. We expect
Pidilite to report FY10-13e earnings CAGR of 22%.
Pidilite Industries, a company promoted by the Parekh family, is an
established player in adhesives, sealants and construction chemicals in
India. The company’s major brands include Fevicol, Fevikwik, M-Seal and
Dr Fixit. Further, Pidilite derives ~12% of revenues from international
markets.
Focus on brand creation
Pidilite focuses on creating brands in ‘low-involvement’ categories, where
end-customer engagement is low or nil. Globally, branding is limited in
such niche sub-segments (such as adhesives and sealants). The company
has increased awareness of its brand by educating intermediary users
(carpenters, plumbers, civil contractors) as well as via advertisements (Dr
Fixit).
Hence, it effectively utilizes the ‘prescription’ route (i.e., via carpenters,
plumbers etc) to push its brands and generate brand-loyalty, promoting
Fevicol, M-Seal and Dr Fixit via educating carpenters, plumbers and
construction workers (via training programs, pamphlets etc) at the in-
house ‘Dr Fixit Institute’.
Fig 8 – Prescription route of Pidilite
Segment Middle men Brands
Adhesives Carpenters Fevicol
Sealants Plumbers M-Seal
Art materials Teachers Fevicryl
Construction chemicals Construction workers Dr Fixit
Source: Anand Rathi Research
Focus on creating leading brands in
niche sub-segments
Fig 7 – Revenue breakdown (FY10)
Segmental
Others
1%
Organic Pigment
& Preparation
6%
Industrial Resins
8%
Industrial
Adhesives
8%
Art & Materials
10%
Construction &
Paints Chemicals
18%
Adhesives &
Sealants
49%
Geographical
India
88%
North America
5%
South East Asia
1%
Middle East &
Africa
1%
South America
5%
Source: Company
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 4
Market leader in niche segments
Pidilite focuses on the niche sub-segments of adhesives and sealants.
There being only a few players in these sub-segments helps Pidilite
develop strong brands without much competition. The company does not
target launching products in the competitive consumer segments or
products in the well-penetrated segments. Hence, its focus on only niche
sub-segments has resulted in it developing market-leading brands Fevicol,
Dr Fixit and M-Seal. As there are no competing products in these sub-
segments, it has developed products that now enjoy more than 80%
market share.
Fig 9 – Pidilite: Competitive positioning of brands
Brand Segment Competing products
Fevicol Adhesives No major product
Fevikwik Adhesives No major product
Fevistik Adhesives Kores Glue
M-Seal Sealants No major product
Dr Fixit Water proofing Local products
Steelgrip Electric insulation Various smaller products
Roff Tiling solutions No major product
Source: Anand Rathi Research
Enjoys strong pricing power
The company enjoys strong pricing power in all sub-segments it has
presence in, with a market share of over 80% in each. It has been able to
pass on any rise in raw material costs to end-consumers, though after a lag.
Its EBITDA margin remains slightly volatile due to the lag effect of price
hikes, but we expect the company to maintain its margins.
Fig 10 – Price hikes
-30
-20
-10
0
10
20
30
F
Y
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F
Y
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e
(%)
Source: Company, Anand Rathi Research
Valuation
Our DCF-based target price stands at `178 (Rf. 9%, Rm. 14%). At our
price target, the stock will trade at target PE of 23x FY12e earnings. In the
past ten years, the stock has traded at par with the 12m-forward Nifty PE.
With better profitability and a higher growth trajectory, we expect the
premium over 12-month forward Nifty PE to expand.
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 5
Fig 11 – Premium/discount to the 12-month forward Nifty PE
Pidilite
Nifty
Average
40
60
80
100
120
140
160
180
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Source: Bloomberg, Anand Rathi Research
Fig 12 – DCF-based valuation
`m FY11e FY12e FY13e FY14e FY15e FY16e FY17e FY18e FY19e FY20e
Net Sales 25,831 30,250 35,476 41,507 48,563 56,818 66,478 77,779 91,001 106,471
Growth in Revenues (%) 17.9 17.1 17.3 17.0 17.0 17.0 17.0 17.0 17.0 17.0
EBITDA Margin 19.6 19.5 19.5 19.0 19.0 19.0 19.0 19.0 19.0 19.0
EBITDA 5,070 5,898 6,924 7,886 9,227 10,795 12,631 14,778 17,290 20,230
Depreciation 765 925 990 1,159 1,356 1,586 1,856 2,171 2,540 2,972
Other Income 365 407 487 570 667 781 913 1,069 1,250 1,463
Interest Expenses 244 244 167 100 50 - - - - -
PBT 4,426 5,136 6,253 7,198 8,488 9,990 11,688 13,675 16,000 18,720
Income Taxes 996 1,181 1,438 1,727 2,122 2,597 3,156 3,829 4,640 6,178
PAT 3,430 3,954 4,815 5,470 6,366 7,393 8,532 9,846 11,360 12,543
Increase in Working Capital (288) (114) (199) (827) (635) (743) (869) (1,017) (1,190) (1,392)
Capex (1,000) (1,000) (1,000) (1,170) (1,369) (1,602) (1,874) (2,192) (2,565) (3,001)
Free Cash Flows 2,908 3,766 4,607 4,632 5,718 6,634 7,645 8,808 10,145 11,121
Discounted Free Cash Flows 33,363
Terminal Growth Rate (%) 4
Terminal Value 152,185
Discounted Terminal Value 56,675
Net Value to Shareholders 90,038
No. of Shares (m) 506
Value Per Share (`) 178
Discounting Factor (%)
Risk Free Rate 9.0
Beta 0.5
Market Return 14.0
Cost of Equity 11.6
Source: Anand Rathi Research
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 6
Fig 13 – India Consumer: Relative valuation matrix
RoE RoCE FY10-12e CAGR (%) PE
Company Target price
(`)
FY12e (%) FY12e (%) Revenues EPS FY12e (x)
Pidilite 148 29.6 27.5 17.4 21.4 18.9
ITC 181 34.0 45.7 14.3 20.1 23.0
HUL 285 71.9 70.6 8.0 4.0 27.4
Nestlé 3,650 96.7 124.9 19.7 22.1 34.4
Asian Paints 2,530 42.2 52.8 17.0 21.5 21.4
Dabur 96 49.1 51.2 18.4 22.6 22.2
Colgate 815 120.3 124.7 17.0 14.4 20.0
Marico 139 39.1 33.0 17.1 26.9 20.4
GCPL 365 26.4 31.4 32.3 21.0 22.7
GSKCH 2,240 37.8 39.7 19.3 27.4 24.9
Britannia 670 47.9 24.7 17.7 18.8 42.6
Emami 400 34.8 29.9 18.3 30.3 19.6
Agro Tech 373 22.7 24.2 13.7 40.7 18.3
Bajaj Corp 496 34.5 36.1 15.8 8.7 12.5
Jyothy Labs 220 13.7 13.8 18.9 9.8 19.0
VST Inds 640 30.3 31.6 10.9 5.9 12.4
Zydus Wellness 597 48.2 59.0 27.1 34.1 27.3
Source: Bloomberg, Anand Rathi Research Prices as of 31 Mar ’11
Key risks
? Delay in commissioning of the elastomer monomer plant: The
company acquired an elastomer monomer plant in FY08 to foray a
new segment – synthetic rubber, which is used by various
manufacturing units such as auto and adhesives. However, Pidilite has
not yet been able to commission the plant. It expects to incur capex of
`1.5bn in the next three years for this project. We believe delay in
commissioning of the plant may hamper stock price performance.
Though we have factored capex in our estimates, we have not
assumed any revenue or earnings from the business.
? Lower growth in the industrial sector may impact demand for
industrial products.
? Keener competition.
? Higher raw material prices.
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 7
Focus on creating brands
Pidilite focuses on creating strong brand awareness in low-
involvement categories by educating intermediary users (carpenters,
plumbers, civil contractors) as well as via advertisements (Dr Fixit).
Also, it has created strong brands in niche segments such as
adhesives for rubber products, crockery, kitchen appliances and
tiles.
Creating brands in low-involvement categories
Pidilite focuses on creating brands in ‘low-involvement’ categories, where
end-customer engagement is low or nil. Globally, branding is limited in
such niche sub-segments (such as adhesives and sealants). The company
has increased awareness of its brand by educating intermediary users
(carpenters, plumbers, civil contractors) as well as via advertisements (Dr
Fixit).
Case study: Intel Pentium
Pidilite’s products are used by intermediaries and not directly by the end-
customer. However, if a carpenter (the intermediary) uses an adhesive
other than brand Fevicol, the end-customer tends to get wary of the
product quality.
For example, Pentium micro-processors are used by computer
manufacturing companies. However, as Intel has been able to create a
brand around Pentium, the ‘Intel Inside’ sticker increases a computer’s
brand-worthiness.
Creation of brands through education
The company pushes its brands via educating users and intermediaries. To
this effect, it conducts training classes for carpenters and water-proofing
workers at the in-house ‘Dr Fixit Institute’. It promotes products through
carpenters. The prescription route has been successful for various
consumer products in India, used extensively by pharma and over-the-
counter (OTC) product companies. Companies such as Nestlé India have
used it to promote infant food products. Navneet Publications has utilized
this means to promote its school guides and stationery.
Fig 14 – Successful prescription route in India
Segment Company Medium Products
Paints Asian Paints Painters Paints
Oral care Colgate Dentists Toothpastes & toothbrushes
Infant foods Nestlé Doctors Cerelac
Educational guides Navneet Teachers Educational books
OTC medicines GSK, Dabur Doctors Crocin, Eno, Iodex, Pudin Hara
Low calorie sweeteners Zydus Wellness Doctors Sugar Free
Source: Anand Rathi Research
Following the prescription route
Pidilite, too, uses the prescription route. For example, it pushes Roff tile
fixing solutions through construction workers. Products such as M-Seal
and Dr Fixit are promoted through plumbers. The company uses
carpenters to promote Fevicol. We believe this helps the company
promote brands and develop brand loyalty.
Ability to create strong brands in
low-involvement categories
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 8
Fig 15 – Pidilite: Prescription route
Segment Middle men Brands
Adhesives Carpenters Fevicol
Sealants Plumbers M-Seal
Art materials Teachers Fevicryl
Construction chemicals Construction workers Dr Fixit
Source: Company
Creating products for segments
The company develops products in new (non-existent) sub-segments. It
has created brands such as M-Seal to stop leaks in pipes (where earlier,
pipes were replaced). Also, it has created sub-segments for tiling, where
broken tiles were earlier discarded. Its products to mend crockery and
utensils have also created a new sub-segment. We believe that developing
sub-segments and brands in such space has been Pidilite’s strength.
Fig 16 – Segments created by Pidilite
Segment Brand
Leakage in pipes M-Seal
Sticking of marine products Fevicol Marine
Crockery Fevikwik
Leakage in walls Dr. Fixit
Tiling solutions Roff
Art materials Fevicryl
Source: Company
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 9
Market leader in niche segments
Pidilite is the market leader in niche sub-segments – adhesives,
sealants and construction chemicals. Presence of only unorganized
players and lack of MNC interest in these sub-segments help the
company maintain steady growth and margins.
Focus on niche segments
The company focuses on niche sub-segments such as adhesives and
sealants. Since there are only few players in such segments, Pidilite can
develop strong brands without much competition. It is not seeking to
launch products in competitive consumer segments nor products in well-
penetrated segments. Its focus on niche sub-segments allows it to develop
market-leading brands such as Fevicol, Dr Fixit and M-Seal. Hence, the
company is able to dominate the market with overall share of +80%.
Fig 17 – Competitive positioning on current brands
Brand Segment Competing products
Fevicol Adhesives No major product
Fevikwik Adhesives No major product
Fevistik Adhesives Kores Glue
M-Seal Sealants No major product
Dr Fixit Water proofing Local products
Steel grip Electric insulation Various smaller products
Roff Tiling solutions No major product
Source: Company
No major competitor in niche sub-segments
The company’s major competitors in the niche sub-segments it has created
are local players, who lack management or financial strength to create
brands. As such players do not invest in R&D or sub-segmentation, they
are losing market share to Pidilite.
Adhesives is not a consumer segment in international markets, and there
are no brands in such a segment. Minnesota Mining & Manufacturing
Company (3M), Henkel and AkzoNobel are major global players in
adhesives. However, they cater to institutions and do not have branded
products for retail. Also, there are no products like adhesives developed by
modern trade players.
Competitive positioning of global players in India
Fig 18 – Global players and their products in India
Company Status in India
3M India Not in branded adhesives
AkzoNobel Only paints
Henkel Not in branded consumer adhesives
Source: Anand Rathi Research
Strong sub-segmentation strategy in place
The company has developed a strong sub-segmentation strategy to create
products for all consumers. In adhesives, it has products for furniture,
paper, marine products, crockery etc. Each adhesive has different
characteristics and targets various types of consumers.
Pidilite focuses on creating brands in
niche segments where competitive
pressures are low
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 10
Apart from the different products, the company has created various SKUs.
Besides price-point-based SKUs (`5, `10 etc), it also has large packs (in
tins and plastic bags). This helps it attract various kinds of consumers.
Fig 19 – Sub-segmentation strategy
Fevicol
Fevicol
(Carpenter,
Household products,
Marine products
Fevikwik
(Plastic,
Rubber, Crockery)
Fevistik
(Paper)
Fevicryl
(Art materials)
Fevibond
(Stone materials)
Source: Company
Fig 20 – Portfolio across price points
Price points Products available
`5 Fevikwik, Fevistik, Fevicol
`10 Fevikwik, Fevistik, Fevicol
`15 Fevikwik, Fevistik, Fevicol
`20 Fevikwik, Fevistik, Fevicol
`20 and upwards Dr Fixit, M-Seal
Source: Anand Rathi Research
Strong distribution network to drive growth
The company’s strong and well-established distribution network for the
products in all sub-segments helps drive revenue. It markets through
stationery, hardware, kirana stores, modern trade, medical stores and
furniture stores. Also, it sells some of its products directly to end-
consumers. Operating through such varied distribution channels helps it
increase cross-selling.
Fig 21 – Strong distribution network
Segment Distribution channel
Fevicol Kirana stores, stationery, pharmacies, furniture shops
Fevikwik Kirana stores, stationery, pharmacies
Fevistik Kirana stores, stationery, pharmacies
Fevibond Kirana stores, hardware shops
M-Seal Hardware shops, kirana stores
Dr Fixit Construction material stores
Source: Anand Rathi Research
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 11
Strong pricing power in a volatile raw
material scenario
The company has strong pricing power in all the sub-segments it is
present in and is thereby able to pass on any rise in raw material
costs to end-consumers via price hikes. Also, consumer uptrading
has improved its profitability and margins.
Enjoys strong pricing power
The company enjoys strong pricing power in all sub-segments it operates
it, with a market share of over 80% in each. It has been able to pass on the
higher raw material costs to end-consumers, though after a lag. Its
EBITDA margin remains slightly volatile due to the lag effect of price
hikes, but we expect the company to maintain its margins.
Fig 22 – Price hikes
-30
-20
-10
0
10
20
30
F
Y
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2
F
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0
3
F
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(%)
Source: Company, Anand Rathi Research
Backward integration for VAM
Pidilite received the VAM (Vinyl Acetate Monomer) manufacturing unit
post the latter’s demerger from Vinyl Chemicals. Hence, via VAM, Pidilite
is the only player in India that enjoys backward integration. This helps it
source raw materials at lower prices than the competition; it also aids the
company to manage the volatile VAM prices.
Higher raw material prices
The company’s major raw materials are linked to crude oil. With higher
crude oil prices, we expect prices of crude oil derivatives to rise. The
company follows the hedging strategy and also keeps inventory. This
protects it from margin erosion.
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 12
Changing revenue mix driving margins
The company’s revenue mix is shifting in favor of consumer products,
which constituted 79% of sales in FY10 compared with 70% in FY01.
With this changing consumer mix (towards high-margin sub-segments), we
expect margins to expand.
Fig 24 – Change in revenue mix
Change in revenue mix (%) FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10
Industrial adhesives 8 8 8 8 8 7 7 8
Organic pigments & preparations 9 8 8 7 6 6 6 6
Industrial resins 10 10 11 9 10 8 8 8
Art & Materials 5 5 5 5 6 6 6 10
Construction & paint chemicals 13 13 14 16 16 15 17 18
Adhesives & sealants 54 56 54 55 54 51 50 49
Others 1 0 0 0 0 7 6 1
Total 100 100 100 100 100 100 100 100
Source: Company
Fig 23 – Prices of packaging material and VAM
Packaging material
45
55
65
75
85
95
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(US$/MT)
Source: Bloomberg, Company Note: VAM = Vinyl acetate monomer
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 13
Financials
We expect Pidilite to report 17% revenue CAGR over FY10-13e,
through volume growth of 12 percentage points (pps) and price
hikes of 5pps. We expect the EBITDA margin to be ~19.5% through
FY11-13e. We estimate 21.6% net profit CAGR over FY10-13.
Steady revenue growth
We expect Pidilite to register 17% revenue CAGR over FY10-13e, with
volumes contributing 12pps and price hikes 5pps. The company has not
increased prices for the past two years (as crude oil prices have been
weak). However, it has the ability to raise prices to pass on any increase in
raw material costs.
Fig 25 – Revenue and revenue growth
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
F
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1
1
e
F
Y
1
2
e
F
Y
1
3
e
6
12
18
24
30
36
42
48
Revenues Growth (RHS)
(`m) (%)
Source: Company, Anand Rathi Research
EBITDA margin to remain at ~19.5%
We expect EBITDA margin to be maintained at ~19.5% owing to the
company’s strong pricing power that enables it to pass on additional raw
material costs.
Fig 26 – EBITDA margins to remain at ~19.5%
0
1,600
3,200
4,800
6,400
F
Y
9
3
F
Y
9
4
F
Y
9
5
F
Y
9
6
F
Y
9
7
F
Y
9
8
F
Y
9
9
F
Y
0
0
F
Y
0
1
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
e
F
Y
1
2
e
F
Y
1
3
e
10
13
16
19
22
EBITDA EBITDA Margin (RHS)
(`m) (%)
Source: Company, Anand Rathi Research
Strong revenue growth over the past
two decades
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 14
Net profit CAGR of 21.6% over FY10-13e
We expect 21.6% net profit CAGR during FY10-13e. A strong operational
performance would drive growth. We expect other income to grow faster
and do not see any major changes in tax rate. We expect the tax rate,
which has risen to 23% in FY11 to sustain during FY12-13. However, our
earnings estimates would change after any performance update regarding
its elastomer monomer project.
Fig 27 – Stable net profit growth
0
1,000
2,000
3,000
4,000
5,000
6,000
F
Y
9
3
F
Y
9
4
F
Y
9
5
F
Y
9
6
F
Y
9
7
F
Y
9
8
F
Y
9
9
F
Y
0
0
F
Y
0
1
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
e
F
Y
1
2
e
F
Y
1
3
e
-40
-10
20
50
80
110
140
170
200
230
Net profit Growth (RHS)
(`m) (%)
Source: Company, Anand Rathi Research
Return ratios
Though the company plans to invest in an elastomer monomer project
over the next three years, its improving profitability and better working
capital management would help maintain RoCE of ~28% over FY10-13e.
Fig 28 – Return ratios stable over the past two decades
10
15
20
25
30
35
F
Y
9
3
F
Y
9
4
F
Y
9
5
F
Y
9
6
F
Y
9
7
F
Y
9
8
F
Y
9
9
F
Y
0
0
F
Y
0
1
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
e
F
Y
1
2
e
F
Y
1
3
e
RoE RoCE
(%)
Source: Company, Anand Rathi Research
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 15
Fig 29 – Income statement (`m)
YE 31 March FY09 FY10 FY11e FY12e FY13e
Gross Sales 21,326 22,842 26,924 31,529 36,976
Less: Excise Duty 1,462 927 1,092 1,279 1,500
Net Sales 19,863 21,916 25,831 30,250 35,476
Growth (%) 16.3 10.3 17.9 17.1 17.3
Expenditure
Cost of Goods Sold 11,663 11,391 12,818 14,974 17,555
Staff Cost 2,205 2,525 2,841 3,327 3,902
Advt & Sales Promotion 582 718 969 1,210 1,419
Processing & Packaging 314 314 362 423 497
Clearing, Forward & Octroi 881 933 1,111 1,301 1,525
Other Expenses 2,114 2,266 2,661 3,116 3,654
EBITDA 2,105 3,770 5,070 5,898 6,924
Growth (%) (12.7) 79.1 34.5 16.3 17.4
EBITDA Margin (%) 10.6 17.2 19.6 19.5 19.5
Depreciation 588 666 765 925 990
EBIT 1,517 3,104 4,305 4,973 5,933
Interest Expense 361 329 244 244 167
Other Income 119 335 365 407 487
Profit Before Tax 1,275 3,111 4,426 5,136 6,253
Total Taxes 167 408 996 1,181 1,438
Income Taxes 167 408 996 1,181 1,438
Deferred Taxes - - - - -
Income Tax rate (%) 13 13 23 23 23
Profit After Tax 1,108 2,703 3,430 3,954 4,815
Share of Profit From Associates 4 24 - - -
Pref. Dividends/Minority Interest 7 (1) - - -
Profit Before X/O 1,105 2,680 3,430 3,954 4,815
Growth (%) (35.8) 142.5 28.0 15.3 21.8
PAT Margin (%) 5.6 12.2 13.3 13.1 13.6
Extraordinary Items - 44 - - -
Profit for Shareholders 1,105 2,723 3,430 3,954 4,815
Number of Shares (m) 506 506 506 506 506
Earnings Per Share Bef X/O (`) 2.2 5.3 6.8 7.8 9.5
Earnings Per Share Aft X/O (`) 2.2 5.4 6.8 7.8 9.5
Source: Company, Anand Rathi Research
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 16
Fig 30 – Balance sheet (`m)
YE 31 March FY09 FY10 FY11e FY12e FY13e
Sources of Funds
Share Capital 253 506 506 506 506
Reserves and Surplus 6,688 8,213 10,910 13,983 17,771
Deferred Tax Liability 434 417 417 417 417
Net Worth 7,375 9,136 11,832 14,906 18,694
Net Worth Net of Rev. Res. 7,375 9,136 11,832 14,906 18,694
Pref.Capital/Minority Interest 7 2 2 2 2
Secured Loans 3,001 2,627 2,627 2,627 432
Unsecured Loans 3,088 2,059 2,059 2,059 2,059
Total Loans 6,089 4,686 4,686 4,686 2,491
Total 13,470 13,824 16,520 19,594 21,187
Application of Funds
Fixed Assets Gross Block 9,273 9,808 13,736 14,736 15,736
Less: Depreciation 3,761 4,346 5,111 6,037 7,027
Net Block 5,512 5,462 8,624 8,699 8,709
Capital WIP 2,819 2,928 - - -
Gross Block-Brand value 9,273 9,808 13,736 14,736 15,736
Goodwill - - - - -
Liquid Investments 254 2,678 4,678 6,928 7,428
Other Investments - - - - -
Current Assets 8,286 7,432 8,514 10,168 12,323
Inventories 2,798 2,979 3,358 3,781 4,346
Sundry Debtors 2,876 2,959 3,487 4,084 4,789
Cash & Bank Balances 1,601 449 623 1,258 2,142
Loans & Advances 1,011 1,046 1,046 1,046 1,046
Current Liabilities 3,401 4,675 5,295 6,201 7,273
Liabilities 2,804 3,696 4,262 4,991 5,853
Provisions 597 980 1,033 1,210 1,419
Net Current Assets 4,885 2,757 3,218 3,967 5,050
Total 13,470 13,824 16,520 19,594 21,187
Source: Company, Anand Rathi Research
Fig 31 – Cash flow statement (`m)
YE 31 March FY09 FY10 FY11e FY12e FY13e
OCF before W/C changes 2,162 3,038 4,195 4,880 5,805
W/c Changes 218 681 (288) (114) (199)
OCF After W/C Changes 2,379 3,719 3,908 4,766 5,607
Cash Flow from Investing
Capital Expenditure (2,025) (865) (1,000) (1,000) (1,000)
Disposal 14 11 - - -
Investments (220) (2,380) (2,000) (2,250) (500)
Acquisitions - - - - -
Net Cash used in Investing (2,231) (3,234) (3,000) (3,250) (1,500)
Cash Flow from Financing
Changes in Share Capital (29) - - - -
Changes in Loans 275 (1,119) - - (2,195)
Dividends (513) (519) (734) (881) (1,027)
Net Cash used in Financing (266) (1,638) (734) (881) (3,222)
ExtraOrdinary Items - - - - -
Changes in Cash & Equivalents (118) (1,152) 174 635 884
Opening Cash & Equivalents 1,718 1,601 449 623 1,258
Closing Cash & Equivalents 1,601 449 623 1,258 2,142
Free Cash Flow 368 2,866 2,908 3,766 4,607
Source: Company, Anand Rathi Research
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 17
Fig 32 – Ratio analysis
YE 31 March FY09 FY10 FY11e FY12e FY13e
Profitability ratios (%)
EBITDA Margin 10.6 17.2 19.6 19.5 19.5
EBIT Margin 7.6 14.2 16.7 16.4 16.7
PBT Margin 6.4 14.2 17.1 17.0 17.6
PAT Margin 5.6 12.3 13.3 13.1 13.6
Income Tax Rate 13.1 13.1 22.5 23.0 23.0
Excise Duty Rate 7.4 4.2 4.2 4.2 4.2
RoE 15.8 32.5 32.7 29.6 28.7
RoCE 12.0 22.7 28.4 27.5 29.1
Major Costs as % of Net Sales
Cost of Goods Sold 58.7 52.0 49.6 49.5 49.5
Staff Cost 11.1 11.5 11.0 11.0 11.0
Advt & Sales Promotion 2.9 3.3 3.8 4.0 4.0
Processing & Packaging 1.6 1.4 1.4 1.4 1.4
Clearing, Forward & Octroi 4.4 4.3 4.3 4.3 4.3
Other Expenses 10.6 10.3 10.3 10.3 10.3
Per Share Data (`)
Earnings Per Share 2.2 5.3 6.8 7.8 9.5
Growth (%) (35.8) 142.5 28.0 15.3 21.8
Book Value per Share 14.6 18.1 23.4 29.5 36.9
Growth (%) 12.0 23.9 29.5 26.0 25.4
Dividend Per Share 0.9 1.5 1.3 1.5 1.8
Growth (%) - 71.4 (16.7) 20.0 16.7
Sales Per Share 39.2 43.3 51.0 59.8 70.1
Growth (%) 16.3 10.3 17.9 17.1 17.3
Other ratios (%)
Net debt/Equity 57.5 17.1 (5.2) (23.5) (37.9)
Current Ratio 243.6 159.0 160.8 164.0 169.4
FCF/EPS 33.2 106.0 84.8 95.2 95.7
OCF/Sales 12.0 17.0 15.1 15.8 15.8
Div Payout Ratio 40.1 28.3 18.4 19.2 18.4
Source: Company, Anand Rathi Research
1 April 2011 Pidilite Industries – Market leader in niche segments; initiate with Buy
Anand Rathi Research 18
Company Background & Management
Concentrating on adhesives and sealants, Pidilite Industries is well-
established in construction chemicals and art materials. Promoted
by the Parekh family, it employs professionals in various positions.
Company background and business
An adhesives and sealants company, Pidilite Industries is also well
established in other countries: Brazil, the USA and the Caribbean islands.
Its strong brands are Fevicol, Fevikwik, Dr Fixit, M-Seal and Steelgrip.
The company has ventured into art and stationery materials, which bring
in ~10% of revenue. It also has an industrial adhesives business, which
makes up 17% of sales.
Fig 33 – Revenue breakdown (FY10)
Others
1%
Organic Pigment
& Preparation
6%
Industrial Resins
8%
Industrial
Adhesives
8%
Art & Materials
10%
Construction &
Paints Chemicals
18%
Adhesives &
Sealants
49%
Source: Company
Management
BK Parekh is Chairman; MB Parekh is the managing director. Though the
Parekh family owns a majority stake, it has inducted professionals in key
management positions. Sandeep Batra joined Pidilite as CFO after a
successful career at ICI India.
Fig 34 – Key management
Name Designation
BK Parekh Chairman
MB Parekh Managing Director
Sandeep Batra CFO
Source: Company
Though ownership is with the
Parekh family, the company has
inducted professionals for key
management positions
Appendix 1
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the
compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research
analyst(s) in this report.
The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking
revenues.
Anand Rathi Ratings Definitions
Analysts’ ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (US$1bn) >20% 5-20%