Gulshan Polyols – Grossly undervalued !! Proxy FMCG play !!

Gulshan Polyols Ltd is an agro processing Company with a turnover of 500 crores FY16-17. Gulshan’s product lines consist of Sorbitol, MD, DMH, animal feed ingredients like gluten, germ and enriched fibres mainly meant for cattle, aqua, animals etc. mainly maize and Rice processing, , Native Starch, ENA and HFRS. It’s a sub-400 crores market cap outfit which is trading at 7X its FY 16-17 cash profits.

It is a multi-locational, multi-product company having a consistent profitable record for decades together.

What is important that it has been a cash rich company because of it’s clientele mainly MNCs, FMCG and top-notch Corporates. In the last 5 Financial Years Company has generated Free Cash Flow of more than 235 crores and the entire cash has been ploughed back in the Company to create productive assets of grain based businesses. Capex Programme is 100% over.

It’s customers’ line reads like ‘Who’s Who’ including Colgate, Hind Unilever, Dabur, Asian Paints, Wipro, KansaiNerolac, Berger Paints, Pidilite, Britannia, Henkel, ITC, TNPL, Cadila, IPCA, Pfizer, Novartis, Merck, Glenmark,AstraZeneca, Bata, Lakhani, Relaxo, Sintex, BASF, a host of paper mills and pipe manufacturers. The company enjoys a long term relationship with its clientele for more than two decades.

In two of its products, the company enjoys market leadership i.e. Sorbitol and Calcium Carbonate. Both businesses are more than 25 years old.

In the last 3 – 4 years, the company saw an opportunity to enter grain based businesses and set up many verticals.

Beauty of grain based businesses is that nothing goes waste and apart from main products, plant generates gluten, germ, enriched fibres which are used for cattle, poultry, piggery, aqua based units. In FY 16-17 it sold these by products worth 75 crores which is expected to double to 150 crores in FY 18-19 as it has commissioned two new plants. 

Company has at least 8 locations where the plants are located.

Prominent among them is Muzaffarnagar based facilities which is on 65 acres of land. Here the company has a Calcium Carbonate Plant, Native Starch Plant catering mainly within a radius of 150 kms to numerous paper industry units. The plant capacity is 60K tonnes pa

It has got a rice based MD and DMH plant running at optimum capacity.

In FY16-17 they set up a rice based High Fructose Rice Syrup (HFRS) and Brown Rice Syrup unit which is completely an import substitute and first in India saving around US $ 20 Million pa.

Another important thing is that Company got its products certified from Germany. And they have started exporting to developed markets like USA and Australia.

Muzaffarnagar facility is the only facility in India which has got dual feed ie Corn and Rice at one place.

Sorbitol is their main product generating around 250 crs turnover from Bharuch, Gujarat. The plant has a capacity to process 80K MTPA corn and this capacity will be expanded in the near future to cross 100K pa. This plant is most modern and meeting all pollution norms.

It is worth noting that Sorbitol is exported to over 35 countries worth 70 crores.

Company has been able to enter grain based ENA Plant with 60 KLPD capacity located at Chhindwara, MadhyaPradesh. Raw material is rice and can be changed to other grains as well.
This unit has a distillery, bottling unit and captive power plan. Seed marketing of their brand, Golden Deer for Rum and whisky is already on for the last two years. The ENA plant incurred a project cost of over 100  crores and ready to go into commercial production shortly in the current quarter itself. ENA is a high entry barrier business and business parameters are quite promising. Here again Company will have by products of gluten, germ, enriched fibres and also Dry Ice which will be manufactured by recovering Carbon dioxide and compressing the same into Dry Ice.

All three main locations i.e. Muzaffarnagar, Bharuch and Chhindwara are equipped with captive power plants making them self sufficient power wise.

3 / 4 years back the company entered the business of setting up of Satellite PCC plants and have set up half a dozen such plants. Prominent among their customers are ITC, Orient Paper and two units at Basundhara Group, Bangladesh. Company expects to set up more such plants in paper industry in view of the paper industry doing well.

During FY 16-17, the Company generated a cash profit of 55 crores on a tiny capital of 4.69 crores.

Promoters hold around 59 percent and more than 16 percent is held by Reliance Mutual Fund and Antara Evergreen Fund. More than 4 per cent is in physical mode leaving a floating stock of just 20%

The beauty of their businesses is that in FY18-19 i.e. next year, will have a turnover of 1000 / 1100 crores and out of which 90% will be grain based mainly Corn / Maize and Rice. And these businesses will have around 150 crores worth of products as by product which are mainly animal based i.e. germ, gluten, enriched fibres and dry ice.

Last year the company had a turnover of 500 crores. It plans to achieve a turnover of 750 crores in FY18 & 1100crores in FY19.



Disclosure: I personally hold the stock so my views may be biased.

Disclaimer: I, am not registered under SEBI (Research Analysts) Regulations, 2014. No content on this blog should be construed to be investment advice. Any security specific discussion on this site is not a recommendation to Buy / Hold / Sell. The purpose of this site is solely for investor education. You should consult a qualified financial advisor prior to making any actual investment or trading decisions.

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