Vinati Organics to gain from dollar-linked contracts

21 Dec 2011

Vinati Organics is investing heavily in expanding capacities and adding new products, which will drive its profitability growth in the next two-three years. The economic weakness in the western countries is leading to an increase in outsourcing activity in manufacturing of specialty chemicals. Vinati Organics derives 89% of its revenues through US dollar-linked contracts at a time when the rupee has depreciated over 20% in the past five months. This, in turn, will prove to be positive factors for the company's bottomline in the coming quarters.

Vinati Organics has enjoyed a high-speed growth in the past few years. Its net profit grew at a CAGR of 93% between FY06 and FY11, while the revenues grew at 41%. In the first half of FY12, however, the company faced stagnancy due to a variety of factors. Sales of its IBB were low due to competition, isobutylene plant was running at sub-optimal capacity and expiry of sops increased tax burden. Between FY09 and FY11, it doubled its gross block to Rs 149 crore, which will again double by end FY13. However, its debt-equity ratio has declined steadily to 0.56 at end September 2011, thanks to high profitability and healthy cash generation. In FY12 and FY13, it plans to invest Rs 150 crore, which will double ATBS capacity to 24,000 tonne apart from adding products such as Diacetone Acrylamide (DAAM), High Purity Methyl Tert Butyl Ether (HP MTBE) and Di-Ethyl Aniline (DEA). Most of these additional plants will commence operations by July 2012.

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