Grey Market Premiums - Gokul Refoils, Anu's Laboratories

Gokul Refoils 175 to 195 25 to 27

Anus Laboratories 200 to 210 23 to 26

Grey Market - Anu's Laboratories, Gokul Refoils

Gokul Refoils 175 to 195 20 to 25

Anus Laboratories 200 to 210 21 to 23

Grey Market - Anu Laboratories, Gokul Refoils

Gokul Refoils 175 to 195 8 to 10

Anu Laboratories 200 to 210 18 to 20

Gokul Refoils and Solvents IPO

Investors can consider subscribing to the IPO from Gokul Refoils and Solvents in the price band of Rs 175-195, at the cut-off price. The asking price for the offer appears reasonable in relation to listed peers as well as the company’s own financials and growth prospects.

At Rs 195, Gokul Refoils would be valued at a price-earnings multiple of about eight times its estimated FY08 earnings and at about six times FY09 earnings, using conservative assumptions, on the diluted equity base. Solvent extraction and edible oil players of a similar or much larger size such as Agro-Tech Foods and Ruchi Soya trade at valuations of 11-15 times current earnings.

The company’s expansion projects are likely to scale up contributions from the current fiscal. However, the offer is suitable only for investors with a high risk appetite, as the edible oils business is characterised by thin margins and is exposed to commodity price fluctuations as well as policy changes.
Business overview

Gokul Refoils is a marketer of edible oils such as palmolein, soyabean oil and cottonseed oil, mainly in bulk form, to domestic retailers. It also exports de-oiled cake, a by-product of oil extraction and is present in the vanaspati business.

The company’s present capacities include 1,280 tonnes per day (tpd) of seed processing and solvent extraction capacity and 1,200 tpd of oil refining capacity. Partly financed by the offer proceeds, these will be stepped up to 2,780 tpd and 1,500 tpd, respectively.

In the three years to 2007-08, Gokul Refoils managed a 21 per cent annualised growth in sales with a higher 46 per cent growth in profit. Operating profit margins, though thin, have improved from 3.5 per cent to over 6 per cent in this period.

Trading activities, shifts in the product mix, and a gradual increase in retail sales (38 per cent of sales in 2007-08), relative to bulk sales, appear to have aided margin expansion. However, given that the margins managed by the peer group hover in the 2-3 per cent range, the sustainability of current OPMs remains to be seen.
Expansion plans

In this context, the recent capacity expansion, apart from building scale (crucial in this volume-driven business) may aid margins by improving utilisation. The soybean crushing plant is a backward integration move. The addition of refining capacity in proximity to the Western ports will provide the flexibility to source imported crude oil, to tide over any shortfalls in domestic availability of oilseed. Plans to set up a Singapore subsidiary may help sourcing and open up export avenues for de-oiled cake.
Branded foray risky

Expansion plans apart, Gokul Refoils plans to enhance its retail presence by establishing a larger distribution network and investing in brand-building efforts. Though the company claims a distribution presence in 19 States and has managed to ramp up proportion of retail sales from 18 to 37 per cent in two years, establishing a foothold in the branded edible oil market on a national scale may prove extremely challenging.

This business is highly competitive with strong regional brands as well as established commodity trading houses in the fray; Gokul may find it difficult to sustain the promotional spends required by foray over several years. The branded edible oil market is extremely price-sensitive and requires dynamic pricing to build as well as retain market shares. Changes in tariff values or duty structure by the government also have the potential to impact margins.

At this juncture, the sharp increase in global edible oil prices and the firm outlook for the same do pose risks to edible oil market and could result in slower growth rates.

However, as the category tends to be quite income elastic, substitution, rather than low offtake, would be the key risk for individual players. In this respect, Gokul’s flexibility to alter its product mix between various edible oils should help reduce substitution risks to some extent.

Gokul Refoils and Solvent

Gokul Refoils and Solvent

Gokul Refoils and Solvent IPO Analysis

Promoted by Balvantsinh Rajput, Kanubhai Thakkar, Mrs. Bhikiben Rajput and Mrs. Manjulaben Thakkar in 1982, Gokul Refoils and Solvent extracts solvents; refines edible oils, castor oils and their derivatives; and manufactures vanaspati.

Besides 680-tonne-per-day (tpd) seed-processing capacity, Gokul Refoil and Solvent has 600- tpd of solvent-extraction, 1,200-tpd of refining, and 200-tpd of vanaspati manufacturing facility. The company gets captive power from four windmills of 1.25 MW each in Kutch, Gujarat. It has also set up a co-generation power plant of 500 KWH at its Gandhidham unit in Gujarat.

To expand the scale of operations and have a global presence, Gokul Refoils and Solvent has set up two wholly owned subsidiaries in Mauritius and Singapore: Maurigo International Ltd and Maurigo Pte Ltd. The Mauritius subsidiary, Maurigo International, is involved in commodity trade on the Chicago Board of Trade and the Malaysia Derivatives Exchange (MDEX),Kula Lumpur, Malaysia. The Singapore subsidiary, Maurigo Pte, procures raw material and trades in commodity. Its strategic presence in Singapore enables it to locally negotiate and deal with the small and fragmented oil suppliers of Malaysia and Indonesia, which will enable the company to procure raw materials at reasonable terms.

Products are marketed under the brand name, Gokul, in Gujarat, Maharashtra, Rajasthan, Madhya Pradesh and Punjab.

Gokul Overseas is a partnership firm manufacturing and processing castor seeds and oil and their derivatives with plant at the Kandla Special Economic Zone (KASEZ). This partnership firm has reported sales of Rs 205 crore and net earning of Rs 8.59 crore in the financial year ending March 2007 (FY 2007).

Consolidated net sales stood at Rs 1323.20 crore and Rs 1563.46 crore in the eight months ended November 2007 and FY 2007. Operating profit margin (OPM) was 6.5% and 3.8%, and net profit Rs 41.83 crore and Rs 25.73 crore.

Standalone net sales stood at Rs 1309.28 crore and Rs 1562.49 crore in the eight months ended November 2007 and FY 2007. OPM was 6.3% and 3.9%, and net profit Rs 37.82 crore and Rs 26.94 crore.

A soya processing plant, with installed capacity of 1500 tpd and capital investment of Rs 51 crore, is proposed at Gandhidham, Gujarat. The existing edible oil refinery at Surat is being expanded to 400 tpd from 100 tpd, with an estimated outlay of Rs 12.31 crore. About Rs 15 crore is to be invested in brand building, Rs 10 crore to increase the warehousing capacity and meet other capital expenditure at existing units, and Rs 60.69 crore to fund part of long-term working capital. Rs 139.59 crore is to be raised at the cap price of the price band, and Rs 38.25 crore will be taken on loan from banks.

Strengths

Versatile manufacturing capabilities, giving extreme flexibility to manufacture all type of oils depending on the market requirement and availability of raw materials at competitive rates.

Weakness

Earnings are vulnerable to changes in the duty differential between crude and refined oil.

The business is characterised by inherently low margin.

Has negative cash flow fof Rs 5.39 crore from operating activity in FY 2007, Rs 21.18 crore in FY 2006 and Rs 18.91 crore in FY 2004.

Primarily present in the bulk market, where there are strong competitive pressures from the unorganised segment.

Valuation

Gokul Refoils and Solvent has set a price band of Rs 175 to Rs 195 per equity share of Rs 10 face value. At the lower band of Rs 175 per share, the P/E would be 7.4x times annualised EPS of Rs 23.8 for the November 2007 ended period and 17.9x times the EPS of Rs 9.8 for FY 2007 on post-issue equity of Rs 26.38 crore. At the upper band of Rs 195 per share, the P/E would be 8.2x times and 19.9x times respectively. In the edible oil industry, the comparable companies such as Ruchi Soya Industries, Gujarat Ambuja Exports, and K S oils have TTM P/E of around 12.6, 9.3 and 21.3, respectively.

via CM

Grey Market - Gokul Refoils, Aishwarya Telecom

Aishwarya Telecom 35 10 to 12


Gokul Refoils 175 to 195 15 to 17

Gokul Refoils IPO

Gokul Refoils And Solvent Limited, a Gujarat based company, engaged in the business of solvent extraction, refining of Edible oils and Vanaspati manufacturing, proposes to raise Rs15bn with an Initial Public Offer (IPO).

The Objects of this issue are to set up a new 1500 TPD Soyabean processing plant near Gandhidham, expansion of its existing edible oil refinery at Surat, investment in its wholly owned Singapore subsidiary, funding part of its long term working capital, brand building activities, investment in increasing warehousing capacities and continuous Capex for existing units, general corporate purposes and public issue expenses.

Gokul Refoil started its business in 1982 and is primarily engaged in the business of Solvent Extraction, refining of Edible oils and Vanaspati manufacturing. The group's interest also includes power generation, commodity trading in the domestic and international markets.

The company markets its products under the brand name "Gokul" in the states of Gujarat, Maharashtra, Rajasthan, Madhya Pradesh and Punjab. The brand enjoys a national recognition and the products are packed and sold include Mustard oil, Sunflower oil, Groundnut oil, Cottonseed oil, Palmolein oil, Vanaspati oil and Soya bean oil these are not only sold in in bulk quantities but also consumer retail packs of 15 Kgs, 15 Litre, 10 Litre, 5 Litre, 1 Litre and 500 ml.

Pan India distribution network spread across 19 States catered by 18 C&F agents and 802 distributors, 3 depots, 15 brokers and 295 resellers, distributing Gokul products through a total 1133 bulk points.

Gokul Refoils has setup a Solvent Extraction plant and an oil refinery at Sidhpur, Gujarat, a refinery of 800 TPD and Vanaspati plant of 100 TPD at Gandhidham, four environment friendly wind mills of 1.25 MW each in Kutch for captive power consumption and a 100 TPD operational refinery in Surat. It has also set up a co-generation power plant of 500 KWH at its Gandhidham unit. At present the company has 680 TPD of seed processing, 600 TPD of Solvent Extraction, 1200 TPD of refining and 200 TPD of Vanaspati manufacturing.

Towards expanding the scale of operations and having global presence Gokul Refoils has setup two wholly owned subsidiaries in Mauritius and Singapore under the name Maurigo Pte Limited and propose to invest approximately Rs250mn i.e. US$ ~6.10mn for enhancing the resources of the subsidiary.

Commenting on company's global expansion plans, Kanubhai Thakkar, MD, Gokul Refoils and Solvent limited said, “Singapore is the global hub of edible oil industry with all major oil suppliers having a base in Singapore. Currently we are sourcing about 1, 50,000 MT of Palm oil from Malaysia and Indonesia and 1, 00,000 MT of soyabean oil from Argentina and Brazil. If we have our presence in Singapore, we shall be in a position to negotiate locally and deal with the small and fragmented oil suppliers of Malaysia and Indonesia, which will further enable us to procure the raw materials at reasonable terms."

“Setting up of this office was a part of our long term strategy of increasing our foot print in the global markets to reduce the involvement of intermediaries and source raw materials from the producers. It will help us in procuring oil at reasonable terms and also providing assured supplies round the year. This global presence shall help us to improve the scope of exports of De-Oiled Cake and our margins in export of de-oiled cake," Said Thakkar.

Gokul Refoils consolidated total income for the financial years / period ended July 31, 2007, March 31, 2007, 2006 and 2005 was Rs6.57bn, Rs15.66bn, Rs12.55bn and Rs9.07bn respectively. The Company posted net profit for the said years / period was Rs207mn, Rs254.2mn, Rs123.4mn and Rs200.5mn respectively.