Indian Phosphate Limited
Company
| Website š |  |
| Business Activity | Manufacture |
| Division | Chemicals |
| Sub-class | Speciality Chemicals & Fertilizers |
| Location | Girwa, Rajasthan, Dhule, Maharashtra, and Cuddalore, Tamil Nadu. |
| Establishment Year | 1998 |
Management
| Managing Director | Ravindra Singh |
| Educational Qualifications | Graduation in Commerce (Kota Open University, 1988) |
| Experience | Over 28 years in manufacturing Phosphatic Fertilizer, Surfactants, HDPE Woven bags, and Logistics of bulk liquid cargo |
| Annual Salary | ā¹42.00 lakhs (excluding perquisites) |
About
Overview:
Indian Phosphate Limited (IPL) is a multifaceted company manufacturing and supplying both chemicals and fertilizers. The company’s core business activities encompass the production of Linear Alkylbenzene Sulphonic Acid (LABSA), a crucial component in detergents and cleaning products, and various fertilizers like Single Super Phosphate (SSP) and Granulated Single Super Phosphate (GSSP), vital for agricultural development.
Work Processes
LABSA: IPL employs a sulphonation process to manufacture LABSA. This involves reacting Linear Alkylbenzene (LAB) with Sulphuric Acid under controlled conditions.
Fertilizer SSP and GSSP:
This involves reacting Rock Phosphate with Sulphuric Acid, followed by granulation or grinding to achieve the desired product form. IPL also produces fortified SSP variants enriched with zinc and boron, catering to specific soil nutrient deficiencies.
Products:
LABSA 90%: A key surfactant used in various cleaning products like detergent powders, cakes, toilet cleaners, and liquid detergents.
Single Super Phosphate (SSP), Granulated Single Super Phosphate (GSSP): A phosphatic fertilizer crucial for root development and chlorophyll synthesis in plants, available in both powder and granulated forms.
Fortified SSP: SSP variants enriched with zinc and boron, addressing specific soil nutrient deficiencies and promoting balanced crop growth.
Raw Materials and Suppliers:
Linear Alkylbenzene (LAB): Sourced from reputable suppliers like IOCL, Nirma Ltd., and Reliance Industries Ltd.
Sulphuric Acid: Procured from Hindustan Zinc Limited and also generated internally during LABSA production.
Rock Phosphate: Obtained from Rajasthan State Mines & Minerals Limited (RSMML) and through imports from JPMC, Jordan, and Egypt based on market dynamics and economic considerations.
Zinc Sulphate and Boron: Used in the production of fortified SSP fertilizers.
Clients:
Detergent Industry: Major consumers of LABSA for various cleaning product formulations. In FY 2024, Hindustan Unilever Limited(HUL) contributed to 78.66% of IPL’s total revenue from operations.
Agriculture Sector: Farmers and agricultural businesses utilizing SSP and GSSP fertilizers for crop cultivation.
Proximity to Sources: The company’s manufacturing facility in Girwa(Udaipur) is strategically located near major raw material sources, reducing transportation costs and lead times.
Backward Integration: IPL is actively pursuing backward integration by setting up a Sulphuric Acid manufacturing plant, aiming to reduce dependence on external suppliers and enhance cost efficiency.
Business
Revenue – Category
Revenue – Region
Audit and Legal
Related Party Transactions:
These transactions primarily involve the purchase of goods from S.K. Chemicals, a proprietary concern of Mrs. Surjeet Kaur, a relative of a Key Managerial Personnel (KMP), and the sale of goods to Udaipur Poly Sacks Limited, a subsidiary of IPL. In FY 2024, these related party transactions amounted to approximately 32.26% of the total revenue.
Auditorās Remarks:
The auditors have not made any qualifications or adverse remarks regarding Indian Phosphate Limited’s (IPL) financial information in their report.
Criminal Complaints: IPL faces five criminal complaints under the Essential Commodities Act, of 1955, and the Fertilizer Control Order, of 1985. These complaints stem from instances where fertilizer samples were found to be deficient in quality.
Taxation Matters:
An outstanding income tax demand of ā¹109.64 lakhs for the assessment year 2011-12 and a TDS demand of ā¹3.09 lakhs are pending. Two show-cause notices under the CGST Act, 2017, for the fiscal year 2018-19, with a total demand of ā¹197.00 lakhs, are also pending resolution.
Untraceable Corporate Records: Some corporate records, including certain forms filed with the Registrar of Companies, are not traceable.
Contingent Liabilities:
Corporate Guarantee: A significant portion of the contingent liabilities arises from a corporate guarantee of ā¹105 Crores provided to Canara Bank on behalf of Elysian Hotels Private Limited, a group company.
Other Litigation: Additionally, there’s an ongoing legal matter related to a trademark dispute with Ankur Seeds Private Limited.
SWOT Analysis
Strengths
| Experienced Promoter and Management Team: IPL benefits from the extensive experience and expertise of its promoter and management team. |
| Cost-Effective Sourcing and Strategic Location: IPL’s manufacturing facility in Udaipur is strategically located near major raw material sources, enabling cost-efficient procurement and streamlined logistics. The company’s focus on backward integration in Sulphuric Acid production enhances cost efficiency and reduces dependence on external suppliers. |
| Quality Assurance and Customer Satisfaction: IPL places a strong emphasis on quality control, ensuring that its products consistently meet or exceed industry standards. The company’s commitment to customer satisfaction has fostered strong relationships with key clients, contributing to repeat business and a loyal customer base. |
Weaknesses
| Dependence on Government Subsidies: IPL’s fertilizer business is significantly reliant on government subsidies, making it vulnerable to policy changes and potential reductions in subsidy support. |
| High Working Capital Requirements: IPL’s operations are working capital intensive, necessitating significant investments in inventory and trade receivables. |
| Concentration of Revenue and Customer Base: A substantial portion of IPL’s revenue is generated from a limited number of customers and regions, making it susceptible to fluctuations in demand or adverse developments in specific markets. |
| Limited Geographical Presence: While IPL has expanded its operations to several states, its primary focus remains on the northern and western regions of India. |
Opportunities
| Expansion into New Markets: IPL’s strategic initiatives to establish new manufacturing facilities in Maharashtra and Tamil Nadu present opportunities for expanding its geographical reach and tapping into new markets in the southern and western regions of India. |
| Backward Integration and Diversification: IPL’s focus on backward integration in Sulphuric Acid production, can strengthen its control over the supply chain, reduce costs, and enhance its competitive advantage. The company plans to diversify its product portfolio with the introduction of Magnesium Sulphate. |
| Growing Demand for Fertilizers and Chemicals: The Indian agricultural and industrial sectors are witnessing steady growth, driving the demand for fertilizers and chemicals. |
Threats
| Intense Competition: The chemicals and fertilizers industry in India is highly competitive, with numerous players vying for market share. |
| Regulatory and Policy Changes: The fertilizer and chemicals industry is subject to various regulations and policies, including environmental, health, and safety standards. |
| Raw Material Price Volatility: The prices of key raw materials, such as LAB and Rock Phosphate, are subject to fluctuations in the global market. Any significant increase in raw material prices can impact IPL’s production costs and profit margins. |
Porter’s Five Forces1 (LABSA)
| Threat of New Entrants | LOW – MODERATE |
| The threat of new entrants in the LABSA segment is low to moderate due to the capital-intensive nature of the industry, the need for technological expertise, and the established presence of existing players. |
| Bargaining Power of Suppliers | MODERATE – HIGH |
| The bargaining power of suppliers in the LABSA segment is moderate to high, particularly for key raw materials like LAB. The limited number of LAB suppliers and the importance of LAB for LABSA production can enhance their bargaining power. |
| Bargaining Power of Buyers | MODERATE |
| The bargaining power of buyers in the LABSA segment is moderate due to the presence of large and established detergent manufacturers who can exert influence on prices. |
| Threat of Substitute Products or Services | LOW |
| The threat of substitute products for LABSA is relatively low, as it is a key ingredient in most detergent formulations and has limited substitutes with comparable performance and cost-effectiveness. |
| Rivalry Among Existing Competitors | HIGH |
| The intensity of competitive rivalry in the LABSA segment is high due to the presence of numerous players, both domestic and international, vying for market share. |
Porter’s Five Forces1 (Fertilizer)
| Threat of New Entrants | LOW – MODERATE |
| The threat of new entrants is also low to moderate due to the capital-intensive nature of the industry, the need for regulatory approvals, and the established presence of existing players. |
| Bargaining Power of Suppliers | MODERATE |
| The bargaining power of suppliers, primarily rock phosphate and sulfuric acid providers, is moderate. |
| Bargaining Power of Buyers | MODERATE – HIGH |
| The Central government has brought (DAP), (MOP) and all other fertilisers that receiveĀ nutrient-based subsidy (NBS)Ā support under āreasonable pricingā controls. |
| Threat of Substitute Products or Services | MODERATE |
| The threat of substitute products is moderate, as there are various alternative fertilizers available in the market, including organic and bio-fertilizers. |
| Rivalry Among Existing Competitors | HIGH |
| The intensity of competitive rivalry is also high due to the presence of numerous players, including large public and private sector companies. |
Peer Comparison
Rama Phosphates Limited is considered a listed peer for comparison.
Revenue and Growth:
IPL’s revenue from operations surpasses that of Rama Phosphates, and it also exhibits a less severe decline in revenue growth.
Profitability and Returns:
IPL significantly outperforms Rama Phosphates in terms of profitability, with positive PAT and EBITDA margins, as well as considerably higher ROE and ROCE.
| Metric | Indian Phosphate Limited (FY 2023-24) | Rama Phosphates Limited (FY 2023-24) |
| Revenue from Operations (ā¹ in crores) | 704.18 | 603.17 |
| Growth in Revenue from Operations (%) | –8.39% | –31.05% |
| PAT Margin (%) | 1.91% | -5.15% |
| ROE (%) | 18.14% | -9.39% |
| ROCE (%) | 20.94% | -6.33% |
| Operating Cash Flows (ā¹ in crores) | -1.91 | -5.1 |
Green Box
Capacity Expansion and Backward Integration: IPL plans to establish a new manufacturing facility in SIPCOT Industrial Park, Cuddalore, Tamil Nadu. This facility will increase the company’s production capacity for LABSA 90% from the current 350 MT/day to 450 MT/day.
The facility will also enable the production of Sulphuric Acid (200 MT/day) for Backward Integration and Magnesium Sulphate (60 MT/day), further diversifying IPL’s product portfolio.
Market Expansion:
IPL’s strategic initiatives to expand its geographical presence in the southern and western regions of India through new manufacturing facilities and enhanced distribution networks can drive revenue growth and market share expansion.
Strong Financial Performance:
The company’s historical financial performance, with healthy profit margins and return ratios, demonstrates its ability to generate sustainable returns for its shareholders.
Amber Box
Regulatory Risks:
The fertilizer industry in India operates within a specific regulatory framework, the Fertilizer Control Order, of 1985. Any changes in government policies related to the agricultural sector, subsidies, or pricing could affect IPL’s business. The company’s products also require regulatory approvals and licenses, some of which are nearing expiration.
Debt Structure:
The company’s debt-to-equity ratio stood at 0.50, indicating a moderate level of leverage. However, it’s important to note that IPL’s operations are working capital intensive, which can put additional strain on its financial resources.
Execution Risks:
IPL’s growth strategy relies on the successful execution of its capacity expansion, product diversification, and backward integration plans.
Capacity Utilization:
Capacity utilization of LABSA (90%) was at 55.5% and that of SSP Powder (plain and zincated) was at 11.5%.
Red Box
Operating Cash Flow:
IPL’s operating cash flow has been volatile in recent years. In FY 2023-24, the company reported a negative operating cash flow of ā¹-1.9 crores, primarily due to changes in working capital and increased tax payments.
High Working Capital Requirements:
IPL’s operations are working capital intensive, necessitating significant investments in inventory and trade receivables. This can strain the company’s financial resources and limit its flexibility in responding to market opportunities or challenges.
Concentration of Revenue and Customer Base:
A substantial portion of IPL’s revenue is generated from a limited number of customers and regions, making it susceptible to fluctuations in demand or adverse developments in specific markets. This concentration can impact the company’s financial performance and growth potential.
Images
- For Porter’s Five Forces, the force value of “LOW” is considered good. ā©ļø
- For Porter’s Five Forces, the force value of “LOW” is considered good. ā©ļø
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