Petro Carbon and Chemicals Limited
Company
| Website 🔗 |  |
| Business Activity | Manufacture |
| Division | Chemical (Industrial) |
| Sub-class | Calcined Petroleum Coke |
| Location | Haldia, West Bengal |
| Establishment Year | 2007 |
Management
| Managing Director | Mr. Vishal Atha |
| Educational Qualifications | Bachelor of Commerce (University of Mumbai), CFA-Foundation Course (The Institute of Chartered Financial Analysts of India) |
| Experience | Over 20 years in Calcined Petroleum Coke, Iron Ore Mining, Renewable Energy Power, and Steel industry |
| Annual Salary | ₹ 12 Lakhs |
| Total Number of Employees | 73 |
About
Petro Carbon and Chemicals Limited (PCCL), a constituent of the Atha Group, is a prominent player in the carbon industry, specialising in the manufacturing and marketing of Calcined Petroleum Coke (CPC).
PCCL’s core business model revolves around supplying CPC to major aluminium manufacturers, graphite electrode producers, titanium dioxide manufacturers, and other entities within the metallurgical and chemical sectors.
Products and Services:
PCCL primarily offers Calcined Petroleum Coke (CPC), a high-purity carbon product with low hydrogen content, excellent electrical conductivity, and a well-defined structure vital for aluminium production.
Clients:
Aluminum Industry: Calcined Petroleum Coke (CPC) is used to make anodes, which are crucial in the aluminium smelting process.
Steel Industry: CPC acts as a recarburizer in steel production.
Titanium Dioxide Industry: CPC is used in the manufacturing process of titanium dioxide.
Other Industries: CPC also finds applications in various other sectors, including the foundry, glass, metallurgical, and chemical industries.
Raw Materials:
The core raw material for PCCL is Raw Petroleum Coke (RPC), sourced both domestically and internationally.
Suppliers:
Imports:
PCCL sources a major portion, approximately 95%, of its RPC requirements from international refineries located in countries such as Brazil, China, Malaysia, Indonesia, and the USA. This reliance on imports highlights the company’s engagement in the global supply chain for this crucial raw material.
Domestic Procurement:
The remaining 5% of RPC is procured domestically from Indian Oil Corporation (IOC) facilities situated in Bongaigaon and Barauni. This demonstrates PCCL’s commitment to leveraging domestic resources while maintaining a diversified supply base.
Manufacturing Process:
Procurement of Raw Petroleum Coke (RPC):
The journey begins with sourcing raw petroleum coke, also known as green coke, a byproduct of crude oil refining.
RPC Storage and Processing:
The company maintains on-site storage facilities and customs lockers for efficient raw material management. The RPC is then crushed and sized to meet specific application requirements.
Calcination:
The pivotal step involves calcining the RPC in a high-temperature kiln, typically ranging from 1200°C to 1350°C. This process removes impurities and enhances the coke’s properties, making it suitable for anode production in aluminium smelting.
Cooling and Blending:
The calcined coke is cooled using water quenching and natural air draft. Subsequently, blending may be employed to achieve desired quality standards.
Quality Control and Distribution:
Stringent quality control measures are implemented to ensure product compliance. The final CPC is packaged and dispatched to customers, often leveraging PCCL’s in-house railway track system for efficient delivery.
Other Key Aspects:
The company’s commitment to quality and customer satisfaction is underscored by its receipt of the prestigious NALCO Vikreta Utkarsh Puraskar in 2018, recognizing it as a top supplier to the National Aluminium Company Limited.
Manufacturing Process Flowchart
Audit and Legal
Auditor’s Remarks:
The auditors’ remarks indicate that the restated financial statements are fairly presented and comply with the relevant accounting standards and regulations,
Related Party Transactions:
For the nine months ending December 31, 2023, the related party transactions represent approximately 13.59% of the total revenues.
Contingent Liabilities:
As of December 31, 2023, Petro Carbon and Chemicals Limited does not have any contingent liabilities.
Tax Proceedings against the Company:
Tax Proceedings: There is one tax-related proceeding against the company, involving a total amount of ₹2.31 lakhs.
SWOT Analysis
Strengths
| Strategic Location: PCCL’s plant is situated within the Haldia port perimeter, offering logistical advantages for efficient raw material procurement and product distribution. This proximity to transportation networks can lead to cost savings and improved operational efficiency. |
| Established Customer Relationships: The company has fostered long-term relationships with key clients in the aluminum, steel, and chemical industries. These relationships contribute to a stable revenue stream and provide a competitive edge in securing orders. |
| Focus on Operational Efficiency: The company has demonstrated a commitment to improving operational efficiency, as evidenced by its recent capacity utilization improvements and cost optimization efforts. This focus could lead to enhanced profitability and sustainable growth. |
Weaknesses
| Single Product Reliance: PCCL’s current revenue is entirely dependent on a single product, Calcined Petroleum Coke (CPC). This lack of diversification exposes the company to risks associated with fluctuations in the CPC market and limits its ability to weather downturns in specific industries. |
| Customer Concentration: A significant portion of PCCL’s revenue is generated from a few large customers. While this reflects strong relationships, it also creates a concentration risk. Any loss or reduction in orders from these key clients could significantly impact the company’s financial performance. |
| Raw Material Price Volatility: The price of PCCL’s primary raw material, Raw Petroleum Coke (RPC), is subject to fluctuations in the international crude oil market. This volatility can affect production costs and profitability margins, especially if the company cannot pass on increased costs to its customers. |
Opportunities
| Capacity Expansion: The company’s plans for capacity expansion through acquisitions and new plant setups could enable it to cater to the rising demand for CPC and further solidify its market position. |
| Favourable Demand-Supply Dynamics: The current demand-supply gap in the CPC industry, with demand outpacing supply, presents an opportunity for Petro Carbon and Chemicals Limited to command better prices and improve profitability. |
Threats
| Competition from International Players: The CPC industry is competitive, with the presence of both domestic and international players. Petro Carbon and Chemicals Limited could face challenges in maintaining its market share and pricing power amidst increasing competition. |
| Fluctuating Crude Oil Prices: The volatility in international crude oil prices directly impacts the cost of PCCL’s raw material, RPC. This could squeeze profit margins if the company is unable to pass on the increased costs to its customers. |
| Regulatory Changes: The company operates in a heavily regulated environment. Any changes in environmental, health, safety, or labour laws could increase compliance costs and disrupt operations. |
| Development of Substitute Products: While the threat is currently low, the development of cost-effective substitutes for CPC could disrupt the market and impact PCCL’s business. |
Porter’s Five Forces1
| Threat of New Entrants | MODERATE |
| The industry requires significant capital investment to set up calcination plants and establish a reliable supply chain. Additionally, the technical expertise required for CPC production and the need to meet stringent quality standards could act as barriers to entry. |
| Bargaining Power of Suppliers | MODERATE |
| The company has a diversified supplier base. The overall bargaining power of suppliers is likely to be moderate, considering the availability of alternative sources and the company’s efforts to establish strategic partnerships. |
| Bargaining Power of Buyers | HIGH |
| PCCL primarily operates in a B2B model, supplying to large aluminum manufacturers, graphite electrode producers, and other industrial entities. These buyers likely have significant bargaining power due to their size and the potential for bulk purchases. |
| Threat of Substitute Products or Services | MODERATE |
| The threat of substitute products for CPC is currently low. CPC’s unique properties, such as high purity, low hydrogen content, and excellent electrical conductivity, make it the preferred material for carbon anodes in aluminium smelting. But continuous research is going on to find replacements for it. |
| Rivalry Among Existing Competitors | HIGH |
| The industry is characterized by a few large players and several smaller manufacturers. The competitive landscape is further intensified by the presence of international suppliers. Factors such as price competition, product quality, capacity utilization, and customer relationships play a crucial role in determining the competitive dynamics. |
Peer Comparison
The company’s performance on various financial and operational metrics compared to its peers is as follows:
| KPI (FY 2024) | Petro Carbon and Chemicals Limited | Goa Carbon Limited |
| Revenue from Operations (₹ in Crores) | 539 | 1,057 |
| Operating Profit Margin (%) | 23 | 12 |
| Return on Equity (%) | 101 | 38.8 |
| Return on Capital Employed(%) | 48.6 | 23.2 |
| Debt-Equity Ratio | 0.46 | 1.35 |
PCCL is performing better in most of the KPIs compared to Goa Carbon for the latest FY 2024.
Green Box
Capacity Utilization:
The capacity utilization rate for the nine months ended December 31, 2023, was 92.30% on an annualized basis. This indicates that the company was operating at a high level of efficiency during this period, utilizing a significant portion of its production capacity.
Favourable Demand-Supply Dynamics:
The current demand-supply gap in the CPC industry, with demand outpacing supply, creates a favourable environment for Petro Carbon and Chemicals Limited. This scenario allows the company to command better prices for its products, potentially leading to increased profitability.
Strategic Partnerships:
PCCL’s efforts to forge strategic alliances with international refineries and other industry players could provide access to new markets, enhance its supply chain resilience, and drive innovation. These partnerships could create new revenue streams and improve the company’s overall competitive position, leading to potential value appreciation.
Focus on Large Tender-Based Orders:
PCCL’s business strategy emphasizes securing large, tender-based orders. This approach could provide stability and predictability to its revenue stream, compared to competitors who might rely on smaller, more frequent orders.
Industry Outlook:
Favourable Government Policies:
The Indian government has implemented policies that encourage growth in the sector. These include allowing 100% FDI under the automatic route, establishing PCPIRs (Petroleum, Chemicals, and Petrochemicals Investment Regions) and plastic parks, and providing duty drawbacks and tax incentives.
Expanding Export Market:
The demand for Indian chemicals and petrochemicals in the international market is also on the rise, contributing to the industry’s growth trajectory.
Amber Box
Negative Operating Cash Flow:
Petro Carbon and Chemicals Limited experienced a negative operating cash flow in FY 2021 and FY 2022.
Significant Increase in Profitability in FY 2024:
The company’s profit after tax (PAT) saw a substantial jump compared to FY 2023, and the Operating Profit Margin increased from 5% to 23%. This raises questions about the sustainability of such high profitability and the factors driving this sudden increase.
Environmental Regulations:
PCCL is subject to various national, state, municipal, and local laws and regulations concerning environmental protection. These regulations address issues such as the discharge of pollutants into the air and water, and the management and disposal of hazardous substances.
Red Box
Raw Material Price Volatility:
The price of PCCL’s primary raw material, Raw Petroleum Coke (RPC), is subject to fluctuations in the international crude oil market. This volatility can impact the company’s production costs and profitability, especially if it is unable to pass on the increased costs to its customers.
Single Product Focus:
PCCL’s current product portfolio is limited to Calcined Petroleum Coke (CPC). This dependence on a single product makes the company vulnerable to fluctuations in the CPC market and limits its ability to diversify its revenue streams.
Images
- The force value of “LOW” is considered good Click Porter’s Five Forces article for more information. ↩︎
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