Jayant Agro : Results Quarter and Year ending March 2012

Jayant Agro Organics
CMP: 119
Market Cap: 178.50Cr


Jayant Agro Year ending March 2012 results are out. lets look at the standalone numbers which are reported in the press..

The results at standalone level is picture perfect. 
Sales (topline) up by 45.17% and Net Profit (Bottomline) up by 52.76% indicating profit margin expansion.

3 year standalone numbers are even more impressive..

March 2010 Sales: 880.33Cr Net Profit: 7.84Cr

March 2011 Sales: 1,148.07Cr Net Profit: 17.74Cr

March 2012 Sales: 1,666.69Cr  Net Profit: 27.10Cr

In 3 yrs sales have doubled while net profits have more than tripple'd !! 

Consolidated Results:-

As mentioned before the numbers that we need to look at is consolidated results because of materially significant subsidiaries of Jayant Agro Organics namely Ihsedu Agro Chem and Ihsedu Specialty Chemicals (Ihsedu Specialities Chemicals is now awaiting merger approval from high court with Jayant Agro Organics)

3 yrs Consolidated Results for Jayant Agro.

1. At the consolidated level year on year sales growth is 51.30% which is great but net profit growth at 12.09% leaves a lot to be desired. the top two y-y highest percentage change are Interest (65.26%) and Taxes (59.01%) 

2. Interest payments: My understanding was that govt was giving a 2% interest rate subsidy to motivate exporters... hence exporters are reporting interest expense to claim that subsidy. 

Interest rate payments at 2.26% of  sales for year end March 2012 seems to be just that.. though a little on the higher side.. needs to be watched closely in the future..

2. Tax payments: Tax payments are up 59% (y-y) while net profit is up just 12% completely baffles me..

One of the many reason's companies are incorporated is because they are effective in reducing the tax paid to govt. 

Increase in tax paid :- 16.91cr (2012) - 10.63cr (2011) = 6.27cr

Increase in net profit :- 27.54cr (2012) - 24.57cr (2011) = 2.97cr

Surely taxes paid in 2012 is on the higher side and net profit is on the lower side.. 

Corporate Income tax rate in India is 33.2% so lets try to calculate the hypothetical PBT and hence Net profit for tax paid of 16.91Cr ..

Tax Paid 16.91Cr 

Effective tax rate 33.2%

PBT: 51.24Cr

Net Profit: 51.24 - 16.91Cr = 34.33Cr

P.N: this is a hypothetical calculation for our own understanding.

Here is another interesting piece of info.. effective taxe rate for Jayant past 3 yrs

2012: Tax paid: 16.91Cr Net Profit: 27.54 PBT: 44.46Cr Effective tax rate: 38% 

2011: Tax paid: 10.63Cr Net Profit: 24.57Cr PBT: 35.21Cr Effective tax rate: 30%

2010: Tax paid: 10.64Cr Net Profit: 12.46Cr PBT: 23.10Cr Effective tax rate: 46%

Jayant it seems has a habit of paying higher taxes.. infact in 2010 and 2011 tax paid is 10.64Cr while net profit is 12.46Cr(2010) and 24.57Cr(2011) 

Conclusion: Jayant year end March 2012 numbers though "impressive"  at standalone levels is just "fair" at consolidated levels mainly because of low rate of net profit growth.. digging a little deeper the taxes paid are very high and seems to give an idea that profits are being watered down.. looking at the last 3 yrs data we can see that Jayant management seems to be conservative in reporting net profit figures and taxes paid 3yrs avg is higher than the 33.2% corporate income tax rate set by govt of India. 

My personal opinion is for the year ended March 2012 at gross level (PBDIT) profit margins are stable  ..which could imply ...Interest rates are over stated and maybe depreciation also .. this has effectively reduced the net profit figures.. and skewed the results to such an extent that tax increase is 6.27cr while profit increase is just 2.97cr..  I would say jayant could have ideally reported march 2012 net profit of 34.33cr 

PN: these are my personal views/interpretation based on publicly available data.. Pls do your own deep dive before investing.

Jayant Agro Blog Archive

    

5000 Tonnes of castor seed sold by Acazis AG

Gilching, Germany, Mar 19, 2012 (Thomson Reuters ONE via COMTEX) -- Acazis AG / ACAZIS AG signs its first CONTRACT for sale of 5000 tons of castor beans and appoints SINOETH Hong Kong International Group Limited as exclusive distributor for China, Japan, Korea, Ethiopia. . Processed and transmitted by Thomson Reuters ONE. The issuer is solely responsible for the content of this announcement.

Gilching, Munich, 19 March 2012 - Acazis AG based in Gilching, Munich signed a 5 year agreement with Sinoeth Hong-Kong International Group Limited on 15 March 2012. The agreement foresees the marketing and sale of all or part of Acazis AG's castor harvest. It will be renewed for a further five years should neither party decide to terminate the contract.

Sinoeth Hong Kong has committed to purchasing from Acazis AG, a minimum of 1000 tons of castor beans annually. The purchase price of the castor beans is based on the official prices indicated by the Indian Commodity Futures Exchange NCDEX (www.ncdex.com/MarketData/SpotPrice.aspx ) in India. At present the SPOT price for one ton of castor beans corresponds to approximately USD 720, -.

Sinoeth Hong Kong has excellent commercial contacts in both in Asia and beyond. Some of the companies with which Sinoeth Hong Kong currently collaborates include the following:

SDIC International Trade Co. Ltd.,

China National Light Industrial Products Imp. & Exp, Corporation,

China Star Int. Trade Co. Ltd.,

SinoTruk (Hongkong) Ltd.

Sandong Wuzheng Co. Ltd,

Quingdao Doublestar Tire Co. Ltd.,

Changzhou Dongfeng Agriultural Machinery Group Co. Ltd. and

JiangSu Sevencontinent Green Chemical Co. Ltd.

The terms and conditions agreed with Sinoeth Hong Kong already include the purchase of a minimum of 1000 tons of castor beans in 2012. Acazis has guaranteed delivery of the castor crop in two instalments - September and December of this year.

Patrick Bigger, CEO of Acazis AG, has expressed great pleasure in the company's partnership with Sinoeth Hong Kong. He states; "The signing of such a long-term contract with Sinoeth Hong Kong has opened the market for Acazis AG in the sale of castor in the Asian and, in particular, the large Chinese castor market. The conditions relating to a minimum annual purchase provide us with greater operational planning guarantees whilst at the same time minimising the risks for Acazis AG.

We are convinced that we have found in Hong Kong Sinoeth an experienced and very well-connected trading partner which will facilitate access to the world's most important castor importers. With this in mind, we very much look forward to both a fruitful and long-term cooperation."

Jason Xie, CEO of Sinoeth Hong Kong adds; "The contract signed with Acazis AG means that we have acquired one of the major producers of castor oil in the future for our customers in China and Asia. The long-term contract term of 5 years which will be automatically extended for a further 5 years after expiration, will greatly help us to consolidate and increase trade relations with our customers. China is one of the largest importers of castor beans and we are convinced that the quality of the harvest and the significant potential of the 50,000 hectare castor crop means important benefits for our company".

About the company

Acazis AG (Acazis) based in Gilching near Munich, operates in the cultivation and use of castor plants, the production of edible oils, the provision of any related services and the acquisition and management of companies and shareholding in related companies as well as the as the carrying out of Executive Board functions.

Link to the source

Conclusion: 50,000 hectares of castor production is a lot.. if they can get the same yield. In India the yield varies from 500kg/hectare to 1700kg/hectare. The fact is that people see the potential and castor plantations are coming up in Africa, South America, Mexico.. as the saying goes .. more the merrier. Looking forward to Jayant Agro Organics producing higher value added castor derivatives .. maybe India can start import castor seeds!!

Jayant Agro Organics Archives

Castor oil Loan Scam 1100Cr detected by Central Vigilance comission

The Central Vigilance Commission has unearthed a large scale fraud committed by a private firm by allegedly misusing Rs 1,100 crore loan taken from different nationalised banks and wrongly claiming its end-use.
CVC officials said the firm was taking loans from various banks with the stipulations that it will be used by farmers of different states for growing and supplying castor seeds.

During  a detailed scrutiny, the Chief Vigilance Officer of Bank of Maharashtra noticed irregularity and found that the firm has perpetrated an alleged fraud of Rs 50 crore. "The matter was brought to the notice of other banks and the Commission which found that the total amount involved in the whole case is Rs 1,100 crore," a CVC official said. He said that a consortium of nine banks have lent to the firm.

"The loan amount has been siphoned off through Village Level Aggregators appointed by the company. The account has become Non-Performing Asset and has been declared as fraud,"  the official said refusing to divulge further information. The Commission advised the banks to ensure that staff accountability be fixed in the case and has asked them to get the case registered with CBI. "The CBI has been directed to register
the case and investigate the matter," he said.An email query on the matter sent to Bank of Maharashtra and other banks did not yield any response.

"It is a serious fraud. The firm has wrongly claimed that the loan amount was being used by the farmers. We are awaiting CBI's preliminary enquiry report on the matter," the official added

Conclusion: This is not good news.. There were no names mentioned but considering the size of Jayant Agro in the castor business it is a cause for concern. hopefully the whole of udeshi family is involved in day to day running of Jayant Agro and will be able to prevent this scam from impacting Jayant Agro. News has been reported in major news papers in April 22,2012 onwards.


Link to news Item: Link1 , Link 2

Jayant Agro: Castor Crop Survey-SEA & Jayant estimated earnings Year 2011-12

Looks like there has been a huge increase in cultivation of Castor in India. As per Solvent Extractors Association (SEA) of India.

=   Total area under Castor crop in India for the year 2011-12 is 11.50 lakh hectares. It has increased by 34% as compared to previous year.

=    Estimated total production of Castor Seeds in India for the year 2011-12 is 16.19 lakh tonnes.  It has increased by 30% as compared to previous year.

=    Average yield for the year 2011-12 is 1417 kg/hectare as against 1453 kg/hectare during the year 2010-11.  It has decreased by 3% as compared to previous year.

Export numbers have also increased by 60% .. so we can expect Jayant also to report higher earnings for the year ended March 31,2012.

Jayant has reported for 9 months ended dec2011.(Year on Year)Sales increase: 62%  PBDIT Profit margin of 5.05%Net Profit margin of 1.83%

Assuming Jayant Agro maintains the same profit margins as reported for 9 months ended Dec 2011we can expect Jayant Agro Expected year ending March 2012:-Sales:1,875.20crPBDIT: 94.69crNet Profit: 34.31cr EPS: 22.87

Please Note for year ending March 2011 Profit margins were

PBDIT : 5.41%

Net Profit: 2.10%

Assuming Jayant maintains the same margin as march 2011..(higher than margins for 9 months ended dec 2011) these margins would result in :- 

- PBDIT:  101.44cr

- Net Profit: 39.37cr

- EPS: 26.25

Now we all know that Sebacic acid derivatives plant has started production from dec 2011 so we can expect margins to improve for 3 months data..

My guess estimate for Year ending March 2012 Net Profit numbers:

Poor Result would be below 31Cr EPS: 20.66

Fair result would be: 34.31cr EPS: 22.87

Great result would be: 39cr,  EPS: 26 or above

A     whatever the result .. we can expect the dividend payout to increase based on historical figures..  

        dividend payout as percentage of net profit (Including dividend tax):

          March 2011: 13.40%

          March 2010: 23.33%

          March 2009: 36.18%

          March 2008: 25.65%

   

          So even assuming 5 yrs avg of 19.71% and assuming worst case result of 31Cr Net Profit: Dividend payout will be rs 4.07 per share assuming 34-39cr as net profit dividend payout could be: 4.46 - 5.12 assuming 13.4% for net profit of 31cr we can expect dividend of 2.76 (Poor payout) 

C

           Conclusion: Jayant is a strong value buy! For year ending March 2012 we can expect Jayant Agro to report:

            Topline of 1875cr 

            Net Profit from 30cr to 39cr, 

            EPS of 20-26 per share and 

            Dividend payout from Rs 2.76 to 5.12 per share (before dividend tax)

 

       PN: this is my personal view based on publicly available information. please do your own deep dive before investing

Jayant Agro: Castor oil to rescue Auto Companies..

Here is an interesting article by ICIS Green Chemical Blog

For the benefit of readers I have copied it but here is the link to the original article

The global automotive industry is abuzz with the tightened supply of polyamide 12 (also called nylon 12) which are used in cable ties, wire insulation, flexible hosing, nozzles, damping cogwheels, flexible cover caps, sheet gaskets, sealing rings, and in other fuel line applications/auto-related parts.

PA-12 is also used in plastic parts to make solar panels and cable coverings used in offshore oil and gas production.

Based on several googled websites, PA-12 reportedly have excellent properties such as high degree of dimensional stability under humidity or freezing environment; high resistance to chemicals such as hydraulic fluids, oil, fuels, grease, salt water, solvents; strong resistance to cracking under stress; high-resistance to abrasion; and has high fatigue resistance.

PA-12 also dampens noise and vibration, according to various sources. Unfortunately, I am not familiar with cars but from what I've seen on several news about this PA-12, this is an important chemical for the automobile industry as car makers and several players along the automotive supply chain held an emergency meeting yesterday in Detroit, Michigan, to discuss the critical issue on PA-12 shortage.

According to this article from Plastics News, there are very few suppliers worldwide of  PA-12, namely Evonik, Arkema, Ube Industries and EMS-Grivory. Global PA-12 production was estimated at around 100m lbs/year. Evonik is the only producer here vertically integrated in a key PA-12 feedstock called cyclododecatriene (CDT), which is manufactured by cyclotrimerization of butadiene.

CDT is used to make laurolactam, which in turn is used as a monomer in PA-12.

Unfortunately, a fire broke out at the end of March at Evonik's CDT facility in Marl, Germany, (two employees were killed) and CDT production (capacity is not disclosed) is expected to remain out-of-order for at least three months. This in turn, will affect PA-12 production for those who are dependent on CDT material.

Now here comes the castor part (sorry it took a while to get to this point...).

According to Evonik, the company is able to provide alternative substitutes to its CDT-based PA-12 products in the form of its VESTAMID Terra DD, which contains 45% renewable-based materials made from castor oil derivatives (mostly sebacic acid). The product is based on the polycondensation product of 1,10-decamethylene diamine and 1,12-dodecanedioic acid (this is where sebacic acid comes from).

VESTAMID Terra also comes as polyamide 6,10 which has a 63% biocontent -- the polycondensation of 1,6 hexamamethylene diamine and 1,10 decanedoic diacid (another sebacic acid material); and polyamide 10,10 - a 100% bio-based polymer from the polycondensation of 1,10 decamethylene diamine and 1,10 decanedoic diacid.

Evonik said it is possible to modify the biobased polymers to achieve much of the same material attributes as PA-12. In fact, the company announced yesterday that it has begun measures to increase production capacities of its VESTAMID Terra polymers at its Shanghai, China, plant.

An additional compounding facility for VESTAMID Terra will become operational in the third quarter of this year, and new capacity for the polymerization of the bio-based nylon are in the works and is scheduled to operate in the second half of 2013.

As the blog noted in previous posts about castor-based polyamides, Arkema has also been expanding its castor-based polyamides (under the RILSAN brand) -- when it acquired Hipro Polymers and Casda Biomaterials last year.

Other castor-based polyamides producers include Rhodia (Technyl eXten: PA-6,10) , BASF (Ultramid Balance: PA-6,10),  DSM (EcoPaXX: PA-4,10) and DuPont (Zytel PA-10 and PA-6,10). One thing to note is that Elevance is also targeting to produce natural oil-based derivatives such as diacids for PA-11 and PA-12 and is currently collaborating with companies like Arkema and DSM.

An interesting information about this PA-12 shortage is that other types of polyamides such as PA-6,12 and PA-6,10 could be an alternative to PA-12, according to producers who were interviewed* by ICIS colleagues at the recent plastic tradeshow NPE.

According to US plastic compounder A Schulman, PA-6,12 is a superior alternative to PA-12 for automotive applications given the same chemical resistance factors but PA-6,12 is said to have higher melting point. According to A Schulman, PA-12 supply has been increasingly tight even before the Evonik fire incident as demand from the oil and gas production has taken consumption share from the automotive supply chain.

More plastics are also being used in the automotive manufacture and therefore nylon-based materials are increasingly being used.

DuPont said* it is also working with auto makers to find alternatives for PA-12 in certain applications.

Rhodia, which produces PA-6,10 is reportedly* also working with customers to seek replacement for PA-12, while BASF -- a small CDT supplier as well, is offering its support to PA-12 producers.

Meanwhile, Evonik has also been in the middle of a planned PA-12 expansion, which was announced in December last year. Evonik said a 5,000 tonnes/year PA-12 expansion will supposedly start this year, and another 20,000 tonnes/year PA-12 expansion in its Asian facility is scheduled to be completed within 3 years.

Conclusion: Jayant Agro is the cheapest big Castor oil companies in the heart of castor growing region in the World.

Jayant Sales are approximately Rs 2000Cr ie USD  400 million dollar

Jayant Market Cap is: Rs 155Cr ie USD 31million dollars

Jayant is the largest processor of Castor Seeds are per Solvent Extractors Association (SEA) since 2005 till date (Link)

Banaskantha district in gujarat produces the largest amount of castor seeds ..and jayant has seed crushing plant in banaskantha.. how big is banaskantha? well here is a comparision.. According to castor oil Report (Must download link) 

China production of castor oil:81,400Tonnes

Banaskantha District castor Seed production: 178,240Tonnes (2009-10) Banaskantha oil production is 53,472 - 71,296 tonnes.. standalone Banaskantha district would be 3rd largest producer in the world!! (Seed to oil conversion is 30-40%)

Promoters own 65% equity in Jayant and ITOH Oil 4% .. so still one can buy 30% stake in the largest castor oil player in India for just 9 million Dollars!! 

Jayant promoters have patented production process for efficient production of sebacic acid ... patent is valid till 2020.(Link)

Jayant has been consistently paying dividends each year for the past 18 yrs..(3.5cents per share 2011)

CMP of jayant stock is Rs 103.6 ie USD 2.07 per share. (Calculation is based on conversion rate of Rs 50=1USD)

So here its is Folks if you are not invested in Jayant Agro you are really missing out on one of the best Green chemical stock in the world. With new Indian govt regulations which allow foreign individual investors to directly invest in equity of Indian companies.. Investment opportunity in Jayant agro stock is available to one and All!! .... 9 milion USD will buy you a 30% stake in Jayant Agro Oragnics . Ideal price for Jayant is one times sales ie upside is 10 times current stock price.

Archives of Jayant Agro Investment in this blog

Jayant Agro Organics: PA12 shortage Castor Oil Derived PA11 in demand

March 31 explosion at chemical maker Evonik Industries AG halved the global source of an ingredient used to make the resin, called PA-12.
TI Automotive Ltd. warned its customers in an April 12 letter of severe shortages interrupting production “in the next few weeks.” The Auburn Hills, Michigan-based company supplies brake and fuel lines, as well as fuel tanks and pumps, to all major automakers, including General Motors Co. (GM), Ford Motor Co. (F), Toyota Motor Corp. and Volkswagen AG (VOW), according to its website.


It seema PA11 (PolyAmide11) is a replacement for PA-12. PA-12 manufactured from Crude oil while PA-11 is manufactured from Castor oil.. A Comparison of the 2 shows PA-11 infact being superior to PA-12 


PA 11 is a high-performance technical polyamide 11 polymer developed in 1942. It is produced from castor beans. Its properties are basically similar to the PA 12. The resin has earned a preferred material status in the most demanding applications due to its excellent combination of thermal, physical, chemical and mechanical properties. Good impact strength at low temperatures (-40°C), good chemical resistance 
and low humidity absorption (only 1/6th compared to standard PA 6) are outstanding characteristics of the material.


Check out PA-11 Data..  (Link)

BloombergNews Link about shortage
Jayant at CMP of Rs104/= per share  and market cap of 155Cr is ultra Cheap as Castor oil Derivatives are used for high performance plastics.. and a replacement for crude in the chemical industry..

The Fall of Central Governance: Hello Self Governance.

Looking at he big picture.. we see

- Congress and BJP .. large central (all India) parties not doing so well in Assembly elections in UP.

- Rise of non governmental organisations such as "Anna Hazare" Group, Occupy Wall Street

- Kundankulam Atomic Power Project - Anti-nuclear protest by the locals and People's Movement Against Nuclear Energy.

- Rise of regional political groups.. Kolkata, UP, Bihar, Karnataka etc..

We are surely entering an era of "local" or "self" governance..

with the advent of information age .. there is sufficient level of information available to a person/group ...to make an intelligent/informed decision.. (and this level of information provides enough confidence for individuals (or groups) to question decisions taken at the central level)

Govt worldwide are "stuck" as resistance to central govt decisions are questioned and debated. 

Is this break up of central control "intentional" ?? after all even today I am sure the central govt's have a higher level of information/intelligence to make an informed decision.... then why this breakup of central control??

Are the problems too big to handle hence .. Let's wait-out attitude??

Looking at a future of Post Peak Oil where everything will have to be local? Are we being encouraged into  local self governance .. in subtle ways..

Why is there no national level discussions  on
- "Peak oil"
- "Post Peak Oil Society"
- Zero Growth,
- Being Self Sufficient,
- Self Sustainable?
- Energy Independence.

Is the public being kept in the dark to be fed as the turkey on the dinner table?
with Gas Pipelines to every urban household.. are we going to get cheap gas or we are left with  a "no choice" option?

What are the "Jobs" of the Future?

Wake Up!!

Jayant Agro Organics: Sebacic acid used in "sustained release" medicine

Now a days all medicines are "sustained release" types.. which means required dosage is released over the period of 24 hours reducing the number of pills and avoid taking excess medicines.. looks like sebacic acid is used in making sustained release medicines 

======================================

Carbohydrates are attractive candidates for drug development because sugars are involved in many, if not most, complex human diseases including cancer, immune dysfunction, congenital disorders, and infectious diseases. 

Unfortunately, potential therapeutic benefits of sugar-based drugs are offset by poor pharmacologic properties that include rapid serum clearance, poor cellular uptake, and relatively high concentrations required for efficacy. 

To address these issues, pilot studies are reported here where ‘Bu₄ManNAc’, a short chain fatty acid-monosaccharide hybrid molecule with anti-cancer activities, was encapsulated in polyethylene glycol-sebacic acid (PEG-SA) polymers. 

Sustained release of biologically active compound was achieved for over a week from drug-laden polymer formulated into microparticles thus offering a dramatic improvement over the twice daily administration currently used for in vivo studies. 

In a second strategy, a tributanoylated ManNAc analog (3,4,6-O-Bu₃ManNAc) with anti-cancer activities was covalently linked to PEG-SA and formulated into nanoparticles suitable for drug delivery; once again release of biologically active compound was demonstrated.

Link to original article

It seems sebacic acid is used for diabetes treatment also (google search link)

Strong buy for Jayant Agro Organics CMP: 101.40 Market Cap: 151.28Cr.

=happy investing

Castor Oil Report - Download link

From Brazil I think ..(Link)

Must download.

Stocks should rise after budget 2012-13 additional 33 Billion USD flowing into Indian market

Just the fact that govt is giving 50,000 additional tax incentive for investment for long term in stock market should see the NIFTY reach 5584 level. here is the lowdown.

Indian tax payers are close to 3.3Cr assuming everyone takes the 50,000 tax rebate for stock market investment .. this should itself see additional cash infusion into the market of  50,000 x 3.3Cr = 1,65,000Cr which is 1,65,000/5000 = 33 Billion dollars.

- this 50,000 investment is going to have a long term tenure 3+ yrs which means the money will stay invested fixed in one stock and will not increase trading.

- Most investments are concentrated in top 50 companies. 

Sum Total Market Cap. of top 100 companies (by market cap) is 48,23,754Cr

(there total market cap in the table is 47,17,515 which is about 1,06,239Cr This is due to the fact that market has fallen in post budget trading)

Assuming all the money will be invested in top 100 companies then market cap of top 100 companies will rise to  48,23,754+1,65,000 =  ie an increase of 3.4%

- Assuming NIFTY which is actually just 50 stocks and is currently at 5400 levels.. we can expect the NIFTY index to also rise by 3.4% which means we can expect nifty to reach 5583 just on the basis of tax incentive announced by the govt in budget 2012-13.

- Also we must remember that India is going to be the country of the largest youth population in the world by 2020 which means we will see consumption/income/investments rise and hence stock market index will also rise.

- Fiscal deficit is also expected to reduce.. which means more money for pvt players .. and lower interest rates.

I think the govt is taking steps to encourage investors to enter the equity market on a long term basis.. with govt/public pension schemes also investing in equity we should see a flood of money into quality stocks..

Note: In the days after budget the market (index) has actually lost value.. I would say..
- People are waiting to invest for next year ie. investments will rise after April1,2012.
- Since investments are going to be with a "lock in period" of 3 yrs we can also expect investments to be targeted at long term value stocks rather than momentum short term stories.
- Keeping in mind that the income tax deduction is 50% ie income reduces by 25,000 and hence extra money in pocket for 10Lakh income is 20% of 25,000 ie 5,000 which means you get the stock at 10% discount.(if you invest after April 1,2012)
- As already calculated this will result in additional money equivalent of 33Billion USD into indian equity markets

Our Best Picks GAEL, Jayant, NHPC and Tata Comm are all deep value buys which can take advantage of the opportunity for growth in Indian Economy..  Be invested and Be long term invested in the market and invest that 50,000 after  April 1, 2012

Castor Oil Derivative -Primer.

It seems on Jan 18,2012 someone has just dumped a lot of great data about oilseed industry and I also found data with regards to Castor oil Derivatives. Always looking for information I have decided to copy all of it and try and present it in a more readable format... The link to original source is at the end.

Castor oil is used to manufacture range of derivatives using several processes. These derivatives can be classified in four categories

1.  Primary

2.  Secondary 

3. Tertiary and 

4. Complex

Depending upon the stages of production and reactions involved. Proven Technologies are available for primary and secondary level derivatives, while technology for tertiary and complex derivatives has to be imported and hence their development is very limited in India.

The derivatives of Castor oil have assumed great significance because of the need to go for value addition.
Castor oil derivatives can be segregated into several categories. However, the broad categorization would be in the following terms.
a) Modified Castor Oils and
b) Application Base Derivatives

Indian Scenario
In India at present, there are few primary and secondary derivatives that are manufactured on commercial scale and relatively very small quantities of tertiary and complex derivatives are developed and produced in India. 

Castor Oil Derivatives, their estimated installed capacities TPA and names of major producers are summarized in table 1.

2-Octanol:

2-Octanol is an 8 carbon atom contaiing secondary octyl alcohol also known as Capryl Alcohol or 2-octyl alcohol  which is mainly obtained as a by product of alkali fusion reaction of Castor oil in Sebacic acid manufacturing. It is an oily, refractive, transparent,  colorless liquid with an aromatic and somewhat unpleasant odour.

Applications of 2-Octanol
- 2-Octanol is used for the manufacture of different plasticizers like its sebacates, adipate and phthalates-esters of different types with respective organic acids.
- It is used as an anti-foaming agent for urea formaldehyde
and poly-vinyl resins.

- 2-Octonol is finding application as an organic solvent. Its main use is as solvent in rubber processing industry.

- In coal industry, it is used as floating agent. In farming chemical industry also it is used as floating agent and as for producing emulsifier.

- It is finding application in chemical fiber industry as fibre oil.

- It is also used in the manufacture of range of perfumery compounds by forming its esters-butyrates and acetates. It can also be used in the manufacture of methyl-hexyl ketone by oxidation.

Refined Glycerine
Glycerine is chemically-a tri glycerol (Molecular Formula: C3H5(OH)3), a colorless, thick transparent viscous liquid, generally without any smell but with sweet taste. It has sweet smell, is heavier than water, and mixes with water, methanol and ethanol at any proportion. It is insoluble in organic solvents such as benzene, chloroform, carbon disulphide and carbon tetrachloride, etc. It has Boiling point at 290oC and it is hygroscopic. Specific Gravity decreases with dilution by water.
Glycerine is available in different purity grades such as Technical, Industrial white (IW), Chemically pure
(CP) grade, and Refined grade etc. Its prices also vary according to its purity and grade.

Applications of Glycerine
• Glycerine (also called glycerin or glycerol) is an alcohol that is used as a moisturizers in soap and lotions.
• Due to its sweet taste and it can be used as a food preservative and non-sugar sweetener.
• It has wide variety of applications in explosives manufacture (nitro glycerin), to water based adhesive, glycerol Esters, cream and lotions Lubricants (jet engine, refrigeration), Plasticizer for polyvinyl
Butyric (PVB), polyurethane Foam, dispersant, toothpaste, mouthwash, surface lubricants, pharmaceuticals, Alkyd Resin, liquid soaps, paints, cosmetics and in tobacco industries. Thus, Glycerine finds many more applications in wide variety of industrial and consumer products.

Dehydrated Castor Oil Fatty Acid (DCOFA)
Dehydrated Castor Oil Fatty Acid (DCOFA) is a secondary derivative  manufactured from Dehydrated Castor oil (DCO). DCO fatty acids contain conjugated and non-conjugated (C 18) fatty acids as major components. Depending on the conjugation three different type products are commonly offered in the market.

Applications of DCOFA
• DCOFA is used in the manufacture of high quality surface coatings, dimmer acids and poly carboxylic acids.
• DCOFA is used to make epoxy resins, special automotive paints with good weathering resistance and water resistance, high class enamels for copper and aluminum windings, electrical varnishes, epoxy special glues with insulting properties.
• They are generally preferred for metal coating, durable printing ink, paint lacquers, etc;
• DCOFA is also used as high trans-trans acid for specialty chemicals through Kjedahl reaction. The specifications may be tailor-made as per the requirement of the client.

Dimer Acid
The term dimmer acids is applied to the dicarboxylic acids formed by reactions of two or more C18 unsaturated fatty acids such as Oleic and Linoleic acids. The only higher dicarboxylic acids of commercial importance are unsaturated cyclic C36 dicarboxylic acids known as dimmer acids. Commercial dimmer acids are mixture of C36 dibaisc acids, also containing some trimer (C54), higher oligomers and also some amount of monomer acids (C18) saturated, unsaturated, and structurally modified fatty acids.
Applications of Dimer Acid
• The Dimer acids produced on an industrial scale are used in the manufacture of poly-amides, polyesters, epoxy resins, lubricants, plasticizers and pesticides.
• Dimer acids are used to import special properties to alkyd resins.
• The most important use dimmer acid is the manufacture of polyamides. Polyamide resins based on dimmer acids fall into two general categories, nonreactive or neutral polyamides and reactive polyamides.
• The major applications of neutral polyamides are imprinting ink, hot-melt adhesives and coatings.
• Reactive polyamides find their applications as curing agent for epoxy resins which are used as thermo-setting surface coatings, adhesives, potting and casting resins.
• Dimer acid esters of tri-methylolpropane are used in a synthetic lubricant formulation and dimmer derivatives of amines have found applications as aqueous metal working fluids. Dimer acids are used where the complexity of high molecular weight is important.

Ricenoleic Acid
Ricenoleic Acid is a yellow to amber coloured viscous oily liquid with characteristic odour. There are two different qualities of Ricenoleic acid are produced, commercial and Kosher grade.
Applications of Ricenoleic Acid
• Ricenoleic acid is effective in preventing the growth of numerous species of viruses, bacteria, yeast, and molds. It is successful as a topical treatment for ringworm, keratoses, skin inflammation, abrasions.
• Ricenoleic acid is used in preparation of soaps having the desired characteristics, lubricants, emulsifier & amp; metal working compounds.
• Ricenoleic acid finds uses in inks, coatings, plastics and cosmetics etc;
• It finds application in textiles as it provides polarity, surface wetting & lubricity.
• The sodium & potassium soaps of Ricenoleic acids are emulsifiers and foam stabilizers used in rubber processing.              

• It is used to manufacture Poly Glyceryl Poly Ricinoleate (PGPR) a key ingredient in chocolate products. Ricenoleic acid of Kosher grade is having application in the manufacture of ingredients for chocolate industry.

• Ricenoleic acid is used for the treatment of leather. It provides good wetting. Flexibility and softening property to leather.

Methyl Ricinoleate (MR)
Methyl Ricinoleate (MR) is a methyl ester of Ricenoleic acid, the main hydroxyl fatty acid present in the Castor oil. It is less viscous, pale yellow coloured oil.
Applications of MR
• It is used in paints, plasticizers and lubricants.
• MR is excellent wetting agent and foam control agent.
• It is used to make various perfumery chemicals and additives.
• Methyl ricinoleate is converted to acetyl and butyl esters which are used as plasticizers.
• Methyl Ricinoleate is used as intermediate for the manufacture of Methyl 12 Hydroxy Stearic Acid.

Methyl 12 HSA
Methyl 12 HSA is high value and low volume derivative of hydrogenated Castor oil. Methyl 12 HSA is tertiary level Castor oil derivative, which is methyl ester of 12 Hydroxy Stearic Acid (Hydrogenated Castor Oil Fatty acid-HCOFA). However, commercially it is produced from Methyl Ricinoleate.
Applications of Methyl 12 HSA
• M-12 HSA is used in high quality greases. Its most important use is in lithium based greases because of improved stability during usage under shear and water resistance requirement.
• M-12 HSA is also used for surface Coating.
• M-12 HSA is used as plasticizer for Vinyls.
• It is used in the pharmaceutical industry for ointment manufacture and in cosmetics.
• Amides made from M-12 HSA are used in various wax formulations. It is good replacement of hard waxes.

Sebacic Acid
Sebacic acid is a long chain-di-carboxylic acid manufactured from Castor oil, by a complex manufacturing process. Sebacic acid is white powder crystal, dissolves slightly in water completely in Ethanol or Ether, but not in Benzene. Sebacic acid can be synthesized from phenols or cresols but Caster oil oxidation is more appropriate and environment friendly. Sebacic acid is commercially available in two main forms, powder and prilled.
Applications of Sebacic Acid
• Esters of Sebacic acid are used in the manufacture of plastics as plasticizers.
• Ethyl Sebacate is used as flavoring agent. Di-octyl sebacates and Sebacic acid is also used as a starting material for the synthesis of Muscone.
• Sebacic acid is used in fungicidal sprays.
• Other higher alkyl derivatives of Sebacic acid are used as additive in lubricating oil and in the preparation of low temperature grease. Sebacic acid esters and other compounds find application as additive in aviation engine lubricants.
• Sebacic acid is used as alternative of adipic acid in the manufacture of Nylon-12. Sebacic acid is used in as main raw material in Nylon 6-10, Nylon 1010, Nylon 810 and Nylon-9.
Thus, Sebacic acid is an important Castor oil derivative, finding its applications in many more industries and its demand is largely in developed countries like USA, France, Germany, South Korea, Japan and China.

Ethoxylated Castor Oil
Ethoxylated Castor oil is pale amber coloured liquid with specific gravity just above 1 at room temperature. Ethoxylated Castor oil products containing from 5 to 200 moles of added ethylene oxide are marketed. These surfactants cover the HLB range from 5 to 18.
Applications of Ethoxylated Castor Oil
• Ethoxylated Castor oil is water-soluble surfactant and is used as emulsifier and dispensant.
• Castor oil ethoxylates are widely used in textile industry in the preparation of micro-emulsions for spin finishes and as components of emulsifier systems used as dye carriers. Ethoxylated HCO is used as antistatic agent of textile fibres.
• It is used in the preparation of latex paints, cosmetics & toiletries.
• Ethoxylated Castor oil is also used as good solublizer for Vitamin A palmitate.
• The highly Ethoxylated Castor oils are also used as components in detergents, lubricating and cutting oils, hydraulic fluids, textile finishing composition and as antistatic agents for nylon carpets and apparels.
• Poly Ethoxylated Castor oil derivatives are used in a variety of oral, topical and parenteral pharmaceutical formulations.

Nylon-11
Nylon-11 is polymer of 11-Aminodecanoic acid. Nylon-11 is hydrophobic and provides excellent insulating properties. As expected from the longer hydrocarbon chain, Nylon-11 shows hardly any sensitivity of dimensional change in presence of moisture.
Applications of Nylon-11
• Nylon-11 and Nylon 12 are used for making films with lower water vapor permeability. Nylon 11 is available as film and sheeting material with thickness of 0.025 to 1.27 mm.
• Nylon-11 is useful in making bristles, industrial fabric, which finds use as filter cloth, bags, netting, flexible fishing lines and varieties of brush applications where toughness and durability are required.
• Nylon-11 is used as engineering plastic in the automobile manufacture, as fuel lines for petrol and diesel engines. It is also finding application in manufacture of various using extruded and molded parts of fuel systems such as filter necks,Air Brakes, gas tanks, reservoir modules, fuel rails, and vapor recovery systems.

• Coating powder based on Nylon-11 polyamide resins have been in use for fusion coating processes for long time.Today Nylon-12 based coating powder has also been introduced in the market.

Nylon 6-10
Nylon 6-10 is an important polyamide being prepared using Sebacic Acid prepared from Castor oil. Nylon
6-10 has high toughness and lower moisture absorption than Nylon 6-6, which is manufactured from petroleum based raw materials. It is also having better dimensional stability and electrical properties. Nylon 6-10 is one of the high moisture barrier polymer. Nylon 6-10 is translucent in nature and has fair possibility. Nylon 6-10 has better molding properties and resistance to moisture than adipic acid-based Nylon 6-6.
Applications Nylon 6-10
• It is used for making bristles, because of low moisture absorption and elasticity.
• It is used for molding, extrusion, filaments, bristles and some textile fiber applications.
• Nylon 6-10 is working as better substitute of Nylon 6-6 and hence it can be used for all application where Nylon 6-6 is used.

Table 3 Castor Derivatives estimate production in India

As can be observed from Table 3 that the group of units which has a share of about 65% to 70% include Jayant Agro-Organics Limited (JAOL), Jayant Oil and Derivatives Ltd. (JODL), Sree Rayalseema Alkalies and Allied Chemicals Ltd., Gokul Refoils and Solvents Limited, etc. Of this, the Rayalseem group is located at Kurnool, Andhra Pradesh, whereas the rest are in and around Gujarat. In the following, brief profiles of the three main units in the country, i.e. JAOL, JODL and Rayalseema are given based on GITCO visits to these units.

The Indian castor oil industry is characterized by high dominance in castor oil exports at international level but poor production and therefore exports of Castor Oil Derivatives. It is observed that while India today crushes nearly all the castor it crops, it does very little beyond just shipping out the oil. It is estimated that only 12% of India’s exports of castor are as derivatives.

International Market Scenario
This is in sharp contrast to countries such as China and Brazil that convert nearly all of the oil expelled into value added derivatives. The global market for castor oil derivatives is estimated at US$ 500 plus million. It is also highly remunerative in terms of contribution. The world market of castor derivatives in terms of quantity is estimated in the range of 2.0 to 2.5 lakh tonnes per annum. This is only an indicative figure based on GITCO’s discussions with industry sources.

Global Market of Castor Oil Derivatives
As previously indicated Castor Oil is used directly as well as for manufacturing various castor oil derivatives  from it. World Export of Castor Oil and Derivatives and countries exporting it for last 6 years period is summarized in Table-4.

• As it can be observed from above table World castor oil and derivatives export has grown from 2.09 lakh M. tonnes in the year 2001-02 to the level of 3.07 lakh M. tonnes in the year 2004-05 and declined to 2.80 lakh M.tonnes as projected for the year 2005-06.In 2007-08, it was forecasted at 2.97 Lakh. tonnes Castor oil demand globally is fluctuating with its supply position and also prices in the international market. However, it is worth noting here that overall demand for Castor Oil and its Derivatives has increased by about 30% in past six years period.
• USA, Europe and Japan are major consumers of first generation derivatives like HCO, 12 HSA, DCO and Methyl-12 HSA. This is mainly attributed to the fact that much of this is processed further to produce second and third generation derivatives, which give very high value addition. USA is dominant in the field of third generation derivatives like Polyols and Esters. Europe has prominence in Polyamides (Nylon-11, Nylon 6-10).
• In last few years, China has acquired dominant position in the field of Sebacic Acid. In fact, China is also into other derivatives and therefore imports castor oil in substantial quantities. In view of China’s emergence as major derivative manufacturer and also the fact that China along with Indian and Brazil is one of the few countries to have castor crops, base, a brief scenario of China in the field of derivatives in general and Sebacic Acid in particular is described below.

USA imports Sebacic acid from China mainly to convert into other derivatives as also using in application segments mentioned above. According to data available (Chemical Weekly, July 31, 2007), India imported about 442 tonnes of Sebacic acid in the period January 1, 2005 to May 31, 2007 (29 months). Almost all of these came from China.


India’s Exports of Castor Derivatives
India of its total exports of Castor Oil, exports only 12% derivatives. India’s total exports of derivatives is estimated at 55000 to 70000 TPA based on last three years performance. This less than 25% of the global market in Castor Derivatives in terms of quantity. Since India is really not into 3rd generation derivatives and has small base in 2nd generation derivatives its share in terms of value could be even less.
The following Tables 5,6,7 give indicative estimates of India’s export performance in this field.

As seen from the above tables, most of the Indian exports are accounted for by the low value added derivatives – in fact no Indian producers manufacture Sebacic acid while exports of Undecenoic acid is just 1% by weight of the total derivatives exported. In the light of the WTO norms, castor seeds can now be exported from India, as the government can impose no quantitative restrictions.
Prospects for Castor Oil Derivatives in Domestic Market
Castor oil and derivatives are used in consuming industries like Soap, Cosmetics, Lubricants, Paints &
Resins, Printing ink, and as food additives. These all industries are growing and expected to grow at the
rate of 5% per annum during next five years period from 2007 to 2012 due to growing demand of their
domestic consuming class. The demand for Castor and derivatives in domestic market is expected to grow in parallel to growth in their consuming industries. The current market share and projected growth rate of
consuming industries is given in Table-8.

Export Market Prospects
It is estimated that the global market for castor oil derivatives grows @ 3% to 5%. This is an average across all the derivatives. A few factors which may help the international castor derivatives market its general and the Indian Castor Oil Derivatives exports in particular include following.
i) 3rd generation derivatives like Polyols, Polyamides and Sebacic Acid are expected to grow faster.
ii) Since India is practically not there in this segment now but expected to enter in near future export growth would be much higher.
iii) With focus on environmental issues, castor oil derivatives are projected to enter new user application segments like Polyols and Adipic Acid.
iv) A stable pricing scenario in Castor Oil segment would lead to competitive prices of Indian Castor Derivatives. At present, with higher Castor Oil prices and consequent higher derivatives prices, foreign buyers go for alternate products.
v) With positive measures and favourable developments the Indian Exports of Castor Oil Derivatives is expected to grow at about 5%. The projected exports in that would be in the range of 1.00 lakh to 1.10 lakh in the year 2010.
The Future Ahead
The industry now seems to have realized the need to be not only active and but proactive. A few signs are
a) The annual castor crop survey by SEA and supported by the industry is increased much required transparency.
b) Medium and large units (derivatives) are moving into 3rd generation derivatives.
c) Active units in the SME segments are planning to strengthen their product mix.
d) Established, large derivative units in Europe, Japan and China seem to be showing some interest in coming to India and have tie-ups.
e) Global market, as analyzed earlier, may grow faster.

It is important to note here that in India all the three levels of players are operating at present. There are large numbers of small players in the industry who are mainly engaged in castor seed crushing in small way and mainly catering the local market or supplying oil to larger players and derivative manufacturers. Medium and large players in castor industry have diversified in primary and secondary level products and have started supplying them in domestic and export market.
Out of these few medium level companies, few companies are exploring the possibilities or have already entered into tertiary level derivatives and also exploring the possibilities of technology tie up with multinational companies for high level, complex products from Castor oil and Castor oil derivatives.

Courtesy: GITCO Comprehensive Status Study on Castor Oil and its Derivatives in India (Vol I & II-
2008)

Here is the link to the original post

Conclusion: Jayant Agro Organics is the largest player of Castor in India ..no doubt about that. Jayant has also reported that the Commercial production of sebacic acid has been started (non commercial production and testing was on for past 2 yrs ) Right now you get to buy Jayant agro Organics which is a 2000Cr Sales company for just 160Cr(Current Market Cap). The move to Sebacic acid is going to be a real game changer as margins are going to improve substantially increasing the PE of Jayant. Jayant Agro is a recommended Best Buy for long term and a multibagger in the making.


Jayant Agro Blog Archives