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Atul Ltd: Aromatic division the key to future growth


Atul is promoted by the Lalbhai Group, one of the oldest business houses of India, with interests mainly in textiles and chemicals. Atul operates through six business divisions, namely agrochemicals, aromatics, bulk chemicals & intermediates, colours, pharmaceuticals & intermediates and polymers.

 Atul joined hands with American Cyanamid Corp (1952), Imperial Chemical Industries plc (1955) and Ciba-Geigy Ltd (1960) to form three separate joint venture companies, namely Cyanamid India, Atic Industries and Cibatul respectively. 

Following the worldwide divestment of the businesses of dyes and polymers by ZENECA plc (formerly part of ICI plc) and Ciba respectively, Atic Industries and Cibatul were merged into Atul in 1995 and 1998 respectively.

            Currently, Atul is present in China, Germany, the UK and the USA through trading/marketing 100% subsidiary companies. It has manufacturing facilities at Atul and Ankleshwar in Gujarat and Tarapur in Maharashtra.

Atul’s management has already initiated the business growth plans with a capex of Rs80 crore in FY2011 and further planned capex of Rs400 crore over the next three years. The management’s confidence in the growth prospects of the company is also reflected in the increase in the promoter’s holding in the company in the last two years from 39.6% in June 30, 2009 to around 50% in June 30, 2011.

We believe the full-blown financial impact of the current capacity expansion and the process debottlenecking is likely to get reflected in the second half of FY2013 and in FY2014. At the current market price of Rs211, the stock is trading at 6x FY2012 and 4.7x FY2013 based on our quick earnings estimates. We remain positive on the company from a longer-term perspective.