Petro Carbon and Chemicals
- Petro Carbon and Chemicals is coming out with an initial public offering (IPO) of 66,17,600 equity shares of face value of Rs 10 each in a price band Rs 162-171 per equity share.
- The issue will open on June 25, 2024 and will close on June 27, 2024.
- The shares will be listed on SME platform of NSE.
- The share is priced 16.20 times of its face value on the lower side and 17.10 times on the higher side.
- Book running lead manager to the issue is GYR Capital Advisors.
- Compliance Officer for the issue is Manisha Somani.
Profile of the company
Petro Carbon and Chemicals Limited (PCCL) is a ATHA Group Company engaged in the business of manufacturing and marketing of Calcined Petroleum Coke (CPC) in the carbon industry. Atha Group is a multi-product, multi-technology, multi-location business conglomerate. It is a 70 year-old diversified Indian business house headquartered in Kolkata. The Group was founded in the year 1957 in Odisha as a Mining and Minerals company. Since the last decade, the group has been focusing towards its growth strategy of business diversification, forward and backward integrations and acquisition of projects, which has significantly helped the
group maintain consistency in performance and growth.
The company’s business model is fundamentally a B2B model wherein it majorly supplies its end product CPC, to the renowned, aluminum manufacturing government companies, graphite electrodes and titanium dioxide manufacturers as well as other users in the metallurgical, chemical industries and other steel manufacturing companies. In 2018, the company was honoured with the prestigious Nalco Vikreta Utkarsh Puraskar, recognizing it as the top supplier among all the suppliers of POL (Petroleum, Oil, and Lubricants) by the National Aluminium Company Limited.
The company’s plant was operational since the year 1975, wherein the detailed engineering and layout of the plant was done by Engineers India Limited. This plant was later acquired, revamped and upgraded by its group in the year of 2008. In the last five years, the group has strategically shifted its attention towards Vertical Integration, technological Innovation, Diversification, strategic partnerships which has resulted in Operational expansion, excellence, resulting in a substantial enhancement of its overall performance.
Proceed is being used for:
- Achieving the benefits of listing the Equity Shares on the Stock Exchanges
- Carrying out the Offer for Sale of Equity Shares by the Selling Shareholders
Industry Overview
In recent years, India is emerging as one of the competitive and high-quality manufacturing destinations in the global market, attracting foreign investments. Presently, India’s chemical and petrochemical (CPC) industry holds a significant position in the world market, worth $178 billion, and it is expected to grow to about $300 billion by 2025.The strategic geographical location of India has enabled the country to maintain its key position in the international market. Calcined petroleum coke (CPC) is one of the major raw materials for the Aluminium Industry. Like any other raw material, it plays a significant role in the aluminium production process. CPC is used for fabrication of anodes used in the aluminum electrolysis process. CPC has been in use for more than 120 years to produce the carbon anodes used in the Hall-Heroult Aluminium electrolysis process. Performance of the anodes in the aluminium electrolysis process depends on many properties of CPC.
Raw petroleum coke is calcined to remove excess water and volatile matter in rotary kilns or shaft kilns. Rotary kilns are most widely used for economic reasons. Calcination temps are between (1250-1400) degree Celsius. The calcined coke leaving the kiln is discharged into a rotary cooler, where it is quenched with direct water spray at the inlet and then cooled by a stream of ambient air. The calcining operation can have an important influence on coke quality. Cokes with significantly different volatile contents (quality and quantity) and impurity levels should be calcined differently. CPC is the product from calcining petroleum coke. This coke is the product of the coker unit in a crude oil refinery. The calcined petroleum coke is used to make anodes for the aluminium, steel and titanium smelting industry. The green coke must have sufficiently low metal content to be used as anode material. Green coke with this low metalcontent is called anode-grade coke. When green coke has excessive metal content, it is not calcined and is used as fuel-grade coke in furnaces.
Extensive research is taking place since more than 30 years to find an alternative to this material. It is known that though considerable progress has been made in finding right kind of materials for making inert anodes, it may take many years to address the impending problems associated with fabrication and use of inert anodes. Hence, today more focus is required on the carbon anodes made out of CPC & coal tar pitch (CTP) for continual improvement of performance of the electrolytic pots producing aluminium metal.
Pros and strengths
Well positioned to capture the growth potential of the Indian carbon industry: Calcined petroleum coke (CPC) is one of the major raw materials for the Aluminium Industry. Like any other raw material, it plays a significant role in the aluminium production process. CPC is used for fabrication of anodes used in the aluminum electrolysis process. Calcined Petroleum Coke (CPC) has been in use for more than 120 years to produce the carbon anodes used in the Hall-Heroult Aluminium electrolysis process. Performance of the anodes in the aluminium electrolysis process depends on many properties of CPC.
Strategic location of Plant provides it with competitive advantages: The company’s manufacturing plant is strategically situated within the port perimeter, providing unparalleled access to vital transportation networks. Its prime location ensures seamless movement of raw materials and finished products, thanks to its proximity to major highways, railways, and ports. This strategic advantage facilitates efficient logistics and distribution channels, enabling it to effectively meet customer demands while minimizing transportation costs and lead times. The plant site area is well developed. All necessary infrastructure facilities such as motorable road, with its own railway siding inside the plant premises and having all the necessary utility facilities like continuous service water connection from Haldia Development Authority (HDA), industrial electric-power connection from West Bengal State Electricity Distribution Company (WBSEDCL) with their 132/33 KV Sub-station at Chranjibpur which is around 2.5 KM away. The Passenger Railway Connectivity, Haldia Station is about 2.0 km from the Plant.
Strong track record of financial performance: The company’s strong track record of financial performance and cash flows from its existing operations provide it with sufficient resources to fund its projects, support its working capital requirements and maintain a healthy level of cash on its balance sheet. Supported by high revenues generated primarily by sales to Aluminium industry participants under quarterly / regular tenders it has been able to establish its current financial position. Its total income was Rs 51,550.67 lakh, Rs 27,696.83 lakh, Rs 15,200.36 lakh and Rs 44,570.06 lakh in Fiscal 2023, 2022 and 2021 and for the nine months’ period ended December 31, 2023, respectively. The company’s profit after tax, as restated, was Rs 672.20 lakh, Rs 570.99 lakh, Rs 11.64 lakh and Rs 7,031.16 lakh in Fiscal 2023, 2022 and 2021 and for the nine months’ period ended December 31, 2023, respectively.
Risks and concerns
Maximum revenue comes from single largest customer: The company’ business model is fundamentally a B2B model wherein it supplies its product i.e. CPC, primarily to leading manufacturers of steel and aluminium. The company has, through its over 16 years of business operations, established long-term relationships with its customers. It supplied to aluminium smelters, graphite electrode and titanium dioxide manufacturers as well as other users in the metallurgical and chemical industries as per their specifications. The company’s single largest customer contributed approximately 56.81%, 78.45%, 85.30% and 61.85% of its revenue from operations for FY21, FY22, FY23 and Nine months period ended December 31, 2023. In case of loss of the key customer, the deterioration of their financial condition or prospects, or a reduction in their demand for its products could adversely affect its business, results of operations, financial condition and cash flows.
Substantial portion of its revenues from sales of aluminium and steel industry: The company focuses on manufacturing of CPC only and has limited user industries, predominant ones being steel and aluminium. Majority of its revenues is derived from the sale of CPC and its products are primarily supplied to aluminium smelters, graphite electrode and titanium dioxide manufacturers as well as other users in the metallurgical and chemical industries as per their specifications. Accordingly, any significant downturn in the aluminium and steel industry could have a significant impact on its financial condition and its growth prospects. Further, its revenue from the sale of such products may also decline as a result of increased competition, regulatory action, pricing pressures or fluctuations in the demand for or supply of such products, which may adversely affect its business, results of operations and financial condition.
Dependent on certain key suppliers for raw materials: The company’s production depends on obtaining adequate supplies of raw materials and other components on a timely basis. It purchases its main components from domestic and foreign raw material manufacturers that can satisfy its quality standards as well as those of its customers and meet its volume requirements. In light of its standards, there are few suppliers who may supply (within time) the raw materials of the required specifications and as per the quality standards, which are essential to its manufacturing process and its products. The company places reliance on these key suppliers and this generally involves several risks, including a shortage of raw material and other components, increases in component costs and reduced control over delivery schedules. The company’s reliance on certain key suppliers could result in delays that could adversely affect its output, results of operations and financial condition. Where alternative sources of raw materials and components are available, qualification of the alternative suppliers, establishment of reliable supplies from such sources and reliance on them over time may result in delays that could adversely affect its manufacturing processes, results of operations or financial condition.
Outlook
Petro Carbon and Chemicals is engaged in the production of calcined petroleum coke (CPC) for the carbon industry. The company produces calcined petroleum coke, commonly known as CPC, from raw petroleum coke (RPC), also known as green petroleum coke, for use in the manufacture and production of aluminum, steel and various other carbon-based products. The company's production facility is located in Purba Medinipur, West Bengal, and has a capacity of around 93,744 tons of CPC per annum; the plant is spread over an area of around 30 acres. On the concern side, it depends on the success of its relationships with its customers. Its major revenue is generated from single major customer, and the loss of such customer, the deterioration of their financial condition or prospects, or a reduction in their demand for its products could adversely affect its business, results of operations, financial condition and cash flows. Also, the company derives a substantial portion of its revenues from sales of aluminium and steel industry and has a single product CPC.
The issue has been offered in a price band of Rs 162-171 per equity share. The aggregate size of the offer is Rs 107.21 crore to Rs 113.16 crore based on lower and upper price band respectively. On performance front, the revenue from operations of the company for fiscal year 2023 was Rs 51,550.67 lakh against Rs 27,696.83 lakh revenue from operations for Fiscal year 2022, an increase 86.12% in Revenue from operations. This increase was due to higher realisation in finished product. Moreover, profit after tax for the Fiscal 2023 was at Rs 672.20 lakh against profit after tax of Rs 570.99 lakh in fiscal 2022, an increase of 17.73%.
Going forward, the company’s business strategy is to be a Calciner with PAN India presence with capacities located at strategic location that allows it to source raw materials at cheaper rates and to maintain the standards of the CPC produced. This along with a distributed geographical presence shall contribute to the company being in a position to supply per requirements of the customers at competitive rates. Also, the focus of the company is in the large tender based orders. Further, the company intends to continue its focus on R & D, which will be the threshold of discovery of processes & efficient control of Pollution. This will help the company in the development of more efficient production processes etc.
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