Fine Organic Industries Ltd - Research Report

Private Client Research






Fine Organic Industries Ltd


September 25, 2019

Sensex: 38593.52

CNX Nifty: 11440.20


BSE: 541557

Reco Price
Rs. 1675
Price Target (2 - 3 Years)
Rs. 2850


September 25, 2019



CNX Nifty








Stock Data

CMP (Rs)
Face value (Rs)
52 Week Range (Rs)
1651.00 - 991.40
Market cap (Rs Crores)
Price To Book Value (x)
P/E Ratio (x)

One Year indexed Stock Performance

Fine Organic Industries Ltd Sensex
Fine Organic Industries Ltd
Return (%)


(in %)

+91 22 6639 3000


Founded in 1970, Fine Organics was the brainchild of Mr. Ramesh Shah, a Mumbai-based businessman with experience in chemical trading and Mr. Prakash Kamat, a skilled technocrat from Institution of Chemical Technology. Together, they envisioned the potential of oleochemical derivatives and created an organization founded on the pillars of innovation and passion. Fine Organics introduced the Indian market to high-quality additives for specialty applications with raw materials from locally-grown plant sources and quality levels on par with international standards.

A technology and customer-driven company, Fine Organics enjoys a privileged position in the specialty additives industry globally. Fine Organics owes its growth and success to its expertise on oleo chemistry, in-house manufacturing technology, customer-centric research and development and a techno-commercial mindset. Fine organics have highly qualified technocrats in marketing, production and quality control that provide exceptional support to our customers, suppliers and distributors.

Fine Organics has four manufacturing facilities in Maharashtra - two at Ambernath, and one each at Badlapur and Dombivili. These plants have a combined capacity of 69,300tpa. Until 2000, Fine Organics catered only to the domestic market, but has emerged as a key global player thereafter. Globally, FOIL caters to 650+ direct customers (end users) and 130+ distributors (selling to 5,000+ customers) in more than 70 countries across Asia (including India), Middle-east, North America, South America and Europe.

What are oleochemical-based additives?
Additives are chemicals added in small quantities to products to improve/strengthen or alter their performance. Even though additives are used in minor quantities (0.5-1% of end-users’ raw material costs), their functional usage is highly critical for end-use product applications. Oleo chemical-based additives are chemicals derived from natural oils and fats of plant origins. Since they are derived from natural and renewable resources, they are referred to as green additives.

Better product mix, strategic JV’s and Capex at a right time will help to reach at new limits; a pure niche play makes the company FINEtastic.

A niche player in Oleo chemical:
Fine Organics limited is a distinct leader in specialized industry; it is involved in process of manufacturing of Oleo chemicals. There are many players in industry who manufacture oleo chemicals. So in order to differentiate from others Fine Organics extracts Green additives from oleo chemicals with help of its own In-house technology process design and R&D centre, this creates a kind of entry barrier for other players.

Product diversification to lead sales growth:
Fine Organics Limited (FOIL) has 400+ products and catering 650+ clients. Company has implemented process of continuous innovations to give best products to their clients. It has huge distribution reach with almost 170+ distributors across globe and it ranks among top 5 players in polymer additives across world. FOIL is focusing on Green additives and offers wide range of different products.

Capacity expansion will lead to reach new limits:
FOIL’s FY19 Revenue was impacted due to inability to fulfill demand due to lower capacities. Despite of working on high capacity utilization FOIL was unable to fulfill demand of its client. Now In order to fulfill robust demand for its products FOIL has decided to invest around Rs.200 crores to add 42000tpa. New capacities will operate at higher utilizations in future and contribute around Rs.400-Rs.500 crores of revenues.

Company has Entered into 2 JV it will help to improve international business:
In order to serve its existing direct customers and distributors, secure new direct customers and distributors and expand the product reach to new markets, Fine Organics intends to expand globally. It entered into a joint venture agreement with German company Adcotec in January 2018 to set up FineAdd Ingredients, which will operate the German facility. FineAdd Ingredients will manufacture specialty food emulsifiers and other food additives. The company will own a 50% equity interest in FineAdd Ingredients. This German facility is planned to initially come with installed capacity of 10,000TPA. The company expects the German facility to commence operations by Q3FY22E subject to necessary approvals.


Oleo chemistry
Global basic oleo chemical market size was valued at $ 19.10 billion in 2018 and is estimated to reach $ 25.91 billion by 2019 Oleo chemicals market is anticipated to witness a CAGR of 5.8% from 2019 to 2025. The Asia-pacific will continue to dominate the market during the same time span. Growing demand for naturally derived products of food & beverages and from other industries are expected to be the major factors driving the oleo chemicals market. The key applications markets include cosmetics and other industries & personal care, food & beverages and polymers, among others.

Favorable government policies regarding tax benefits and financial incentives for bio-based chemical producers are impacting the industry growth positively. The application development coupled with product innovation will yield potential opportunities for companies operating in the industry over the forecast period.

Oleochemicals are used in wide range of applications including personal care, surfactants, soaps, food additives, and detergents. The key chemical manufacturers including Arkema, Lanxess, BASF, DSM, Solvay, and DuPont have shifted their focus towards using bio-based chemicals for manufacturing polymers. This trend is projected to positively influence the companies involved in developing the downstream potential of various oleochemicals such as alcohols, fatty acid esters, and glycerol.

Major chemical manufacturers have increased their spending on sustainable development owing to responsible care initiatives which includes the elimination of toxic chemicals which prompted a shift in trend towards biodegradable and renewable products. Manufacturers have taken a realistic approach to replace petrochemicals by bio-based chemicals in an attempt to minimize the reformulation and re-equipping time and cost.

The increasing bio-diesel demand may cause a hike in biofuel prices which are mostly affected by changes in the government regulations and blending norms. These factors are expected to affect the overall economics of oleochemical-based products and hinder growth.

The raw materials used for manufacturing oleochemical include vegetable and animal oils & fats are derived from petrochemical feedstock. The polyols, which are key feedstock for polyurethane production can also be produced using oleochemical routes which are anticipated to steer growth in the near future.

Oleochemical derived from vegetable oils, such as soybean oil, castor oil, and linseed oil, are used to develop polyamides which are widely used in automotive and textile applications. The high rate of commercialization of bio-based polyamide in the above applications is further anticipated to stimulate product demand over the forecast year.

Easy availability of feedstock and rapid expansion of major end-use industries drives the global oleochemical market trend over the next seven years. Indonesia and Malaysia are the major producers of base products for oleochemical. Asia Pacific along with being the largest consumer is also the largest producer of oleochemical and accounts for over half of the global production.

The presence of a large number of domestic manufacturers in Southeast Asian countries such as Malaysia and Indonesia coupled with high demand in the local markets has been a major factor driving the regional oleochemicals market share. Government support in terms of tax benefits particularly in the emerging markets of China and India with an aim of promoting manufacturing biodegradable chemicals is projected to complement the growth in the sector.

Source: Company, Grand View Research, Research and markets

Profit & Loss Statement:- (Consolidated)

(Rs Crores)

DESCRIPTION Mar-17 Mar-18 Mar-19 Mar-20 E Mar-21 E
Net Sales 779.00 856.00 1060.00 1188.00 1425.00
% Growth 18.10% 9.80% 23.90% 12.00% 20.00%
Raw Material Cost 490.00 536.00 626.00 713.00 827.00
% of Sales 62.90% 62.60% 59.10% 60.00% 58.00%
Employee Cost 64.00 52.00 63.00 69.00 79.00
% Growth 140.00% -19.90% 21.60% 10.00% 15.00%
General and Administration Expenses 16.00 18.00 20.00 30.00 29.00
% of Sales 2.00% 2.20% 1.90% 2.50% 2.00%
Selling and Distribution Expenses 16.00 24.00 30.00 36.00 50.00
% of Sales 2.10% 2.80% 2.90% 3.00% 3.50%
Other Expenses 22.00 27.00 39.00 42.00 50.00
Total Expenditure 634.00 697.00 830.00 924.00 1091.00
EBITDA (Excl OI) 145.00 158.00 230.00 263.00 334.00
Growth(%) -0.60% 9.30% 45.30% 14.40% 26.70%
EBITDA Margins(%) 18.60% 18.50% 21.70% 22.20% 23.40%
Depreciation 24.00 20.00 17.00 16.00 14.00
Other Income 4.00 16.00 24.00 26.00 29.00
EBIT 125.00 154.00 237.00 274.00 349.00
Interest 4.00 3.00 6.00 12.00 22.00
Exceptional Income / Expenses 0.00 0.00 0.00 0.00 0.00
Profit Before Tax 121.00 151.00 231.00 263.00 327.00
Provision for Tax 43.00 56.00 95.00 66.00 82.00
Profit After Tax 78.00 95.00 136.00 197.00 245.00
PATM (%) 10.00% 11.10% 12.90% 16.60% 17.20%
Earnings Per Share 161.20 31.10 44.40 64.20 79.80
Adjusted EPS 6.20 7.90 6.50 64.20 79.80
Source: Stockaxis Research, Company Data


Fine Organics Limited (FOIL) is involved in process of manufacturing oleo chemical based niche products catering to various industries which have huge potential to grow. FOIL is a distinct leader into oleo chemical based products and it is one of the top 5 players globally. We believe that capex is in the right direction and at a right time which will help FOIL to boost sales in near term. We expect Revenue/EBITDA/PAT to grow for FY21 by 20%/26%/24% respectively. We recommend “Buy” on FOIL with a target price of Rs.2850 based on 35x FY21 EPS, which implies 50% upside for a long term perspective.