Market leader in a niche space:
Toner powder looks to be a very niche space. The company has been manufacturing
this product for more than 20 years and has created a name in the industry. The
company has a very strong focus on quality which has enabled it to stay in the market
and create a name for itself. The company is one of the few companies manufacturing
toner powder in India and other players are usually importing from other international
markets. Indian Toners & Developers Ltd. (I.T.D.L) is India’s largest manufacturer
and exporter of compatible toners for use in laser printers, the new age digital
machines, multi-function printers, analogue copiers as well as wide format printers
and copiers. Indian Toners & Developers Ltd. also offers premium quality chemical
color toners for use in laser printers and copiers.
Indian Toners formed a subsidiary by the name of ITDL Imagetec Limited, which became
operational since beginning 2009. While the manufacturing plant of the parent company
i.e. Indian Toners is located in Rampur (U.P.), the manufacturing facility of its
subsidiary, ITDL Imagetec, is located at Sitarganj (Uttarakhand). Indian Toners
& Developers Ltd has a manufacturing capacity to produce 2400 metric tons of toners
per annum. The facility at Rampur has a manufacturing capacity of 1200 metric tons
of toner per annum, while the facility at Sitargunj also has a manufacturing capacity
of 1200 metric tons of toner per annum, with a total of 4 production lines (600
metric tons each). The production capacity is being enhanced to 3000 metric tons
and expansion will be completed before this year end. Hence company will have strong
capacity on stream where they can improve their production to meet future demand.
Strong Quality standards:
I.T.D.L. Toners are manufactured and examined under strict quality control standards.
At each critical stage of production every batch is subjected to rigorous testing
before being released by the company’s Quality Assurance Dept. Various important
key parameters of toners such as particle size & size distribution, tribo-change,
relative dielectric constant, specific DC resistivity, flow ability, melt flow index,
magnetic properties, etc. are evaluated and tightly controlled. The quality controls
of the products also include long term tests concerning copy quality, compatibility,
influence on the function and maintenance of the copier and printer. Hence company’s
product is most preferred products compare to china and surat manufactured products,
Normally ITDL products are sold at Rs 700/kg in branded segment compare to 600/kg
by Surat manufacturers and Rs 450/kg by Chinese manufacturers.
Strong Client base:
The Company manufactures compatible toners for use in Brother, Canon, Toshiba, Hewlett-Packard,
Kip, Panasonic, Ricoh, Konica Minolta, Kyocera Mita, Lexmark, Samsung, Sharp and
Xerox. It distributes its products through brand such as Supremo. ITDL exports toners
to more than 30 countries across the world. Companies have plans to increase their
presence in the Russian and Ukrainian markets, for which they are planning to hire
a local representatives present in those markets.
Over the last 5 the company has increased its PAT at CAGR of 27%. EBITDA margins
have expanded sharply from 14% in FY09 to 24.6% in FY14. Company’s products are
higher in prices with range of 25-35%.. Another reason for the company for strong
bottom line growth is scale benefits as there is a sharp decline in other costs
and employee costs. The company also gets some tax benefit in their Sitarganj Plant
in Uttarakhand. With cash and cash equivalent of Rs 51.20/ share which is more than
48% of current market share, Company is cash rich company with no debts in book.
Company is generating strong operating cashflow of Rs 19.42 crores and with ROCE
of 33.19% and ROE of 29.45%. Hence Company has very strong financials compare to
its peers in industry.
The few concern, we have is that in spite of making decent profit, the company is
not paying dividend and majority of profit is generated at subsidiary level where
parent company has 51% stake. Also, most of the revenues (almost 100%) are coming
from export, and hence frequent and wide fluctuations in foreign currency and tough
competition in the international market continues to be a challenge for your company.