Vinati Organics Ltd.

(VO IN)

September 26, 2019 CMP: ₹2,247

Time Horizon – 12 Months Target: ₹2,810

Key Data (In ₹ mn) FY-18 FY-19 FY-20E FY-21E

Ticker (Bloomberg) VO IN Net Sales 7,297 11,081 13,514 15,789
V NSE Code VINATIORGA EBITDA 1,982 4,049 4,665 5,466
BSE Code 524200 EBITDA Margin 27.2% 36.5% 34.5% 34.6%
A Sector Chemicals PAT 1,439 2,825 3,275 3,837
Industry
L Chemicals EPS (₹) 28.0 55.0 63.7 74.7

Face Value (₹) 2.0 EV/EBITDA 50.5 25.4 21.9 18.7

U BV per share (₹)

Dividend Yield (%)
205
0.31%
P/E (x)

Price Performance
80.3

CY16 CY17
40.9 35.3

CY18
30.1

YTD

E 52 Week L/H(₹)
Market Cap. (₹ mn.)
1,056/2,393
115,488
Absolute
Relative
26%
22%
70%
34%
66%
69%
36%
33%

Shareholding Pattern (as of Jun’19) Relative stock performance (Sep 18=100)

P Jun-19 Mar-19 Dec-18 Sep-18

190

155

I Promoter 74.0% 74.0% 74.0% 74.0%

120

C Institutions

Others
10.3%

15.7%
10.2%

15.8%
10.5%

15.5%
10.3%

15.7%
85

50

Jul-19
Apr-19

May-19

Jun-19
Sep-18

Nov-18

Dec-18

Mar-19
Feb-19

Aug-19

Sep-19
Jan-19
Oct-18
Total 100% 100% 100% 100%

Nifty 500 VO IN
Source: Company, Anand Rathi Research, Bloomberg

Analyst: Anindita Chaudhury Anand Rathi Research

aninditachaudhury@rathi.com
Vinati Organics Ltd. (VO IN)

A global player in the chemical sector.

 Vinati Organics Ltd. (VOL) is engaged in manufacturing of basic organic chemicals, specialty chemicals and niche specialty chemicals used in a wide range of
industries including oil field, water treatment, pharmaceutical, mining and paints. Headquartered in Mumbai, the company operates through its two
manufacturing facilities located at Mahad and Lote Parashuram, Maharashtra, with an integrated B2B business model. Currently, the company is the world’s
largest manufacturer of its two key products Isobutyl Benzene (IBB) and 2-Acrylamido 2 Methylpropane Sulfonic Acid (ATBS) with a market share of 65%.
 Exit of the company’s key competitor – Lubrizol Corporation – from the ATBS market aided in growth of Vinati Organic’s market share in FY19. The company
registered a whopping 52% year-over-year (y/y) growth in consolidated revenues to ₹11,081 million, mainly driven by solid increase in ATBS revenues. EBIDTA
& PAT grew outstandingly by 99% and 96% respectively.
 The company has grown over the years through capacity expansions and new projects largely being funded through internal accruals and negligible long term
debts. It exhibits a sound financial position given its healthy cash flows from operation, absence of long term debt and low utilization of working capital limits.

 Per management, the ATBS market grows 10% to 15% every year which results in 15% to 20% volume growth of ATBS for Vinati Organics. Notably, for FY20,
management expects revenue growth of 15% from existing products and PAT growth of 15%-20%. It expects both PAT and revenue to grow 20% in FY21.
 As part of growth strategy, the company plans to increase the production capacity of ATBS from existing 26000 TPA to 40000 TPA. Also, in effort to diversify
product portfolio, the company is set to introduce four different types of butylphenol. Both the projects are under progress and expected to be completed in
Q3FY20. Management expects the combined projects can lead to overall revenue growth of 15% to 20% for the next three to four years.

 In terms of crude prices, which remains one of the key determinants of the company’s operational cost, management has arrived at formula-based pricing
contract with its customers. The company enters into contract with the customers that has provision to pass on the change in the raw material prices and also
the volatility in the exchange rate. This has helped the company is restricting margin erosions with volatility in crude prices.

 Regarding macro scenario, the domestic chemical industry has decent upside. Per capita consumption of chemicals in India is lower, compared to western
countries, which provides room for substantial growth. Further, several factors including supportive government polices to make India as manufacturing hub of
chemicals and petrochemicals, increasing applications of specialty chemicals in varied industries, rising exports and tightening environmental norms in
developed markets and China, creates optimism around the industry.
 Given Vinati Organic’s market leadership in its key products, sound financials and ongoing expansion and diversification projects, we believe the company is
well positioned for continued growth and initiate our coverage on Vinati Organics Ltd. with a BUY rating and a target price of ₹2,810 per share.

2 Anand Rathi Research

Vinati Organics Ltd. (VO IN)

Well positioned for continued growth.

 Solid market position with presence of 30 years: Established in 1989, Vinati Organics Ltd. has grown meaningfully over the years to become a reputed
specialty chemical company, focused on manufacturing specialty chemicals and organic intermediaries. With market leadership in its key products, the
company has presence in more than 35 countries worldwide, and export products to customers across the US, Europe and Asia. Notably, the company
derived more than 70% revenues from export sales during FY19. Also, the company enjoys technical partnerships with global and national players,
including Institut Francaisdu Petrole (France), Saipem SpA (Italy) and National Chemical Laboratories (India).
 Increase in market share following exit of key competitor: With the exit of its key competitor – Lubrizol Corporation – from the ATBS market in FY18,
Vinati Organics further cemented its market position. During FY19, the company’s global market share in ATBS increased from 45% to 65%. Also, total
revenues jumped 52% y/y in FY19, driven by growth in ATBS revenue.
 Healthy client relationship to sustain growth: Usually, chemical companies are confined by long-term contracts. With focus on sustainable growth, over
the years Vinati Organics has built long term relationship with its customers. The company have several large reputed clients including BASF Corporation,
Mitsubishi Corporation, Hubei (China), Nalco Holding Company, Akzo Nobel, SNF, DOW Chemicals, Perrigo, Clariant, Chemtall and Shasun, among others.
 Benefit from backward integration: Focused on process innovation, Vinati Organics has benefited from backward and forward integration and has
successfully adopted techniques which helps in reducing operating costs. Notably, with growing demand for ATBS, in CY2010 the company began
manufacturing Isobutylene (IB) – the key raw material ingredient for ATBS. This not only helped in cutting down import cost of IB but increased revenues
with sale of co-products and by-products from the manufacturing process (such as Industrial Polymers and Methanol) as well.
 Expansion moves: Currently, Vinati Organics is running almost 100% capacity for ATBS. With rise in demand for ATBS following exit of Lubrizol, the
company aims to increase the production capacity of ATBS from existing 26000 TPA to 40000 TPA. The site work related to increase in ATBS
manufacturing capacity is under progress and overall revenue expectation from that plant is about ₹2500-3000 million at maximum capacity utilization.
Apart from bolstering capacity, the company also plans to add new products with setting up a plant with revenue expectation of ₹4,500 million to make
four different types of butylphenol which serve industries like flavors, fragrances, plastic, antioxidants. Vinati Organics would be the only manufacturer
of these products in India as presently are not manufactured in India and are being imported. Both the plants are expected to be commissioned in
Q3FY20 and management expects the combined projects can lead to overall revenue growth of 15% to 20% for the next three to four years.
Source: Company, Anand Rathi Research

3 Anand Rathi Research

Vinati Organics Ltd. (VO IN)

Journey so far..

Year Key Historic Milestones

1989 Vinati Organics founded by Mr. Vinod Saraf.
1992 IBB plant at Mahad came on stream with 1,200 MT production capacity
1996 IBB capacity expanded to 3,000 MT
1997 IBB capacity expanded to 5,000 MT
2002 ATBS plant at Lote started operations with 1,000 MT production capacity
2006 IBB capacity expanded to 10,000 MT. ATBS capacity increased to 3,600 MT
2007 Started n-tertiary Butylacrylamide (TBA) production
2008 IBB capacity expanded to 14,000 MT
2009 ATBS capacity expanded to 12,000 MT. TBA capacity increased to 500 MTA
2010 Isobutylene plant came on stream with a capacity of 12,000 MT
2011 HP MTBE plant commissioned with a capacity of 7,000 MT
2013 ATBS plant expanded to 26,000 MT

4 Anand Rathi Research

Vinati Organics Ltd. (VO IN)

The ATBS Journey

 The Idea: In 1999, Mr. Vinod Saraf, founder of Vinati Organics was looking to expand beyond its single product - Isobutyl benzene. He approached Dr.
Prashant Barve, Head, Process Development and Engineering Group at National Chemical Laboratories (NCL) to explore new opportunities in specialty
chemical manufacture. ATBS was identified as one of the potential products owing to its numerous and diverse applications. It is a specialty monomer
used as co-monomer in numerous polymerization processes. Probably ATBS’ most important application is in Enhanced Oil Recovery, where it is used in
its highest possible purity grade.

 The Technology: The technology to produce this specialty monomer was invented by Lubrizol about 40 years ago. With their exceptionally high level of
product purity, they were the global leader ATBS production for a long time. At that time, if Dr. Barve’s team could innovate a novel process for
production of ATBS and VOL could successfully commercialize it, Vinati Organics would become only the 3rd manufacturer worldwide of ATBS. Dr. Barve
and his team found the manufacturing process to be moderately feasible and there was not much demand in the domestic market. However, ATBS did
have a global market.

 The Testing: In July 2000, the NCL team presented the manufacture of ATBS at the scale of 1kg. However, given the costs of the raw materials and the
cost at which the global competitors were selling ATBS, the process was rejected by VOL as non-feasible. Committed to the product, by Nov 2000, Dr.
Barve’s team modified up the process in such a way that the raw material cost significantly reduced and the project became viable for VOL.

 The Challenges: In Oct 2002, a plant spread over 25 acres with international safety standard and remote operation technology, was commissioned at
Lote, Maharashtra. With funding from the Technology Development Board (TDB) and investment from Mr. Saraf himself, the manufacture started at 3
tones per day, in Oct 2002. However, in the first couple of months the NCL-VOL team experienced difficulties in the production of ATBS. By December
2002, the production had been streamlined and first batches of commercially manufactured ATBS were shipped to VOL’s clients globally. In a set back, by
early 2003, various clients from the EU started rejecting the ATBS shipped by VOL on the quality control (QC) bases.

 The Breakthrough: The NCL-VOL further continued to work on meeting the QC expectations of their global clients. Finally, commercial breakthrough
occured in 2005 which steered the path of VOL to manufacture enhanced oil recovery grade ATBS. Since then, there has been a steady progress in the
ATBS plant capacity at VOL. Currently, VOL is the largest manufacturer of ATBS in the world with a market share of 65%.
Source: National Chemical Laboratories (India), Company, Anand Rathi Research

5 Anand Rathi Research

Vinati Organics Ltd. (VO IN)

VOL registered continued growth in revenues and PAT over

the years.
Revenue (₹ Mn.) Profit After Tax (₹ Mn.)

13,000
3,300

10,000
2,600

7,000 1,900

4,000 1,200

1,000 500
FY16 FY17 FY18 FY19 FY16 FY17 FY18 FY19

 Revenues grew at a CAGR of 20.7% over the last three years. During the FY19, Vinita Organics registered a whopping 52% y/y growth in
consolidated revenues to ₹11,081 million, mainly driven by strong growth in ATBS revenues.

 In terms of profitability, the company has grown its profits consistently over the last five years. During FY19, EBIDTA & PAT grew
outstandingly by 99% and 96% respectively.

Source: Company, Anand Rathi Research

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Vinati Organics Ltd. (VO IN)
Key Products…
2-ACRYLAMIDO 2-METHYLAPROPANE
SULPHONIC ACID (ATBS)
ATBS is a highly versatile molecule used to
make polymers, which has applications in a
wide range of industries due to its excellent
hydrolytic and thermal stability.
Notably, Vinati Organics is the largest
manufacturer of ATBS in the world with a
market share of 65%.
Application: Oil Field, construction, water
treatment, textile adhesives, paint and paper
coating, etc.
Source: Company, Anand Rathi Research
7 Anand Rathi Research
ISO BUTYL BENZENE (IBB)
IBB is an organic, aromatic, neutral, colorless
liquid, mainly used in the pharmaceutical
and perfumery industries.
Vinati Organics is also the largest
manufacturer of IBB in the world with 65%
market share and have a record purity level
of 99.8%, compared the prevailing
international standard of 99.5%.
Application: IBB is a basic raw material for
manufacturing Ibuprofen, an anti-
inflammatory analgesic bulk drug, widely
used across the US, Europe and Asia.
Vinati Organics Ltd. (VO IN)

… Contd.

ISOBUTYLENE (IB) HIGH PURITY- METHYL TERTIARY BUTYL

ETHER (HP-MTBE)

IB is a carbon branched olefin, obtained

from petrochemicals or refinery HP-MTBE is an oxygenated solvent miscible
manufacturing processes. The derivatives of with a variety of hydrocarbons, such as
isobutylene are some of the most widely ketones and alcohol, among others.
used and industrially important
intermediates.

Application: It is used as an extractant

solvent for the pharmaceutical synthesis and
Application: Pharmaceuticals and Perfume also in the synthesis of Grignard's reagent.
industries.

Source: Company, Anand Rathi Research

8 Anand Rathi Research

Vinati Organics Ltd. (VO IN)

Diversified revenue mix continues to support growth

prospects.
Product Mix FY19 Sales Mix FY19

Others
15% 100%

25%
75%
IB & HPMTBE
11% 70% 73%
90%
50% 100%
ATBS
56% 75%
25%
IBB 30% 27%
18%
10%
0%
ATBS IBB IB HPMTBE TOTAL

ATBS IBB IB & HPMTBE Others Domestic Sales Export

 During FY19, the exit of the company’s key competitor – Lubrizol – aided the growth of market share in ATBS while ATBS revenues grew by 69% y/y.
The company’s second largest product IBB achieved a higher single digit growth in volume on account of a client’s capacity shutdown for brownfield
expansion. Isobutylene and HP MTBE continued to post consistent growth while customized products launched in the last couple of years delivered
robust performance.

 Vinati Organics continues to benefit from its diverse product portfolio with huge scale of operations. We remain optimistic as the company remains
well positioned for growth following the completion of its ongoing Butyl Phenols project and the ATBS capacity expansion project.
Source: Company, Anand Rathi Research

9 Anand Rathi Research

Vinati Organics Ltd. (VO IN)
Focused on process innovation, VOL has benefited from
backward and forward integration.
Integrated Product Portfolio Product Application - Industries

ATBS - 2-Acrylamido 2-Methylapropane Sulphonic Acid

IB - Isobutylene
IBB - Iso Butyl Benzene
NBB - Normal Butylbenzene
HP-MTBE - High Purity- Methyl Tertiary Butyl Ether
NAATBS - Sodium salt of 2-Acrylamido-2-Methylpropane Sulphonic acid
TBA - N-Tertiary Butyl Acrylamide
PTBP - Para Tert Butyl Phenol
OTBP - Ortho Tert Butyl Phenol
2,4 DTBP - 2,4-Di Tert Butyl Phenol
2,6 DTBP - 2,6-Di Tert Butyl Phenol
Source: Company, Anand Rathi Research

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Vinati Organics Ltd. (VO IN)

Company Strategy

Capacity Expansion and Introduction of New Products

 ATBS Capacity Expansion: Currently, Vinati Organics is running almost 100% capacity for ATBS. With rise in demand for ATBS following
exit of Lubrizol, the company aims to increase the production capacity of ATBS from existing 26000 TPA to 40000 TPA. The site work
related to increase in ATBS manufacturing capacity is under progress and overall revenue expectation from that plant is about ₹2500-
3000 million at maximum capacity utilization. The estimated capex for the expansion is about ₹1,100 million.

 Butyl Phenol Project: Apart from bolstering capacity, Vinati Organics remains focused on diversifying its product portfolio. The
company plans to add new products with setting up a plant (estimated cost ₹2,500 million) to make four different types of butylphenol
which serve industries like flavors, fragrances, plastic, antioxidants. Since Vinati Organics has already in house manufacturing of the key
raw material for these products – isobutylene – it was a strategic decision for the company to produce the products. Revenue
expectation is about ₹4,500 million. Currently, these four products are imported into the country. Hence, Vinati Organics would be the
only manufacturer of these products in India.

 Current Status: Both the plants are expected to be commissioned in Q3FY20 and management expects the combined projects can lead
to overall revenue growth of 15% to 20% for the next three to four years.

Source: Company, Anand Rathi Research

11 Anand Rathi Research

Vinati Organics Ltd. (VO IN)
Growing Indian economy coupled with production shift to
India offer immense opportunity in the chemical sector.
Sales in 2017 (in Euro Billion)

1200

900

600

300

 Per the European Chemical Industry Council Report-2018, world chemicals (excluding pharmaceuticals) sales in 2017 are valued at 3475 Euro billion.
India ranks 4th in Asia and 6th in world with chemicals sales valued at 101 Euro billion in 2017.
 Notably, CY 2018 marked the sixth year of an extended up cycle for the global chemical industry. This extended period of profitability has resulted in rise
in re-investment planning activity in North America, the Middle East, China and some parts of Asia. Amongst the global chemical competitive countries,
China and India in particular, have emerged as major chemical hubs.
 In recent times, stricter pollution control norms in China have led to several plant shutdowns in the country in chemicals and other manufacturing
segments. As a result of this, Indian chemical manufacturers have gained from production shift to India, especially in segments such as Dyes and
Pigments.

Source: Department of Chemicals and Petrochemicals Ministry of Chemicals and Fertilizers Govt. of India, Company Anand Rathi Research

12 Anand Rathi Research

Vinati Organics Ltd. (VO IN)
Chemical sector accounts for about 12.3% of the total export
segment of India.
Production of Major Chemicals in '000 MT Export (Value) of Major Chemicals - FY18
12,000
Organic Inorganic
Chemicals Chemicals
9% 3%
11,000 Alkali Chemicals
3%

Pesticides
10,000
(Technical Grade)
43%

9,000

8,000
FY15 FY16 FY17 FY18 FY19 Dyes & Pigments
42%

 The Indian chemical industry is one of the key industries of Indian economy, offering more than 80,000 products to downstream industries such as
automotive, textile, pharmaceuticals, construction and engineering, etc. The chemicals industry contributes 2.1% towards the nation’s gross domestic
product (GDP) and accounts for 15.95% of India’s manufacturing sector.
 During FY19, production of major Chemicals stood at 11,578 thousand MT, reflecting a growth of 4.61% y/y. The sector registered a CAGR of 4.63% in
the period from FY15 to FY19. Alkali chemicals constituted the biggest share in the chemical industry with about 69% share of total production, while
production of polymer accounted for 59% of total production of basic major petrochemicals.
 Chemical sector accounts for around 12.3% of the total export segment of the country. However, India is net importer of total chemicals and
petrochemicals.
Source: Department of Chemicals and Petrochemicals Ministry of Chemicals and Fertilizers Govt. of India, Company Anand Rathi Research

13 Anand Rathi Research

Vinati Organics Ltd. (VO IN)

The specialty chemicals market has emerged as one of the

most important chemical segments, globally.

MAJOR SEGMENTS OF THE INDIAN CHEMICAL

INDUSTRY

Specialty
Base Chemicals Pharmaceuticals Agrochemicals Biotechnology
chemicals

 Petrochemicals, man-  Dyes & other and  Active  Insecticides,  Bio-pharma, bio-
made fibres, industrial specialty pigments, Pharmaceutical herbicides, agri, bio-services &
gases, fertilisers, chemicals leather Ingredients (APIs) & fungicides & other bio-industrial
chlor-alkali, other chemicals, formulations crop protection products
organic & construction chemicals
inorganic chemicals chemicals, personal
care ingredients

 With a market size of $850 billion for CY 2018, the specialty chemicals market has emerged as one of the most important chemical segments, globally.
Specialty Chemicals, also known as performance chemicals, are low-volume but high-value compounds. These chemicals are derived from basic
chemicals and are sold on the basis of their functions. The sector grew at a CAGR of 19% between FY16-FY19 and represents around 20% of the Indian
chemical sector.
 Specialty chemicals industry can be sub-divided to end-use driven segments (agrochemicals, personal care ingredients, polymer additives, water
chemicals, textile chemicals and construction chemicals) and application-driven segments (surfactants, flavours and fragrances and dyes and pigments).
These are the largest constituents of the specialty chemicals industry and constitute over 80% of the specialty chemicals universe.
 Several factors including applications of specialty chemicals in several industries, increasing exports and tightening environmental norms in developed
markets should continue to support growth prospects of specialty chemicals sector.
Source: IBEF, Company, Anand Rathi Research

14 Anand Rathi Research

Vinati Organics Ltd. (VO IN)

Favorable macro traits should continue to drive demand in the

sector.

 Macro merits: Per capita consumption of chemicals in India is lower, compared to western countries. Hence, this signals for
immense scope for new investments. Further, with an increasing market and purchasing power, the domestic industry is likely to
grow at over 15-19% in the coming years. Additionally , rising disposable incomes and increasing urbanization are driving the end
consumption demand for paints, textiles, adhesives and construction which in-turn leads to substantial growth opportunity for
the domestic chemical industry.

 Production advantage: In order to protect domestic manufacturers and environmental concerns, many developed markets are
tightening their import regulations. As a result of this, China and India in particular, have emerged as major chemical hubs. In
recent times, stricter pollution control norms in China have led to several plant shutdowns in the country in chemicals. This has
benefited Indian chemical manufacturers as production shifted to India. As such Indian manufacturing companies already benefits
from low cost labor and raw material availability.

 Supportive Government Policies: The Indian government has identified chemicals as one of the key priority segments where it
aims to facilitate investment and build infrastructure. Under the PCPIR (Petroleum, Chemical and Petrochemical Investment
Regions) Policy, the government has conceptualized PCPIRs in a conceptualized approach for promotion of Petroleum, Chemical
and Petrochemical sectors in an integrated and environment friendly manner on a large scale. During H1 of FY2019, four PCPIRs
have been set up in the states of Andhra Pradesh, Gujarat, Odisha and Tamil Nadu. The PCPIRs are projected to attract an
investment of ₹117bn by FY 2022 and generate employment for 34 lakh people.

Source Department of Chemicals and Petrochemicals Ministry of Chemicals and Fertilizers Govt. of
India, Company, Anand Rathi Research

15 Anand Rathi Research

Vinati Organics Ltd. (VO IN)

We expect continued growth in revenues along with

improvement in PAT.

Revenue estimates (₹ Mn.) Profit After Tax (₹ Mn.)

17,000 4,500

13,500 3,500

10,000 2,500

6,500 1,500

3,000
500
FY18 FY19 FY-20E FY-21E
FY18 FY19 FY-20E FY-21E

 We expect VOL revenues to grow at a CAGR of 19.4% in next two years. We estimate the company to report revenues of ₹13,514 million in
FY-20E and ₹15,789 million in FY-21E.

 We expect company’s PAT margins to ₹3,275 million in FY-20E and ₹3,837 million in FY-21E.

Source: Company, Anand Rathi Research

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Vinati Organics Ltd. (VO IN)

Valuation and Recommendation:

 Several factors including applications of specialty chemicals in several Relative stock performance (Sep-18=100)
industries, increasing exports and tightening environmental norms in
190
developed markets and China should continue to support growth
prospects of India’s specialty chemicals sector. 155

 We remain optimistic owing to Vinati Organic’s global market leadership 120

in its key products – ATBS and IBB, proven profitability track record and 85
strengthened client relationship. Further, the company remains well
50
positioned for growth as it is focused on bolstering production capacity

Jul-19
Apr-19
Nov-18

May-19

Jun-19
Sep-18

Dec-18

Jan-19

Feb-19
Mar-19

Aug-19

Sep-19
Oct-18
for ATBS (from existing 26000 TPA to 40000 TPA) and introducing four
different types of butylphenol .
Nifty 500 VO IN
 At CMP the stock is trading at 30.1x times FY21E earnings. Source: Bloomberg, Anand Rathi Research

 We initiate our coverage Vinati Organics Ltd. (VO IN) with a BUY rating
and a target price of ₹2,810 per share. (In ₹ mn) FY-18 FY-19 FY-20E FY-21E
EPS (₹) 28.0 55.0 63.7 74.7
P/E (x) 80.3 40.9 35.3 30.1
P/B (x) 14.5 11.0 8.4 6.6
ROE 18.1% 26.9% 23.8% 21.8%
ROCE 23.3% 37.5% 33.8% 31.4%
EV/EBIDTA (x) 50.5 25.4 21.9 18.7

Source: Company, Anand Rathi Research

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Vinati Organics Ltd. (VO IN)

Consolidated Financials:

(In ₹ mn) FY-18 FY-19 FY-20E FY-21E (In ₹ mn) FY-18 FY-19 FY-20E FY-21E

Net Sales 7,297 11,081 13,514 15,789 Liabilities

Operating Expense 5,315 7,033 8,849 10,323 Equity Share Capital 103 103 103 103

EBITDA 1,982 4,049 4,665 5,466 Reserves & Surplus 7,864 10,410 13,685 17,522

Other Income 307 500 609 712 Totat Shareholder's Funds 7,967 10,513 13,787 17,625

Depreciation 234 274 321 374 Minority Interest - - - -

Long-Term Liabilities - - - -
EBIT 2,055 4,274 4,954 5,803
Other Long-term Liabilities 32 29 29 29
Interest 22 22 24 27
Deferred Tax Liability 809 846 846 846
Misc. items - - - -
Short-term Liabilities 993 888 1,083 1,265
PBT 2,034 4,252 4,929 5,776
Total 9,800 12,276 15,745 19,765
Tax 595 1,428 1,655 1,939
Assets
Minority Interest - - - - Net Fixed Assets 4,917 6,657 7,269 7,972
PAT 1,439 2,825 3,275 3,837 144 192 192 192
Long-Term L&A
Non Current Investments - - - -
Margins FY-18 FY-19 FY-20E FY-21E
Other Non-Current Assets 110 116 116 116
Sales Growth % 13.9% 51.9% 22.0% 16.8%
Operating Margin % 27.2% 36.5% 34.5% 34.6% Current Asset 4,629 5,311 8,168 11,484
Net Margin % 19.7% 25.5% 24.2% 24.3% Total 9,800 12,276 15,745 19,765

Source: Company, Anand Rathi Research

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Vinati Organics Ltd. (VO IN)

Key Risks:

 Demand might get impacted owing to any adverse global and domestic economic conditions.
 More than two-third of the company’s revenues are generated from exports and consequently denominated in foreign
currency, mainly US dollar. Given the nature of business, a large part of the costs are denominated in Indian rupees
(INR), leading to currency exposure.

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Vinati Organics Ltd. (VO IN)

Rating and Target Price history:

VO IN rating history & price chart VO IN rating details

210

Date Rating Target Price (₹) Share Price (₹)

170

130
26-Sep-19 BUY 2,810 2,247

90

50

Source: Bloomberg, Anand Rathi Research Source: Bloomberg, Anand Rathi Research

NOTE: Prices are as on 26 September 2019 close.

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Vinati Organics Ltd. (VO IN)

Disclaimer:

Analyst Certification

 The views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the
compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research
analyst(s) in this report. The research analysts are bound by stringent internal regulations and also legal and statutory requirements of the Securities and Exchange
Board of India (hereinafter “SEBI”) and the analysts’ compensation are completely delinked from all the other companies and/or entities of Anand Rathi, and have
no bearing whatsoever on any recommendation that they have given in the Research Report.

Ratings Methodology

 Analysts’ ratings and the corresponding expected returns take into account our definitions of Large Caps (>₹300 Billion ) and Mid/Small Caps (<₹300 Billion ) or SEBI
definition vide its circular SEBI/HO/IMD/DF3/CIR/P/2017/114 dated 6th October 2017, whichever is higher and as described in the Ratings Table below:

Ratings Guide (12 months) Buy Hold Sell

Large Caps (>₹300Bn.) 15% 5%-10% Below 5%
Mid/Small Caps (<₹300 Bn.) 20% 10%-15% Below 10%

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Disclaimer:

Research Disclaimer and Disclosure inter-alia as required under Securities and Exchange Board of India (Research Analysts) Regulations, 2014

Anand Rathi Share and Stock Brokers Ltd. (hereinafter refer as ARSSBL) (Research Entity, SEBI Regn No. INH000000834, Date of Regn. 29/06/2015) is a subsidiary of the
Anand Rathi Financial Services Ltd. ARSSBL is a corporate trading and clearing member of Bombay Stock Exchange Ltd, National Stock Exchange of India Ltd. (NSEIL),
Multi Stock Exchange of India Ltd (MCX-SX) and also depository participant with National Securities Depository Ltd (NSDL) and Central Depository Services Ltd. ARSSBL
is engaged into the business of Stock Broking, Depository Participant, Mutual Fund distributor.

The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based upon
various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues.

General Disclaimer: - This Research Report (hereinafter called “Report”) is meant solely for use by the recipient and is not for circulation. This Report does not
constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. The
recommendations, if any, made herein are expression of views and/or opinions and should not be deemed or construed to be neither advice for the purpose of
purchase or sale of any security, derivatives or any other security through ARSSBL nor any solicitation or offering of any investment /trading opportunity on behalf of
the issuer(s) of the respective security (ies) referred to herein. These information / opinions / views are not meant to serve as a professional investment guide for the
readers.No action is solicited based upon the information provided herein. Recipients of this Report should rely on information/data arising out of their own
investigations. Readers are advised to seek independent professional advice and arrive at an informed trading/investment decision before executing any trades or
making any investments. This Report has been prepared on the basis of publicly available information, internally developed data and other sources believed by ARSSBL
to be reliable. ARSSBL or its directors, employees, affiliates or representatives do not assume any responsibility for, or warrant the accuracy, completeness, adequacy
and reliability of such information / opinions / views. While due care has been taken to ensure that the disclosures and opinions given are fair and reasonable, none of
the directors, employees, affiliates or representatives of ARSSBL shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary
damages, including lost profits arising in any way whatsoever from the information / opinions / views contained in this Report. The price and value of the investments
referred to in this Report and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide
for future performance. ARSSBL does not provide tax advice to its clients, and all investors are strongly advised to consult with their tax advisers regarding taxation
aspects of any potential investment.

Continued…

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Disclaimer:

Contd…

Opinions expressed are our current opinions as of the date appearing on this Research only. We do not undertake to advise you as to any change of our views
expressed in this Report. Research Report may differ between ARSSBL’s RAs and/ or ARSSBL’s associate companies on account of differences in research methodology,
personal judgment and difference in time horizons for which recommendations are made. User should keep this risk in mind and not hold ARSSBL, its employees and
associates responsible for any losses, damages of any type whatsoever.

ARSSBL and its associates or employees may; (a) from time to time, have long or short positions in, and buy or sell the investments in/ security of company (ies)
mentioned herein or (b) be engaged in any other transaction involving such investments/ securities of company (ies) discussed herein or act as advisor or lender /
borrower to such company (ies) these and other activities of ARSSBL and its associates or employees may not be construed as potential conflict of interest with respect
to any recommendation and related information and opinions. Without limiting any of the foregoing, in no event shall ARSSBL and its associates or employees or any
third party involved in, or related to computing or compiling the information have any liability for any damages of any kind.

Details of Associates of ARSSBL and Brief History of Disciplinary action by regulatory authorities & its associates are available on our website i. e. www.rathi.com

Disclaimers in respect of jurisdiction: This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or
located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would
subject ARSSBL to any registration or licensing requirement within such jurisdiction(s). No action has been or will be taken by ARSSBL in any jurisdiction (other than
India), where any action for such purpose(s) is required. Accordingly, this Report shall not be possessed, circulated and/or distributed in any such country or jurisdiction
unless such action is in compliance with all applicable laws and regulations of such country or jurisdiction. ARSSBL requires such recipient to inform himself about and to
observe any restrictions at his own expense, without any liability to ARSSBL. Any dispute arising out of this Report shall be subject to the exclusive jurisdiction of the
Courts in India.

Copyright: - This report is strictly confidential and is being furnished to you solely for your information. All material presented in this report, unless specifically indicated
otherwise, is under copyright to ARSSBL. None of the material, its content, or any copy of such material or content, may be altered in any way, transmitted, copied or
reproduced (in whole or in part) or redistributed in any form to any other party, without the prior express written permission of ARSSBL. All trademarks, service marks
and logos used in this report are trademarks or service marks or registered trademarks or service marks of ARSSBL or its affiliates, unless specifically mentioned
otherwise.

Contd…

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Vinati Organics Ltd. (VO IN)

Disclaimer:

Contd.

Statements on ownership and material conflicts of interest, compensation - ARSSBL and Associates

Answers to the Best of the knowledge

Sr. and belief of the ARSSBL/ its
Statement
No. Associates/ Research Analyst who is
preparing this report

ARSSBL/its Associates/ Research Analyst/ his Relative have any financial interest in the subject company? Nature of Interest (if applicable), is given
1 against the company’s name?. NO
ARSSBL/its Associates/ Research Analyst/ his Relative have actual/beneficial ownership of one per cent or more securities of the subject company, at the
2 end of the month immediately preceding the date of publication of the research report or date of the public appearance?. NO

ARSSBL/its Associates/ Research Analyst/ his Relative have any other material conflict of interest at the time of publication of the research report or at
3 the time of public appearance?. NO
4 ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation from the subject company in the past twelve months. NO
ARSSBL/its Associates/ Research Analyst/ his Relative have managed or co-managed public offering of securities for the subject company in the past
5
twelve months.
NO
ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation for investment banking or merchant banking or brokerage
6 services from the subject company in the past twelve months. NO
ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation for products or services other than investment banking or
7 merchant banking or brokerage services from the subject company in the past twelve months. NO

ARSSBL/its Associates/ Research Analyst/ his Relative have received any compensation or other benefits from the subject company or third party in
8 connection with the research report. NO
ARSSBL/its Associates/ Research Analyst/ his Relative have served as an officer, director or employee of the subject company.
9 NO
10 ARSSBL/its Associates/ Research Analyst/ his Relative has been engaged in market making activity for the subject company. NO

24 Anand Rathi Research