Equity Watch

DSCL sitting on lots of Cash and could reward the shareholders handsomely

DCM Shriram Consolidated  DSCL has its roots in the Delhi Cloth & General Mills Co. Ltd. (DCM),which was founded in 1889 with the establishment of a Spinning Mill at Delhi. Thereafter, the company expanded and diversified into large segments of industry areas and played a leading role in the industrialization of India.

In 1990, to create more manageable business entities, DCM Ltd., was restructured into four separate companies. DCM Shriram Consolidated Ltd. (DSCL) took over 1/3rd of the businesses by the merging of the following units of the erstwhile DCM:

  • Shriram Fertilizer & Chemicals, Kota ( Rajasthan) – Fertilizers, Plastics, Chlor Alkali and Power
  • Shriram Cement Works, Kota ( Rajasthan) – Cement
  • Swatantra Bharat Mills SBM and DCM Silk Mills (Delhi) – Textiles The company recently received Rs. 50 per share in cash for SBM land

In the decade 1990-2007, DSCL added the following units to its portfolio:

  • Shriram Alkali & Chemicals, Bharuch (Gujarat) – Chlor Alkali
  • Shriram Environment & Allied Services, Gurgaon (Haryana) – Environment & Allied Services
  • Ghaghagra Sugar, Lakhimpur Kheri ( Uttar Pradesh) – Sugar
  • Shriram Bioseed Limited, Hyderabad (Andhra Pradesh) – Seeds
  • Shriram Bioseed Reserach  Vietnam
  • Shriram Bioseed Genetics Vietnam
  • Shriram Bioseed  Research Phillipines
  • Shriram Bioseed Rsearch India
  • DCM Shriram Aqua Foods
  • DSCL ESCO Limited, New Delhi – An Energy Services Company
  • Hariyali Kisaan Bazaar was started
  • Fenesta windows were launched.

The main business units of DSCL now comprise of:

Agri Businesses: Sugar, Urea, Agri Inputs, Shriram Bioseeds, Hariyali Kisaan Bazaar

It has 400,000 TPA Urea plant based on Naptha(feed stock changed to CNG or Naphtha recently) and 250,000 TPA Ammonia Plants.

It has 2 sugar mills in Central UP with crushing capacity of 24,000 TPD

Company also manufactures and trades in DAP,MOP,SSP,Pesticides,and various seeds like Cotton , Sunflower, Bajra, Jawar, paddy,corn etc.
Energy Intensive Businesses : Chemicals, PVC Resins, Cement

In chemicals DSCL is the 4th largest producer of PVC Resin based on Calcium Carbide and Chlorine route.This is the only plant in India which is not dependant on Ethylene or EDC/VCM route and thus is insulated from the fluctuating International prices of petro products.It produces Calcium carbide in house and Chlorine is a by-product of Chlor Alkali division where Caustic soda,in lye and flakes forms is produced.It also produces Bleaching Powder, liquid Chlorine ,Compressed Hydrogen  and Sodium Hypochlorite.

Company’s Cement division has a capacity to produce 400,000 TPA from waste sludge produced during calcium carbide manufacture.This makes it the lowest cost producer of Cement in the country.

To cater to the power requirement of units like Chlor Alkai and Cement divisions Company has a Coal based power plant at KOTA with capacity to produce 125 MW of power and DG set based on furnace oil at Bharuch with 24 MW capacity.Besides this company has 24MW power plant based on baggase .
Value Added Businesses : Fenesta™ Building Systems, PVC Compounds, Energy Services
Other Businesses: Textiles and Captive Power Generation

 

Company has an Equity Capital of Rs. 33 crores divided into 16.5 crore shares of Rs. 2 FV.This gives the company a market capitalisation of Rs. 1200 crores based on CMP of Rs.73. Now look at its assets.Its fertiliser division with capacity to produce 400,000 TPA  of top quality Urea and sold  under the much respected brand name of SHRIRAM Urea can be conservatively valued at US $ 150 Million. Its 173 MW power plants based on Coal and Heavy Fuel oil DG Sets and baggase can be conservatively valued at US $ 100 million.Its 2 Sugar Mills at US $ 50million and its PVC plants including Chlor Alkalies units at US $ 250 million.This gives an enterprise value of the comapny’s businesses (excluding its 100% subsidiaries like DSCL Energy Services, DCM SHRIRAM INFRA its many Bioseed Research companies etc.) at Rs. 2200 crores.With the receipt of Rs. 835 crores cash from the SBM LAND deal from DLF, company will become a debt free company.Intrinsic value of Company’s share should be minimum Rs. 230 .However if company’s businesses are demergeed and all the demerged entities are listed on the stock exchanges  its value could go to more than Rs. 500 per share.

Buy at CMP of Rs. 73  is recommended with 2 year HOLD

 

This report has been prepared solely for information purposes and the information contained herein may not be deemed to be an investment advice. Such information is impersonal and not tailored to the investment needs of any specific person. The information contained herein is not a complete analysis of every material fact representing any company, industry or security. The views expressed may change. While the information contained herein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Investors are advised to satisfy themselves before making any investments and should consult with and rely upon their own advisors whether and how to use such information in making any investment decision. Neither the author nor his firm accepts any liability arising out of use of the above information/ article

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