BASF India: Shaping the Future

BASF India: Shaping the Future
BSE 500042; CMP Rs 263

On September 6, 2007 BASF, the Euro 29 bnGerman Chemicals Transnational will voluntarily delist its ADR's from the NYSE. In addition, in a stock repurchase programme worth Euro 4 bn  and valid uptil end 2008, BASF will continue to repurchase and extinguish its stock thereby returning money to shareholders and increasing the earnings for existing shareholders. Already 49 mn shares have been bought over from the bourses in Europe, making BASF one of the prized stocks in the Euro STOXX market with a 36 per cent appreciation since January 2007.

What is BASF India's Forte?
The Rs 875 crore corporation caters to the Automobile, Consumer Goods, Pharmaceuticals, Paints, Paper, Leather and Textiles in India. Substantial capacity build up is taking place in all the relevant end use industries catered to by BASF which will ensure that the corporate records over-all high double digit annual growth rates in top line and bottomline over the next 3-4 years. All divisions are rapidly growing reflecting the average GDP growth of 8.5 per cent recorded in the past 4 years, and increasing demand from consumers in the packaging and retail segments as also growth in the core industries. To participate in this growth phenomenon, BASF completed a near tripling in capacities of its Polymer dispersion facilities at Mangalore from 20000 tpa to 65000 tpa. The new 45000 tpa plant was commissioned on 9th March 2007 and will contribute significantly to Revenue growth in FY 2008.

Financials have been strong with BASF reporting Q1 Revenues of Rs 272 crore (Rs 234 crore), and after tax profits of Rs 20 crore (Rs 17 crore), turning in a non annualised Q1 EPS of Rs 7. With such a performance FY 2008 should see Revenues cross Rs 950 to Rs 970 crore, with after tax profits in the 70 crore range or a EPS of Rs 23 giving the stock a PE multiple of 11.

Shaping the Future
BASF India's, European parent BASF SE has developed using Nanotechnology, the proprietary product Mincor TX, which is an innovative self cleaning finishing material that can be used to prevent dust formation and accumulation on technical textiles used for awnings, sunshades, sails and tents. It could also find application in industrial segments which are prone to heavy dirt accumulation like oil fields and applications that create grease and dust. With one spray of water all that grime could be drained away, opening up a new chapter for textile use in heavy industry.

Secondly, BASF SE, once again using nanotech, has developed the Organic Light Emitting Diodes technology opening up new design possibilities for lighting systems that consume considerably less energy than conventional alternatives. The current incandescent light bulbs and CFL tubes produce heat when in use, thereby adding to global warming. Now major states of the US have made it mandatory to use only CFL lighting in homes, industrial and civilian applications. The OLED technology will replace the CFL technology as nanotech ensures zero heat formatio in lighting applications. These two products are highly needed in a semi-arid dusty nation like India which is perpetually short on energy. BASF India can consequently draw upon the parent's un-paralleled R&D skills.

Who owns BASF India?
53 per cent of the Rs 28 crore Equity is held by the European parent BASF SE, and another 13 per cent is held by the Insurance companies and the Reliance Mutual Fund. The rest is evenly scattered across individual shareholders. The stock should find its way in all solid portfolios.

Long Term Investors should accumulate BASF now.