PANAMA PETROCHEM

Quality lubricants for global clients

Mumbai-headquartered Panama Petrochem, a small cap player in the lubricant sector, is a leading manufacturer and exporter of 80 variants of petroleum speciality products, which are vital for diverse industries like inks & resins, tex tiles, pharmaceuticals, rubber, cosmetics, cables, power and printing. The company is capable of manufacturing a wide range of products, including trans former oils, industrial oils & and greases, automotive oils, drilling flu ids, waxes, and rubber process oil.

Panama Petrochem has four state-of-the-art plants located at Ankleshwar (Gujarat), Daman (Union territory), Dahej (Gujarat) and Taloja (Maharashtra). Of these, the Dahej facility is a fully computerised plant built on DCS/PLC systems to meet international quality and manufactur ing standards, while the Ankleshwar plant has a fully equipped and DSIR approved R&D centre.

The company’s wholly owned subsidiary, Panol Indus tries RMC, in the FTZE located at Ras-Al-Khainah, UAE, caters to the GCC and MENA regions and enjoys a logistics advantage.

With the rising demand for its products at home as well as overseas, the company has made rapid strides in its fi nancial performance. During the last 12 years, its sales turn over has more than trebled from Rs 635 crore in fiscal 2013 to Rs 2,357 crore in fiscal 2024, with operating profit shoot ing up more than 15 times from Rs 20 crore to Rs 309 crore and the profit at net level spurting more than 16 times from Rs 12 crore to Rs 195 crore. What is more, its performance is expected to be all the more promising going ahead.

CLIENT REFERRALS

Consider:

• At home, the company has adapted a pro-customer approach which is paying rich dividends. Over the years, it has developed strong relationships with clients comprising leading names across various sectors. The company’s ability to offer customised products of global standards has en abled it to generate business not only from existing clients but also from new clients through business referrals.
• Panama Petrochem has adopted an aggressive ex port policy to expand its business geographically and quan titatively. Its two Gujarat plants located at Dahej and Ankleshwar are equipped to turn out products of international qual ity. By now, the company exports to over 75 destinations, including the US, the UK, Europe, the Middle East, Australia, Africa and South East Asia. Its UAE subsidiary, Panol, is also active in expanding the ex port business.
• With the rising demand for its products in the domestic as well as export markets, the company recently expanded its production capacity by 60,000 tonnes at a capex of Rs 400 crore raised through internal accruals.
• Panama Petrochem is in a financially sound position, with reserves at the end of September 2024 standing at Rs 1,162 crore, almost 100 times its equity capital of Rs 12 crore, that too after a 1:2 bonus issue in 2017. The company believes in maintaining an investor-friendly approach and pays regular dividends, raising the quantum from 15 per cent in fiscal 2004 to 150 per cent in fiscal 2024. Interestingly, it follows a conser vative payout ratio of 25 per cent of its profit after tax.

R&D FOCUS

• The company is on a healthy growth and has sharp ened its R&D edge to develop new products, It has of late come out with products for drilling companies worldwide. The management expects global sales of these products to be Rs 200 crore within the next 2-3 years. The R&D wing is continuously busy in turning out value-added products which now account for 68 per cent of total sales. The management has targeted raising this to 85 per cent in the next 3-4 years. Shares with a face value of Rs. 2 which had gone up to Rs. 453 tended to decline on account of Indo-Pak conflict and went down to Rs. 290 but after the conflict was over the price recovered mod est ground to Rs. 399. Though the short term outlook is volatile, the long-term pros pects are encouraging. Investors can cer tainly invest in this scrip but only with a long-term perspective.

PERFORMANCE INDICATORS (Rs. in crore)

RUCHIRA PAPERS

Rs 100-cr capex to meet rising demand

Himachal Pradesh-based Ruchira Pa pers is a small-cap paper company engaged in the manufac ture of writing, printing and packaging paper. While the white writing and printing paper is used in the fabrication of note books and writing materials, the coloured paper is used in the fabrication of spiral note books, wedding cards, shade cards, children’s colouring books, coloured copies paper and bill books. Kraft paper finds its application in the packaging industry, especially for making corru gated boxes/cartons and for other packaging requirements.

The company, which came into existence 45 years ago in 1980 to set up an agro waste paper mill for manu facturing of kraft paper with an an nual capacity of 2,310 tonnes, ex panded its capacity subsequently to 52,800 tpa of kraft paper and also set up a second plant to manufacture 33,000 tpa of writing and printing paper. The company is known for keeping pace with the changing technology in the paper industry and has been regularly upgrading its technology.

Despite intermittent challenges being faced by the paper industry, Ruchira Papers has been doing quite well on the finan cial front. During the last 12 years, its sales turnover has more than doubled from Rs 296 crore in fiscal 2013 to Rs 658 crore in fiscal 2024, with operating profit inching up from Rs 51 crore to Rs 82 crore and the profit at net level shooting up more than a four times – from Rs 16 crore to Rs 68 crore. In 2022, the company issued bonus shares in the ratio of 1:10, besides de claring an equity dividend of 50 per cent. The company’s finan cial position is strong, with reserves even after the 1:10 bonus issue standing at Rs 385 crore at the end of March 2024 — almost 13 times its equity capital of Rs 30 crore. What is more, its prospects going ahead are quite promising. Consider:

• The company’s writing and printing paper is used for various purposes, including note books, writing materi als, wedding cards, shade cards, colouring books, bill books, texture paper and drawing paper. In 2004, Ruchira expanded its presence in the writing and printing segment by develop ing two new products – ‘Leher’, a type of used paper to manu facture disposable paper cups for hot and cold beverages, and ‘Mogra’, a premium paper variety crafted for wedding cards. The demand for all these products are on the rise.

CAPACITY BALANCE

• The company made a prudent capacity allocation towards products with relatively in elastic demand during industry down cycles, as well as products addressing a growing need to re place plastic with environment friendly grades. It introduced three new kraft products — ‘Chandan’ for quality packaging solutions, ‘Kansa’ to manufacture products like soup bowls and popcorn tubs, and ‘Neroli’ to address paper bags and high strength packaging solutions. These additions to the company’s portfolio are expected to address relatively un der-addressed market needs. These brands are expected to generate substantial customer interest.
• The company’s copier paper has gained acceptance among commercial offices and copying service providers. Its kraft paper is widely utilized in the packaging industry, spe cifically for the production of corrugated boxes, composite cans, fibre drums, textile cones/ream wrappers, food packag ing and other packaging applications.
• While its writing and printing paper will benefit from increased stationery demand, more office stationery demand and heightened wedding market demand, its kraft paper pros pects appear bright due to a growing packaging industry, a growing paper bag industry, a fast-growing food delivery business, more beverage demand, and increasing e-com merce and quick commerce businesses.
• Ruchira has continued to invest in its business, re flected in an increase in gross block from Rs 484 crore to Rs 512 crore, which should translate into a higher output going ahead. In FYs 25 and 26, we expect the com pany to register an EPS of Rs 21.3 and Rs 27.2 respectively. The scrip trades at Rs 137. The P/E on the FY26 EPS works out to 5.0.

PERFORMANCE INDICATORS (Rs. in crore)