Skip to main content

Stock Review: TATA CHEMICALS

THE proposed acquisition of British Salt will fill a key strategic gap for Tata Chemicals. Brunner Mond, Tata Chemicals' wholly-owned subsidiary in the UK, has signed an agreement to acquire British Salt for £93 million (. 656 crore approximately).
Brunner Mond was at risk of being hit by spurt in raw material prices after its supply contract with Ineos ends in 2016. By acquiring British Salt, it will have a captive and consistent source of raw material salt at reasonable cost.


The acquisition price that Tata Chemicals has agreed to pay for the acquisition is nearly six times the operating profits (earnings before interest, tax, depreciation and amortisation, or EBITDA) of the company. For a commodity chemicals company, this valuation is not cheap. However, the possible strategic synergies for Brunner Mond justify the pricing. The uncertainty over raw material supply at reasonable cost is eliminated for Brunner Mond's UK operations. As British Salt starts supplying salt in a few months' time, Brunner Mond's raw material bill is likely to fall. Lastly, as the acquired company mines underground salt from its fields, the cavities created can be used for storing natural gas. Within five years, the new owners expect to generate gas storage business worth £45 million.


The acquisition will be funded through debt raised on the books of Brunner Mond and British Salt. British Salt's is a high-margin business, with 45% to 50% operating profit margins and high cash generation, which will ensure easy debt servicing. Since the acquired company is profit-making, the acquisition will add to the EPS from the first year itself.


In this acquisition, Tata Chemicals has not repeated the mistake made while buying General Chemicals in the US in 2008. The pension fund liabilities in British Salt show a small surplus and there won't be any incremental liability on this count on Tata Chemicals in future. In the case of General Chemicals, the incremental pension fund liabilities had put pressure on the company's overall earnings for FY09 and FY10.


Tata Chemicals is back on a strong growth path after a couple of years of stagnation. Its acquisition of Rallis and foray into customised fertilisers are aimed at supplying a whole gamut of products to domestic farmers. While all these measures add to the corporate profitability, a mega-booster will come if it is able to double its urea capacity. The project continues to await firm gas allocations from the government.

Popular posts from this blog

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund Tata Mutual Fund has decided to merge Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund, with effect from January 16, 2015.   Investors of Tata Indo-Global Infrastructure Fund can redeem/ switch out units from December 13, 2014 to January 12, 2015 without paying any exit load. For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call Leave a missed Call on 94 8300 8300 Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com --------------------------------------------- Invest Mutual Funds Online Invest Any Mutual Fund Online Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund A...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now