RCF is engaged in business of Fertilizer and mainly producing urea and NPK fertilizers. RCF has two major manufacturing plants in Trombay (Chembur Mumbai) and Thal (Mahahrashtra)
MAKE IN INDIA and to reduce the import of Urea, RCF has announced a brown field project for
new urea plant having a capacity of 1.27 million tons per annum besides its existing plant at Thal (Maharashtra). It is to be setup at an estimated cost of Rs.5500 crores subjects to approval of Central Government Cabinet comittee. There is enough land for such an expansion as RCF owns 958 acres of land in THAL.
RCF has also taken the board approval for buying 11% stake in Sindri Unit of Food Corporation of India (FCIL). The other 89% stake will be bought by other Public Sector Enterprise like Coal India, GAIL and FCIL. It is estimated that FCIL Sindri unit will require Rs. 8000 crores for revival.
RCF requires the funds for expansion and for equity participation in FCIL. However its current balance sheet cannot support such large projects. The Central Government is holding 80% stake in RCF but is unlikely to fund these projects at a time when the Government itself has its divestment agenda. In such a situation the government may encourage RCF to raise resources through selling of surplus Land in Mumbai. RCFs Mumbai plant is spread across 785 acre of land. Recent deals in and around Mumbai have taken place at valuation of around Rs 50 crores per acre. If we were to assume a similar valuation, this land is worth Rs 40000 crores.
RCF has to take a lot of working capital debt due to delay of subsidy receipts from government and thereby pay substantial interest outgo. To facilitate the direct payment of fertilizer to farmers the Government is introducing the ADHAR BILL as money bill in the parliament
the CMP of Rs 39, the market cap for RCF is at Rs 2,100 crores. The average profit after tax for the company in the last 5 years has been around 250 cr. And the company has been continuously paying decent dividend and yielding around 4% at the CMP. RCF’s enterprise value Rs 3400 crores (MCAP = Rs 2100 crores + Debt = Rs. 1300 crores) in comparison to its Rs 250 crores earnings capacity and land value (>50000 cr) is extremely lower and therefore provides very good cushion on downside at the current market price. At the same time, any signs on value unlocking of its Land will greatly add to the returns of the company.
MAKE IN INDIA and to reduce the import of Urea, RCF has announced a brown field project for
new urea plant having a capacity of 1.27 million tons per annum besides its existing plant at Thal (Maharashtra). It is to be setup at an estimated cost of Rs.5500 crores subjects to approval of Central Government Cabinet comittee. There is enough land for such an expansion as RCF owns 958 acres of land in THAL.
RCF has also taken the board approval for buying 11% stake in Sindri Unit of Food Corporation of India (FCIL). The other 89% stake will be bought by other Public Sector Enterprise like Coal India, GAIL and FCIL. It is estimated that FCIL Sindri unit will require Rs. 8000 crores for revival.
RCF requires the funds for expansion and for equity participation in FCIL. However its current balance sheet cannot support such large projects. The Central Government is holding 80% stake in RCF but is unlikely to fund these projects at a time when the Government itself has its divestment agenda. In such a situation the government may encourage RCF to raise resources through selling of surplus Land in Mumbai. RCFs Mumbai plant is spread across 785 acre of land. Recent deals in and around Mumbai have taken place at valuation of around Rs 50 crores per acre. If we were to assume a similar valuation, this land is worth Rs 40000 crores.
RCF has to take a lot of working capital debt due to delay of subsidy receipts from government and thereby pay substantial interest outgo. To facilitate the direct payment of fertilizer to farmers the Government is introducing the ADHAR BILL as money bill in the parliament
the CMP of Rs 39, the market cap for RCF is at Rs 2,100 crores. The average profit after tax for the company in the last 5 years has been around 250 cr. And the company has been continuously paying decent dividend and yielding around 4% at the CMP. RCF’s enterprise value Rs 3400 crores (MCAP = Rs 2100 crores + Debt = Rs. 1300 crores) in comparison to its Rs 250 crores earnings capacity and land value (>50000 cr) is extremely lower and therefore provides very good cushion on downside at the current market price. At the same time, any signs on value unlocking of its Land will greatly add to the returns of the company.
