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Nandita Datta
Epic Ltd (formerly called Enzymes, Pharmaceuticals and Industrial Chemicals), is a low-priced agro-chemical company with an MNC tag. A recent turnaround case, EPIC is the largest producer of ethofumesate (along with Agrevo) and the second largest producer of metamitron (next only to Bayer AG) in India. Both the chemicals are key ingredients in the manufacture of sugar beet herbicide, for which there is a huge demand in Europe. Epic has an assured market for its products as it sells a substantial portion of its production at market rates to its German parent, Feinchemie Schwebda GmbH.
At its current market price of Rs 22.75, EPIC is trading at an attractive P/E of 5.71. For the nine-month period ended March 1999, EPIC has posted of Rs 26.6 crore and a net profit of Rs 1.70 crore as against sales of Rs 15.9 crore and net profit of Rs 9 lakh in the full-year 1997-98. The company is likely to end the year with a net profit of Rs 2.5 crore, giving an EPS of Rs 2.94 (on an expanded equity of Rs 8.55 crore) asagainst 16 paise in the last fiscal. EPIC's equity base has recently gone up from Rs 5.7 crore to Rs 8.55 crore thanks to a 1:2 rights issue.
The rights, priced at a premium of Rs 5, was for financing a new plant to manufacture phenyl glyoxalic ethyl ester (an intermediary for metamitron). This backward integration will help EPIC bring down its production cost, by lowering input cost. In 1997-98, the company had managed to bring down its material consumption cost from a high of 72 per cent to a more manageable 56 per cent. With the plant already on-stream (with finances received from the German parent), EPIC can hope for a substantial cost reduction this fiscal too. In fact, regular flow of funds from the German parent has solved EPIC's liquidity problem. Part of the rights issue proceeds will go towards paying old debt, which will improve the company's gearing.
For the future, the company hopes to improve its bottomline thanks to the backward integration as well as the proposed modernisation of itsexisting manufacturing facilities. As a result of Feinchemie Schwebda GmbH's pre-dominant position in the global pesticides market, EPIC has been able to establish a good market for its products. At present, exports account for over 90 per cent of its production. For investors entry at current levels, would yield handsome returns over a period of one year.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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