Binani Industries has target of Rs 200: Tulsian

Binani Industries has target of Rs 200, says SP Tulsian, sptulsian.com.

Tulsian told CNBC-TV18, "Binani Industries is the holding company for the cement, zinc and glass fiber business of the Binani Group. Recently, they acquired fiberglass business units operating in Norway and Belgium for about Rs 1,800 crore. The net worth of the company is about Rs 400 crore and net debt is Rs 2,200 crore."
He further added, "Earlier, this company was a promoter of Binani Cement, but they have acquired more than 95% stake of Binani Cement and delisted it. So, practically, 100% ownership of Binani Cement is lying with Binani Industries, which has a capacity of about close to 9.5 million tonne. It has plants in India, China, Middle East and Mauritius."
"Now as far as the fiberglass acquisitions for Rs 1,800 crore is concerned, the leveraging seen the books - there is Rs 2,200 crore of debts and if I add Rs 1,800 crore to that, the debt will rise to Rs 4,000 crore against a net worth of Rs 400 crore. This means debt-equity ratio of 10:1, obviously that will not be seen as positive."
"But for last six months, I have been playing on the theme that there are talks about promoters opting to sell cement division. They are only waiting for right pricing because in the last six months we have not seen real good value coming to cement plants. Companies which have a capacity of 10 million tonne can fetch a very good price of valuations of over USD 150 per tonne. I think the company is heading towards that mark."
"They will be completing operational capacity of 10 million, though they have a pipeline of 14-15 million tonne of all the plants put together. My call is that they will look to sell the cement division in the next six to twelve months. This can give them realisation of about Rs 7,000-8,000 crore and then they will focus purely on zinc and fiberglass business. Zinc is not such an attractive proposition because they are merely a converter."
"They import zinc ore, process it in Kerala and sell it. So, their focus is going to remain on fiberglass business. They are planning to induct a strategic investor to the extent of about 40-49% in that business. If somebody can keep a view of about 12 months, the company can give very good returns. But I am expecting the sale of cement business to happen in next six months and that is why I have given a price target of close to Rs 200 in six months." Disclosure: I have personal holding in Binani Industries.