Jayant Agro-Organics Limited.
ISIN INE785A01026 Market Cap (Rs. Cr) 220The company is a leader in the castor oil & derivatives market in India. Castor oil and its derivatives are unique in the sense that they can replace crude oil in the chemicals industry. It is thus an ecological and proven alternative to Green House Gas (GHG) emitting petroleum products that are being manufactured on an industrial scale today. India produces 75-80% of the worlds total castor seed production, giving a competetive edge for companies based in India. According to Solvent extractors Association of India, Jayant Agro-Organics is the largest processor & exporter of castor seeds in india since 2004. Due to environmental concerns and new regulations like the EU Regulation REACH, adopted to improve the protection of human health and the environment from the risks that can be posed by chemicals, the demand for Castor based substitutes for traditional petro-chemical products is set to accelerate. Low molecular weight phthalates (used as plasticizers - substances added to plastics to increase their flexibility, transparency, durability, and longevity) derived from Crude oil leech out of products easily and are carcenogenic and can also cause birth defects. High molecular weight phthalates derived from castor oil are the ideal replacement. In fact, they are considerably superior since they are from renewable sources, bio-degradable and eco-friendly.
EU and other developed countries are restricting the use of hazardous chemicals in products and regulations are driving business to develop REACH compliant products. Ford has started making all car dashboards using castor oil derivatives starting 2012. NIKE also released its lightest ever football shoes (worn by Brazilian football star Neymar !) built using castor oil derivatives, in 2012.
Castor oil is very versatile, and the end product list is vast and varied. From being used in High Performance Lubricants in Jet engines and Racing cars to use as Adhesives for Electronics PCB, High Performance Plastics used in making electronic items like Cell phones and laptop as well as Food Grade Plastics used for making medical supplies/equipments.The list of uses goes on to include High Performance Plastics used to withstand extreme corrosion such as Auto Fuel parts and Deep Sea Drilling Corrosion resistant pipes, Underground Fiber optic cable, Zero VOC (Volatile Organic Compounds) Paints, Inks, Chocolates, Icecreams, Lipsticks, Deodrants, Perfumes, Chemicals used in Diapers to prevent diaper rash, Non-toxic Crayons, Non-toxic Plastic toys and pens.
Jayant Agro Organics is a Govt recognised Star Trading House and is also a Govt recognised Dept of Science & Technology - Research oriented company. Jayant Agro-Organics Promoters hold a US Patent for effiecient production of castor oil derivative Sebacic acid and its salts (US Patent No: 6392074). The Promoters own 65% stake in Jayant Agro and have been increasing their stake through creeping aquistion in the open market since 2012.
The company has been paying dividends since inception and dividends increased to over Rs2 per share after commencing production of Sebacic acid (2nd gen castor oil derivative and most widely used castor oil derivative in the world).
Recently Arkema which is a French Speciality chemicals company with 6.5 Billion Euro in turnover and is the largest Castor oil consumer in the world, bought a 25% stake in Ihsedu Agro chem to ensure a steady supply of Castor oil and its derivatives for its Speciality chemicals business. The 25% stake in Ihsedu was purchased at Rs30Cr thus valuing Jayant Agro-Organics stake of 75% at Rs90Cr. Mitsui Chemical and ITOH OIL of Japan have also signed a JV (50%-Jayant Agro-Organics, 40%-Mitsui Chemical, 10%-ITOH OIL) to produce Castor oil based Polyols in India. Mitsui Chemical is the largest supplier of automotive parts to Japanese and Asian Auto companies and with this JV they expect cost of Castor oil based polyols to compete with Crude oil based polyols.
Given Jayant Agro-Organics Limited's leadership position in the castor oil and derivatives market, its high promoter holding and low valuation, the stock at Rs140 is an investment worth considering. The company has low debt, is paying a steady dividend and its unique products are virtually assured of growing global demand. One significant risk is long term stable to low oil prices which may delay the shift to castor based alternatives in poor and developing economies. Nonetheless, growth in demand from the EU and US will most likely augur well for the future prospects of the Castor oil industry and for Jayant Agro-Organics Limited.
Greenassets.in assigns this investment a risk rating of 4 - HIGH RISK. Loss of capital is possible with equity ownership. Detailed analysis and monitoring is key to managing risks successfully.
With a focus on eco friendly, bio degradble products providing a substitute to GHG emitting petroloem based alternatives Jayany Agro-Organics deserves and E-Score of 10/10.
Being an international supplier with a fast expanding global presences, Non-toxic products containing Castor based derivatives produced by Jayant Agro-Organics reach millions of people across the Americas', Africa, Europe & Asia. The Social Impact of this investment is thus maximum, deserving a score of 10/10.
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