Multibase India – Fundamental Analysis by Fintox

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Multibase India - Fundamental Analysis by Fintox

Multibase India – Fundamental Analysis by Fintox

In this article, we have analyzed the underlying company based on publicly available facts & figures. Most of the websites help you with various pointers about stock analysis. However, here we try to build an easy to understand story so that you can quickly make a long term investment decision. Here we elaborate on Multibase India – Fundamental Analysis by Fintox.

Introduction – Multibase India

The first thing you should know is that Multibase India is a small cap stock (Market Capitalization – Rs 110 Cr approx) which is engaged in the chemicals industry. It manufactures & sells a wide variety of specialty & intermediate chemicals like polypropylene compounds, thermoplastic elastomer, silicone & thermo plastic master-batch etc.

The company was incorporated in 1991 under the name Synergy polymers and it got acquired by Dow Corning Corporation in the year 2002.

In 2007 its name was changed to Multibase India.

Multibase India Products – Specialty Chemicals

Mentioned below are the product propositions from Multibase India. These products are used in primarily in three main industries – Automotive, Electronics & Consumer Durable and FMCG.

Multibase India - Fundamental Analysis by Fintox

Here are a few applications for clarity –

Multibase India - Products
Multibase India - Products
Multibase India - Products

Multibase India – Sales Trend

The company is expected to close the FY 2020 with a sharp fall in revenue around Rs 56 Cr from Rs 110 Cr made last year. This fall is largely attributed to the end of licensing agreement for manufacturing an anti-foaming product by Dow Corning.

Apparently, the product contributed around 33% of Multibase India’s revenue in 2019 and 48% of the profit.

This agreement was entered into in 2016.

Multibase India - Sales Trend

Multibase India – Net Profit Trend

The net profit of the company is estimated to be around Rs 6 Cr. The PAT margin of the company is thus estimated to fall from 13.6% in FY 2018-19 to 10.7% in FY 2019-20.

Multibase India - Profit Trend

Cash Flows & Key Ratios

The Cash flow from operations is positive till 2019 which is a good sign.

Cash Flows Figures in Rs. CroresMar-08Mar-09Mar-10Mar-11Mar-12Mar-13Mar-14Mar-15Mar-16Mar-17Mar-18Mar-19
Cash from Operating Activity + -
Cash from Investing Activity + -0.6-0.9-0.51-0.8-0.18-2.30.59-8.737.183.81-29.9931.77
Cash from Financing Activity + -1.09-0.19-0.97-0.11-1.07-0.1-0.060000-10.5
Net Cash Flow-3.92-0.074.962.750.94-2.783.47-1.3614.268.37-4.8426.44

Here is a quick snapshot of a few key ratios for Multibase India.

ROCE is decent till 2019.

Debtor days has reduced which is a good sign.

Inventory turnover ratio is fairly stable till 2019.

Key RatiosMar-08Mar-09Mar-10Mar-11Mar-12Mar-13Mar-14Mar-15Mar-16Mar-17Mar-18Mar-19
ROCE %26.12%-9.81%18.70%20.63%14.59%24.82%24.44%29.23%33.04%35.29%40.34%23.83%
Debtor Days124.7970.2562.3757.8463.175.7570.9859.6266.7681.1680.1661.19
Inventory Turnover4.344.

Shareholding Pattern of Multibase India

Majority shareholding stands with Dow Corning – 75%

Public shareholding is around 19%

Indian top management shareholding seems to be quite low.

Multibase India - Shareholding

Management review – Multibase India

Here are some key management personnel at Multibase India –

Managing Director – Mr Deepak Arun Dhanak

With more than 20 years of experience, Btech in chemical engineering from CET, Akola & MDBA from Symbiosis Pune, Mr. Deepak has been the MD since 2010. LinkedIn profile – here.

Independent Director – Mr. Harish Narendra Motiwalla

Mr. Harish holds a bachelor’s degree in law & commerce, an experienced finance professional & an independent director on the board of Excel Industries, Hitech Plast Ltd., Siyaram Silk Mills, Balkrishna Synthetics & LIC Nomura MF Trustee Ltd. He has been on the board of Multibase India since 2009.

Independent Director – Mr. Ashok Chhabra

He has been on board of Multibase India since 2009. He has been a general counsel of Proctor & Gamble for over 20 years.

Additional Director – Mr. Krishan Phophalia

With a track record of over 18 years, Mr Krishan is Chartered accountant by profession and is working on an assignment with Du Pont Services as the Accounting & Finance Controller for South Asia/ANZ.

Additional Director – Mr. John Singer

Currently the global director for transportation & advanced polymer business at DuPont, Mr john is a non executive director at Multibase India.

Additional Director – Ms. Latha Nair

With over 25 years of experience, Ms. Latha comes with PG in business & HR management from Chennai University & serves as the non executive director at Multibase India since 2009.

Future Prospects of Multibase India

Thermo Plastic Elastomer Market In India

The TPE market India is estimated to reach $900 mn by 2025 (source – Techsciresearch). This is primarily driven by replacement of PVC(Poly Vinyl Chloride) by TPE as an environment friendly substitute across automotive, consumer durable, medical and footwear industry in India. Multibase India currently has approx 2% market share of the overall TPE market. TPE market in India is mostly price sensitive with consumers preferring low to moderate quality TPEs over high quality TPE.

The performance of the Multibase India depends significantly on the performance of automotive sector & its penetrations across medical, consumer durable segments.

Raw material prices & trading of products like silicon master-batches, thermoplastic elastomer also affect company performance. Further, the company is still figuring out the replacement of revenue from anti foam product among additives & automotive applications.

The company may benefit from new safety regulation for air bags etc. in passenger cars. The drive towards TPE applications in passenger cars, impacting aesthetics as well as fuel efficiency, favors the company.

The company tends to benefit from investment in 4G network requiring silicone based products in optical fiber cable application.

There is a direct competition threat from the Chinese suppliers which are making inroads into the Indian market. At the same time the slowdown in the plastics industry presents tough times for the company.

Overall Review & Ratings – Multibase India – Fundamental Analysis by Fintox

Currently Multibase India trades at around Rs 87 significantly lower than its 2018 high of around Rs 700+. The recent downfall in the price reflects lowering sales volume as well the impact on profit margins.

Multibase India - Price Movement
Fundamental Rating – Multibase IndiaKey Rating Values
(Out of 10)
Management Rating6Financial Management is sound as debt is zero. However company is not able create a sustainable moat & differentiation for future growth. Low shareholding of local management may act as a disincentive for aggressive growth push.
Top Line Growth6Higher dependence on Dow Corning. Price sensitive market requiring rapid diversification for cross industry partnerships
Bottom Line
7Company has been able to manage the costs effectively and may benefit from lower crude/low raw material prices. However external competition from China may hamper margins later on.
ROE7The return to equity shareholders is around 17% which is moderately attractive.
Expansion Plans5Company has currently a manufacturing unit in Daman and significant expansion plans have been announced by management so far.
Marketing & Product Differentiation4With low room for product differentiation, company has not been able to figure out significant other points of difference to establish its moat.
Overall Rating35/60As per current scenario, company does not seem to emerge as a multi-bagger in the long run. However, the company may be a turn-around player in the medium term based on revival of automotive industry.

Disclaimer – The view and analysis presented here is based on independent estimates and assumption by Fintox. The reader must rely on self – judgement for making an investment decision.

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