Agarwal Industrial Corporation Ltd. (AICL) is leveraging India’s development of infrastructure using a strategic focus on bitumen and logistics. The company has significantly grown its vessel transportation volume to over 1 lakh metric tons, coinciding with an increase in government infrastructure spending. This increase demonstrates AICL’s capacity to efficiently supply high-quality bitumen products across India, supporting the company’s competitiveness in the market.

• About the company
• Journey Since Inception
• Board Members
• Shareholding Pattern
• Business Segments
• Revenue Segments
• Cost Structure
• Financial Parameters
• Management Key Highlights
• Strengths & Weaknesses

(A) About

Agarwal Industrial Corporation Limited (AICL) is a prominent Indian firm that specializes in the manufacturing and transportation of bitumen and bituminous products. Established in 1995 as Bombay Baroda Roadways India Limited, AICL has expanded its presence to become a prominent participant in the business.

AICL has manufacturing and storage facilities across India and provides a diverse selection of bitumen products for a variety of purposes, such as road building, waterproofing, and industrial uses. In addition, the company offers LPG transportation services and expanded its activities in the shipping and chartering industry through its subsidiary in the UAE.

AICL’s headquarters are located in Mumbai and Agarwal Family are the promoters of the company.

(B) Journey of Agarwal Industrial Corporation

(C) Board of Directors of Agarwal Industrial Corporation

(D) Shareholding Pattern of Agarwal Industrial Corporation

(E) Business Segments

Manufacturing and trading of bitumen and related products

The company manufactures and trades bitumen and bituminous products, which are vital for infrastructure projects, particularly road construction. The company has manufacturing and storage facilities in Taloja, Belgaum, Baroda, Hyderabad, and Cochin (via its subsidiary Bituminex Cochin Private Limited), and has recently expanded into Pachpadra City, Barmer (Rajasthan), and Guwahati (Assam).

Logistics For Bulk Bitumen and LPG

The company uses specialized tankers to provide logistics services for bulk bitumen and LPG. It has large bulk bitumen storage facilities in numerous cities, including Mumbai, Vadodara, Karwar, Haldia, Dighi, Hazira, and Mangalore. The company is a pioneer in bitumen logistics, with tankers engineered for safe transportation and has contracts with major oil corporations including HPCL, BPCL, and IOCL. Furthermore, the company is one of India’s largest LPG transporters, serving both home and industrial customers with safety-focused tankers.

Power Generation from Windmills

The corporation has diversified into renewable energy by investing in wind power generation. It operates windmills in Dhulia, Maharashtra, and Jaisalmer, Rajasthan, to prepare for future energy resource shortages.

(F) Revenue Segments

(G) Cost Structure of Agarwal Industrial Corporation

(H) Financials of Agarwal Industrial Corporation

The company’s revenue has grown at a CAGR of 25.34% over the past 10 years from Rs 222.15 Cr. in FY15 to Rs 2125.34 Cr. in FY24. Subsequently, The company’s PAT has grown from Rs 5.88 Cr. in FY15 to Rs 109.21 Cr. in FY24 at a CAGR of 33.93%. Furthermore, the company’s ROE increased from 13.61% in FY15 to 21.37% in FY24.

DuPont Analysis

Valuation Ratios

(I) Management Discussion

Outlook

• Bitumen use reached a decade-high in FY24, up 10% to 8.8 million metric tonnes (MMT), owing to a surge in road building before the general election. Over 40% of bitumen consumed in India is imported, with the country spending $1.3 billion on imports in FY24.
• There was a significant increase in road construction activity, with 12,349 km of national highways built in 2023-24, the second-highest number on record. Bitumen is the preferred material for road building, although concrete is increasingly used for making concrete roads.
• Challenges for the company include health and environmental concerns, fluctuating crude oil prices, and the growth of alternatives such as concrete. whereas, Bio-based bitumen and EME(Enrobés à Module Elevé) binders provide promising opportunities.
• AICL now controls 20%-30% of the private sector’s bitumen market. Further, The company has ongoing strategic expansion plans to increase its capacities, which are driven by a consistent growth trajectory year after year.
• The Indian government’s 2023 budget allotted ₹2.7 lakh crore to the Road Ministry, a 36% increase, to support the 25,000-kilometer road development target. The continued pace of infrastructure development is creating a huge demand for road materials.
• AICL Overseas – FZ LLC, a wholly owned subsidiary of AICL, presently operates ten large bitumen logistic vessels with a total capacity of 1,02,949 MT. These vessels are used to import raw bitumen from oil-producing countries.
• In Q3 FY24, AICL added MT Gauri, a new vessel with a capacity of 47,999 MT, bringing the overall fleet production capacity to 1,02,949 MT.

Concall Highlights

• The company reported its highest-ever volume in FY24 with a growth of 15.8% year-on-year to 4.91 Lakh Metric tonnes. At the same time, It is aiming for a 20% Y-o-Y volume growth to 6 Lakh MT for FY25.
• Revenue, EBITDA and PAT for Q4FY24 stand at ₹778.2 Cr, 61.9 Cr and 38.01 Cr representing a growth of 17.88%, 43.31% and 34.31% respectively.
• The company’s vessels contributed 60% of the total bitumen transportation volume. Furthermore, It plans to increase it to 65%-70% in FY25.
• The company plans to transport 3.5 Lakh to 4 Lakh tons through its 10 vessels in FY25. It represents a 25% to 30% growth from ~2.93 Lakh tons in FY24.
• The company expects a y-o-y revenue growth of 15%-20% for Q2FY25 as all of the company’s vessels have become operational.
• The company’s vision is to become the leading player in the bitumen industry, for manufacturing, import, and logistics to support the nation’s infrastructure development. The company plans to double its bitumen volume within the next 2-3 years.
• The company added a new vessel to its fleet in Q3FY24 which has a loadable capacity of 40000-44000 tons. However, It was unable to utilize it as some work was being performed on it.
• The company aims to maintain its forward and backward integration strategy within its current industry, emphasising logistics and procurement. It may produce bitumen on its own in the future.
• During the four-month monsoon period, there is minimal demand for the company’s products in India. To maintain revenue during this time, it lends its vessels to third parties.
• The company has supplied 60,000 tons out of a 192,000 metric ton order which was received from the 3 PSUs IOCL, HPCL and BPCL. It expects to complete the order by FY25.

Realizations

• The company’s debt to equity increased this year as it acquired a vessel in Q3FY24 but expects it to gradually decline as the ROCE increases.
• The company reported ₹3625 EBITDA per ton for FY24 and expects it to increase it to ₹3800 -₹3900 per ton for FY25 due to ongoing efforts of the company to enhance profitability.
• The company’s total realization/ton in FY24 was ₹36,800, comparatively lower than ₹42,000 in FY23. This decrease in prices has led to a significant loss of ₹300 to ₹400 crores in turnover, despite this the company maintained its topline compared to FY23.

Capex

• The company plans to maintain a capex of ₹150 Cr. per year barring it can maintain its ROCE and sees any opportunity as it has done for the last 3-4 Years.
• AICL’s management prefers debt over equity for funding capex and asset acquisition. It is open to adding more vessels through debt financing rather than diluting equity.
• The company sees potential in the current market. It has been focusing on strengthening its infrastructure and logistics so it can do more volume.

(J) Strengths & Weaknesses of Styrenix Performance Materials

Strengths

(i) Established market position in the bitumen industry

The promoters of more than four decades have a great deal of business experience, which helps the AICL group. Furthermore, The group’s well-placed manufacturing plants and storage spaces have helped to lower transportation expenses. Strong realizations combined with consistent demand have resulted in a notable rise in scale with a CAGR of 33% for the past three years ending fiscal 2024.

(ii) Diversified revenue profile with established clientele

AICL group also offers its clients complete transportation solutions. Additionally involved in the transportation of LPG cylinders, power generating via windmills, and ship chartering. Based on cargo revenue from this ship chartering company, AICL’s predicted moderation of its freight expenses ranges from 60 to 70%. Ship chartering company profits balance the modest margins in the bitumen trade sector. Furthermore, the group gains from the developed customer and supplier network in both home and foreign markets, therefore fostering repeat business across sectors.

Weaknesses

(i) Susceptibility of the operating margin to volatility in raw material prices and forex rates

Bitumen has historically shown more unpredictable pricing as the principal raw material. Therefore, the operating margins can be affected by any abrupt change in the bitumen price. In the shipping industry, the freight charges paid to the customer cover any variation in the fuel prices. Thus, although it can pass on this rise to consumers, failure to fully or lag in passing on has resulted in some volatility in operating margins ranging from 6% to 9% in the past five fiscals.

(ii) Exposure to cyclicality in the end-user industry

The company serves industries including power, industrial gases, and infrastructure. The end-user sectors have a cyclical nature and a significant link with economic cycles. Consequently, Economic downturns in the past caused a slowdown in the building industry, which affected participants’ credit profiles. This also results in a stretch in debtors from small consumers.

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets and Management Interviews, Industry Publications.

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