Vinati Organics, a global leader in the manufacture of organic chemical intermediates and specialty chemicals, has a good fan-following in the capital markets, as is evident from the fact that its Re1 FV shares (split from Rs2 FV in February 2021) touched a 52-week record high of Rs1,944 on 23 June 2021 – nearly Rs1,000 higher than the price that prevailed a year ago (Rs947 on 31 July 2020). At the current price, the price-to-book value is more than 12x and the P/E, based on historic earnings, is 71. The market today values this company at Rs19,200 core. What is surprising is that the shares made this new record, despite the company recently declaring muted performance for 2020-21, with its operations impacted by the pandemic. The company’s turnover this year was marginally lower at Rs980 crore, as against Rs1,073 crore in 2019-20, with its EBIDTA declining by 17 per cent to Rs378 crore and the PAT falling by 19 per cent to Rs269 crore. One reason for the lower turnover was the muted demand from overseas buyers. The company exports nearly 2x of what it sells in India. Investors are obviously looking at the long-term prospects and are not swayed by short-term aberrations in the performance. One can well argue that the floating stock of the company is low, with the promoters holding 74 per cent of the Rs10 crore paid-up capital. Of the balance, nearly 11 per cent shares are held by mutual funds and FPI. Mirae Mutual Fund and Invesco have shareholdings above 1 per cent each. As many as 81 FPIs have also invested in the company. Individuals hold just 2 per cent shares. However, it will be a great injustice to the entrepreneurial spirit of the promoters to attribute the high prices only to the low floating stock. There is much more to the company which enamours investors even today. Its track record of rewarding shareholders is a big factor, as is the high standard of corporate governance followed by the company, with 50 per cent independent directors. It is also amongst the few companies in India that have more than the mandated number of women directors, the tally being four – Vinati Saraf Mutreja and Viral Saraf Mittal, the two daughters of the founder promoter Vinod Saraf; Mona Bhide, a partner with the legal firm Dave, Girish & Co; and M Lakshmi Kantham, a professional with 34 years of experience in R&D of catalysts for green and economical processes. Developing new products “We are not concerned with the valuations; nor do we track share prices on a day-to-day basis,” says Vinati Saraf Mutreja, MD & CEO. “We are focussed on developing new products, growing revenues and increasing wealth for all our stakeholders.” Vinati, who joined the company as an executive director in May 2006, has been spearheading the growth of the company since then. Having done her bachelor’s degree in Economics and Finance from Wharton, after completing her studies in Mithibhai College, Vinati also studied Applied Sciences and Pharma at the School of Engineering & Applied Science, in the University of Pennsylvania. She worked briefly with the consulting firm Oliver Wyman in the US, before joining the company promoted by her father Vinod B Saraf, who is now chairman. Vinati was one of the key persons who elevated the company to a level higher than it was since it was promoted in 1989. The company started as a single product entity, manufacturing isobutyl benzene (IBB) in a plant in Mahad, Maharashtra, in 1992. Its turnover in 2005-06 was Rs66 crore, with a PAT of Rs1.95 crore. It was making a niche product IBB, a basic ingredient for ibuprofen, an anti-inflammatory analgesic bulk drug. The company’s capacity at that time was 10,000 tonnes per annum. Its other plant at Lote near Chiplun, Maharashtra, was producing ATBS, a specialty monomer, with wide applications in oil field recovery, water treatment, adhesives and personal care products.
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Vinod Saraf: giving customers right quality
