Key Highlights

Apcotex Industries acquired Omnova Solutions for around Rs 36 crore on all cash deals effective from 5^th Feb'16. Omnova solutions have net sales of around Rs 187 crore for FY'16. Omnova Solutions now is now Apcotex solutions (AS) which is a 100% subsidiary of Apcotex Industries. AS is into manufacturing of nitrile rubbers, powered NBR, Polymers, PVC Polyblends etc which find application in Automobile components like Brakes & Jointing sheets and Rice Roll and Hoses.

The acquisition AS is a complementary nature of acquisition of Apcotex. With the acquisition, now Apcotex at consolidated level caters to industries such as Paper, Carpet, Rubber, Construction, Tyre, Rice Rolls, Automobiles, Automobile components, industrial components, Hoses and LPG etc.

Revenues for standalone FY'16 of Apcotex industries were lower by around 25%. Lower volumes and lower sales due to lower crude oil, all led to lower net sales. Ebidta margin of around 14% is higher due to better product mix and higher realization per unit.

At consolidated level, for 12 months ended Mar'16, Apcotex Industries reported net sales of around Rs 450 crore (including full year of Omnova) with Ebidta margin of around 11%.

The key reason for the acquisition of Omnova was to grab the full potential of Emulsion Polymer industry. Management expects to deploy around Rs 25 crore more in Omnova for further value added products and capacities.

Omnova is a major producer of high styrene rubber. Apcotex aims to expand into new value added products of existing product line of Nitrile rubber, Nitrile Powder, Polyblends etc and new industries and markets. Due to the accumulated losses of Omnova, Apcotex will get tax benefits of around Rs 12 crore. The company also has land of around 115 acres which is near Ankleshwar Gujarat for future use.

Post acquisition which is in full cash, the company still has surplus of around Rs 12 crore.

As per the management, operational leverage, manufacturing and process synergies, distribution network, common clients, working capital efficiency etc will result in increase in margins of Omnova. However management expect these synergies to come in gradually over next 12 months. Long term aim of management is to reach consolidated margins of around 13% in next couple of years.

Exports continue to be around 18-20% of total sales. The company aims to be market leader in exports to neighbouring countries like Bangladesh, Bhutan, Sri lanka etc. New products and variants of products and new markets are driving the growth.

Domestically, while things are uncertain, some sectors like construction and tyres are doing very well for the company. Particularly in construction, the company is able to increase the market share and its strategy on retail and going directly is working very well.