Pondy Oxides makes a stellar debut on NSE

On Monday, value investors rejoiced in celebration as Pondy Oxides and Chemicals got listed on the National Stock Exchange. The company hit the bell at 9:30 am. 

The company was listed under the ticker symbol of “PONDYOXIDE” having the face value of INR 10. The company has listed 1,16,24,780 shares under the listing procedure. Until now, Pondy Oxides was trading under the scrip code of “532626” on BSE.

So what’s the company all about?

Pondy Oxides and Chemicals Limited (“POCL” | BSE: 53262) is India’s leading non-ferrous recycling company and the largest secondary Lead metal manufacturing company of India. The company recycles Lead, Copper, Zinc and Plastic in various forms. It is India’s first and only 3N7 Lead Brand to be registered on the London Metal Exchange (LME) which basically makes the Lead metal manufactured by the Company completely liquid and easy to be delivered to LME warehouses globally and MCX warehouses in India as well.

Investment thesis:

Competitive edge: POCL has direct empanelment with the OEMs across the globe which gives it a competitive edge in securing long term contracts with a certain degree of fixed volumes.

Volume growth to boost Topline: The company has increased the smelting capacity in their plants and further has the finished goods capacity for the manufacture of Lead metal and alloys for 1,32,000 MT per annum. With respect to volume growth, the Company has witnessed 20% growth in smelting operations in the first half of FY 2022-23 compared to the same period in previous year.

Significant debt reduction: makes it virtually a debt debt free company: POCL has achieved a ROCE of 34% in 1 st half of FY 2022-23, and it is strongly in line with our expectations for the entire FY. It has also reduced the debt by around Rs. 72 crores in 1 st Half of the FY 2023. This has happened because of our focus on reducing our working capital cycle.

Diversified Supply Base: The company has a diversified consumer base globally, the raw material procurement is largely inclined towards imports. On account of that, the firm has taken steps to increase the domestic supply base. The diversified consumer and supply base along with a diversified product portfolio works positively to reduce the risk associated with the business.

Recent Developments:

During the quarter, the company has commenced aluminum production with an authorized capacity of 12,000 metric tonnes per annum in December 2022, and have also rolled out the product into the domestic market in the trial phases. In addition, the company has also commenced trial production in plastics, while the other machineries are at different stages of installation and commissioning. This is for a capacity of 12,000 metric tonnes per annum.

POCL has also been recognized as a Three Star Export House for the previous financial year, having crossed over USD100 million in exports sales standalone. 

In the previous quarter, the company also acquired Harsha Exito Engineering Private Limited. The company is acquired as a part of POCL’s strategy to expand its portfolio and enter into additional verticals in our core domain, increasing land bank and evaluating additional business opportunities in both short term and long-term. On the manufacturing side, Harsha Exito is involved in production of Chopped Strand Mat and Glass Fiber. 

Projects Pipeline:

POCL is the first company to commercialize the green technology in the manufacturing space for lead recycling. The project installation and commissioning is going on and it’s in its extreme final stages, where the trial runs have already started. The usage of this technology during the production process, specifically, reduces the greenhouse emission gases. 

The story in charts: 

The revenue of the company has seen a drastic increase with the increased demand of Lead & other metal alloys. The lead metal’s increased demand comes mainly from the Automotive Industry. Along with that, lead as a base metal is used in various industries. So, essentially a boom in development will be largely reflected in the prices of lead. The company monitors its hedging strategies to protect itself from the volatile nature of the commodity market. 

There has been a rise in the cost of smelting and refining along with the rise in freight charges and fuel prices. This rise in various factors of production has impacted the profitability of the firm. 

Shareholding pattern:

Interestingly, the public holds a larger chunk of the shares with DIIs increasing their stake over the quarters. Astoningishly, super investor Dolly Khanna holds 3.12% stake in the company.

Meanwhile, the company has delivered 15% return over the period of last one year.The stock price has also risen by 38% and 55% CAGR over the period of last 10 and 3 years respectively.