Promoted in 1919 by the late Ratansi D Morarji, Dharamsi Morarji Chemicals Co. Ltd (DHARAMORAR) manufactures chemicals at Ambernath, an industrial suburb of Mumbai. Today, it is a multi-product, multi-locational organisation which has emerged as the single largest manufacturer of Single Superphosphate (SSP) in the country and a major producer of heavy chemicals.

In addition to manufacturing fertilisers, various acids and chemicals, the company has a well-developed external project division which offers services such as basic and detailed engineering, project management, supervision of erection and commissioning services for sulphuric acid plants, various grades of oleums, SSP, alumina sulphate, recovery of hydro fluorosilicic acid, pollution control and effluent treatment plants.

Products Markets by End-Use
  • Life Science: Products in this category are intermediates for Pharmaceuticals & Agrochemicals. High purities are assured as well as defined impurities.
  • Functional Chemicals: The Functional Chemicals business delivers global scale products. Products in this category are defined by their performance rather than specification.
  • Industrial Intermediates: DMCC manufactures industrial intermediate derived from Sulfur and Ethanol. They find application in a wide range of industries.
  • Base Chemicals: This category includes a wide range of acids, with each product being offered in multiple concentrations, to exactly meet customer requirements.
    Markets by End-Use:

  • Textile Processing
  • Emulsions
  • Polymers (PEEK)
  • Dyes & Pigments
  • Pharmaceuticals Intermediates
  • Electroplating
  • Thermal Paper Coating
  • Fire Retardants
  • Agro-Chemicals
  • Water Treatment
  • Fertilizers
  • Cosmetics

Borax Morarji Limited (BML) was incorporated on August 27, 1963. It was originally promoted jointly by the Dharamsi Morarji Chemical Co. Ltd. (DMCC) a large-scale fertilizer and Chemical manufacturer and Borax Holdings Ltd. (UK). DMCC is a company incorporated in 1919 and has a turnover of over U.S.$70 million. In 1979 DMCC bought over the share of Borax Holdings Ltd.

Borax Morarji Limited has a cohesive group of 200 dedicated employees and a sales turnover of, U.S.$ 10 million. BML is committed to total customer satisfaction BML offers a wide range of quality products at a reasonable price followed by excellent customer service. The products of Borax Morarji Limited comprises of Borax Pentahydrate, Borax Decahydrate, Boric Acid, Zinc Borate, Disodium Octoborate Tetrahydrate, etc. This has enabled BML to maintain its market share at 60% of the Indian boron chemicals market. A network of dealers all over India, built up over the last three decades, provides full support and service to customers.

The Company Has Two Divisions:

  1. CHEMICAL DIVISION:
    BML has been pioneer in manufacturing boron based chemicals since 1964. Glass, Ceramic and Pharmaceutical Industries are the major consumers of boron chemicals. The Annual production capacity for all grades of Borax and Boric Acid are 24000 MT at Dahej GIDC in the state of Gujarat. A wide range of speciality chemicals are also produced, with application as Detergents additives, Micronutrient fertilizers, Timber Preservatives, Flame Retardants, and Catalysts.
  2. WINDMILL DIVISION:
    The Company has setup two Windmill Farms consisting of 2 Wind Turbine Generators having a total generation capacity of 0.950 Megawatts. Power generated at Windmills is sold to the grid. BML is an active supporter of efforts to promote non-conventional energy sources. BML is the first Company to set up a commercially operated windmill in the state of Maharashtra.

TRANSACTION

Amalgamation of Borax Morarji Limited (“BML” or “the Transferor Company”) into The Dharamsi Morarji Chemical Company Limited (“DMCC” or “the Transferee Company”)

dharamsi-morarji-consolidation-1

SHARE EXCHANGE RATIO

1 (One) equity share of DMCCL of INR 10 each fully paid up for every 2 (Two) equity shares of BML of INR 10 each fully paid up

10(Ten) Equity Shares DMCCL of INR 10 each fully paid up for every 108 (One Hundred and Eight) 8% Cumulative non-convertible preference shares of BML of INR 10 each fully paid.

Please Note:

  • Promoters of Dharamsi Morarji holds 63.47% stake in Borax Morarji Limited. Borax Morarji Limited is one of the Associate Companies of Dharamsi Morarji Limited. After this Amalgamation Borax Morarji will stand dissolved.
  • 8% Cumulative Non-Convertible Preference Share shall waive off their rights to receive the outstanding cumulative dividend and will be issued equity shares as mentioned above

Pre & Post Shareholding of DMCC

Table 1: Shareholding Pattern (Pre & Post Merger)

Particulars DMCC Shareholding Change
Pre Merger Issued on Merger Post Merger
No. of Shares %age No. of Shares %age
Promoters 1,10,52,176 50.6% 22,67,678.33 1,33,19,854 53.41%
Public 1,07,94,575 49.4% 8,25,504 1,16,20,079 46.59%
Total 2,18,46,751 100.0% 30,93,182 2,49,39,933 100.00%

Please Note: The above shareholding is after capturing increase in promoter’s stake in DMCC (Sep-Dec 2016 -1.39% Stake) and Jan- Mar17 0.47% Stake)

FINANCIALS

Table 2: Both Companies Financials as on 31st Dec 2016 (All Figures in INR Crores)

Particulars DMCC BML
Net worth 55.36 1.38
Sales 95.89 40.24
PAT 12.71 (3.14)
EPS 5.93 (8.39)
Book Value 24.06 3.36

Table 3: DMCC Financial Performance (All Figures in INR Crores)

Particulars FY2017(9months) FY 2016) FY 2015 FY 2014
Net Sales 95.89 100.76 120.06 101.31
Operating Profit 21.1 14.31 15 21.66
Operating profit percentage % 22% 14% 12% 21%
Profit After Tax 12.71 11.97 13.98 16.06
Capital Employed (Net worth + Long term borrowings) 65.14 58.08 54.53 43.97
ROCE 19.51% 20.61% 25.64% 36.52%
P/E Ratio (as on 31st March) 19.27 10.72 2.51 1.34
Market Cap (as on 31st March/31st December 2016) 244.98 128.36 35.12 21.44

Table 4: BML Financial Performance (All Figures in INR Crores)

Particulars 2016(9months) 2016(31st March 2016) 2015 2014
Net Sales 40.24 41.76 46.71 66.21
Operating Profit -0.57 9.78 -8.82 -9.56
Operating profit percentage % -1% 23% -19% -14%
Profit After Tax -3.14 4.56 -9.74 -9.64
Capital Employed (Net worth + Long term borrowings) 10.52 13.18 5.33 15.63
ROCE -29.85% 34.60% -182.74% 61.68%
P/E Ratio (as on 31st March) -7.16 3.93 -1.30 -0.53
Market Cap (as on 31st March/31st December 2016) 22.5 17.94 12.66 5.14

Observations:

  • From 31st March 2015 to 31st March 2016, there is decrease in net sales due to reduction in Speciality Chemicals sale by 42.85 %.
  • There is increase in finance cost from the year 2015 to 2016, which is interest on other borrowings by 42.41% and Interest expense on cash credit accounts by 38.36%.

Overview of operations

As per 31st March 2016 Annual Report

Chemical Division

The Company has achieved Sales turnover of Rs. 4176.38 lacs for the Financial Year ended 31st March 2016 as against the Sales turnover of Rs. 4671.04 lacs in the previous year ended 31st March 2015. During the current Financial Year, the Company has completed shifting of the operations from Ambarnath factory to Dahej factory. During the transition of shifting the operations from Ambarnath factory to Dahej factory, the Company had stopped the operations at Ambarnath but the operations at Dahej were not to the full extent, resulting in lower production and thereby lower turnover during the current financial year. The Company through its own Research and Development activities is working on new products Development as also improve production processes for achieving cost effectiveness with increasing emphasis on cost reduction at Dahej factory. The Dahej operations are expected to be profitable during the Current Financial Year, barring the unforeseen circumstances.

Windmills

Due to uneconomical and unviable operations and as approved by the Shareholders earlier, the Company had sold Four windmills located at Thoseghar and Maloshi, Dist. Satara in the State of Maharashtra. The Management is also making efforts to sell the remaining two windmills, one at Vankusavade, Dist. Satara in the State of Maharashtra and the other at Nani Sindhodi at Kutch, in the State of Gujarat.

Land at Ambarnath

As approved by the Shareholders and informed earlier, the Company has sold its land at Ambarnath and the necessary provisions/adjustments have been made in the books of accounts arising out of the said sale.

Pre and Post net worth

Particulars Pre-amalgamation Post-amalgamation
Total shareholding (A) 21.85 24.94
Reserves and surplus (B) 40.69 48.69
Carry Forward of Losses (C) -9.98 -30.12
Net Worth (A+B+C) 55.36 43.51

From the above analysis, the net worth of the company(DMCC) is decreasing, hence stakeholders are not favourable to this merger.

Key Highlights of this Amalgamation

DMCC will carry on the business of both the companies, i.e. BML and DMCC itself. The proposed amalgamation and restructuring would result in the following benefits:

  • Operational rationalization, organizational efficiency and optimal utilization of various resources due to pooling of management, administrative and technical skills of various resources of both the companies, better administration, and cost reduction, including reduction in managerial, administrative and other common costs;
  • Focused attention approach on the businesses and better alignment, coordination and streamlining of day to day operations of both the companies, leading to improvement in overall working culture and environment;
  • Creation of value for various stakeholders and shareholders of both the companies, because of all the foregoing; and
  • Greater administrative efficiency.

Conclusion

Both the companies DMCC and BML are engaged in producing the products which cater to the same set of customers such as ceramics frits, steel, soaps & detergent, fertilisers, chemicals and polymer industries, etc. The amalgamation will increase the customer base of DMCC with additional products base, which may be increase its market share. The Promoters is positive as they have increased stake in DMCC by acquisition of share from the market and additional increase through amalgamation of Borax taking their stake to 53.41%.  But to note is that as of now there is no such gains to the stakeholders as Borax is loss making but has to be look for future growth and synergy benefits.

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