EIC ANALYSIS CHEMICAL INDUSTRYECONOMY

INDUSTRY

COMPANY

CONTENTSECONOMY RELATED FACTORS Growth Rates Interest Rates Inflation BOP, Foreign Trade Exchange Rates Savings & Investments Demographic Data Monsoon INDUSTRY RELATED FACTORS PLC Demand & Supply Barriers to Entry Market for the Products Supply of inputs Government Attitude Other Details FIRM SPECIFIC ANALYSIS Company Details Technical and Fundamental Analysis Common Size Statements Ratio Analysis Trend Analysis

Growth RatesGDP2006-07 2007-08 April-May 2008 rose by 5.0% April-May 2007 rose by 10.9%

Index of Industrial Production (IIP)

AGRICULTURE INDUSTRY SERVICES -

4.5 % 8.1% 10.7%

3.8% 10.6% 11.2%

INFLATIONAUGUST 2008 12.6% JULY 2008 11.89% MAR. 2008 7.75% MAR. 2007 4.76%

As on 18th Sep. 2008 12.1 %

INTEREST RATESBank Rate- 6.00% Repo Rate 9.00% Reverse Repo 6.00% PLR : 12.75%-13.25% Savings Bank Rate : 3.5% Deposit Rate : 7.50%-9.60%

RESERVE RATIOS CRR 9.00% SLR- 25.00%

Balance of Payments Merchandise Exports rose by 23.7% as against 21.8%in 2006-07

Forex Reserves - US $ 309.7 billion at end-March 2008.FOREIGN TRADE

Exports 21.7 % against 24.2% (as a % of GDP) Imports 31.8% against 37.9%(as a % of GDP).

Exchange Rates March 2008 INR 39.97 / USD July 8 INR 43.37 / USD July 25 - INR 42.23 / USD Rupee depreciated against upto July 2008 USD 5.4% EURO 5.0% POUND STERLING 5.2% JPY 1.3 %

As on 18th Sep., 2008INR / 1 USD : 46.3400 INR / 1 EURO : 65.8200 INR / 100 Jap YEN : 43.6900 INR / 1 Pound Sterling : 82.9600

MARKET TREND (as on 18th Sep. 2008) BSE Sensex : 13518.80 S&P CNX Nifty : 4074.90

MONSOON Up to July 23, 2008 -cumulative rainfall 98% June-September forecasted to be 100 % by India Meteorological Department (IMD)

DEMOGRAPHICSPopulation as on 1st Mar. 2001- 1,027,015,247 Male - 531,277,078 Female - 495,738,169 Most Populous State Uttar Pradesh Least Populous State Sikkim Highest Density Delhi with 9,294 persons / sq. km Lowest Density- Arunachal Pradesh 13 persons / sq. km Sex Ratio 933 females over 1000 males Literacy Rate 65%.

Chemical Industry Includes manufacture and/or distribute chemicals including basic, intermediate and specialty chemicals, plastic resins and materials used in synthetic fibers, paints and coatings Currently producing 70000 products. Products Classification Inorganic Organic (commodity) chemicals, Drugs and pharmaceuticals, Plastics and petrochemicals, Dyes and pigments, Fine and specialty chemicals, Pesticides and agrochemicals, and Fertilizers.

COMPOSITION- Current & Projected

C o m p o s i t i o n O f I n d i a n C h e m i c a lC I n d ups ot rsyi t -i o2 n0 0( P6 r o j e c t e d ) O f I n d om

18%

25%B A S IC S P E C IA L T Y K NO W LW DG E

B A S IC 52%

SPEC

25%

57%

KNO W

23%

Product Life CycleChemical Industry

Overview Total Investment US$60 billion Contribution to GDP 3% Share in Exports 13-14% Imports 8 9% 12th largest in World (In terms of Volume) 3rd Largest in Asia Per capita consumption in India 1/10th of world average Global chemical Indus. US$ 1.7 trillion One of the fastest growing Industry in India Average growth rate 12.5%

Herfindahl Index 9 8 7 6 5 4 3 2 1 0X M yl ac en hi ne e To ol s C em C au en st t ic So da U re a a l Te S M et en l ze ne S od a As h S co W oo ot er le s n P Fa as br se ic ng s er C ar C ig s ar re V tte A is ir co s se Co o S ta lers pl e Fi br e B ha no te e

Key Features-

Fragmented and dispersed - multi product and multi faceted.

A Fragemented Chemical Industry in India

Industry

Key Features Chemicals sold directly to large customers and through distribution channels.

Annual Turnover Rs. 90,000 crore (approx.) 1/3rd contribution by 3 main sub-sectors basic chemicals, petrochemicals and pharmaceuticals.

Role of Government INPUT COSTS REVOLUTIONIZING THE POWER SECTOR INFRASTRUCTURE IMPROVEMENT PCPIRs R&D FINANCIAL ASSISTANCE EXPORT PROMOTION ENVIRONMENT RELATED ISSUES AMENDMENT IN LABOR LAWS

SWOT FRAMEWORK ANALYSIS OF INDIAN CHEMICAL INDUSTRYSTRENGTHS

Diversified Manufacturing Base Vibrant downstream industries in different segments Competitive core industries Capability to produce world-class end products

STRENGTHS Strong presence in the export market in sub-segments Large domestic market Major raw material component sources within the country Good R&D base

WEAKNESSES INFRASTUCTURE COST DISADVANTAGESC ost D isadvantages - India vs. Other D eveloping C ountries4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Power Interest Local T axes Import Duties Name o f th e Co u n try India China T hailand Indonesia

Percentage of Net Sales

WEAKNESSES SCALE OF PRODUCTION TECHNOLOGY MULTIPLICITY OF TAXES LABOR LAWS

OPPORTUNITIES Challenge to compete globally by concentrating on weaknesses Markets in the developed countries A large number of products going off patent. Advantages in certain categories can be used for boosting exports. Close to middle-east- cheaper and abundant source for petrochemicals feedstock.

OPPORTUNITIES Stringent environmental laws in the western countries Climatic conditions in India Competencies to utilize renewable resources Competency to emerge as a global player in the area of Specialty chemicals.

THREATS Imports of chemicals, intermediates and end products Tariff levels for chemicals Greater competition due to Chinese products Bilateral/multilateral trade agreements The labor laws, power supply and infrastructure facilities

Growth ImperativesImperatives Basic Aggressive growth strategies Stimulated demand Access to global markets Invest in new areas Consolidation Research & Development (R&D) Cost reduction Operational Financial Collaboration Clusters Co-opetition Institutional interaction High Medium Degree of relevance Specialty Medium Knowledge High

High Low

High Medium Medium

High High Low

Low

High

Medium

Firm Specific Analysis- BASF Ltd. Started in India in 1943, when it acquired shares of R. A. Cole Private Limited Indoplast Limited in January 1963 BASF India Limited in September 1967.

Public limited listed company Subsidiary of BASF Aktiengesellschaft, Germany. Prasad Chandran- Chairman and Managing director

At present, the BASF Group in India is represented by the following companies: BASF India Limited BASF Coatings Private Limited BASF Styrenics Private Limited BASF Polyurethanes India Limited BASF Construction Chemicals (India) Private Limited BASF Catalyst India Private Limited BASF Asia Pacific (India) Private Limited

Activities & Products Offers innovative, hi-tech and safe solutions Tanning agents, Leather chemicals and auxiliaries, Crop protection chemicals, Textile chemicals, Dispersions and specialty chemicals,

Products Plastics, automotive and coil coatings, catalysts, construction chemicals, polystyrene and polyurethane systems. Strong manufacturing and R&D base, >1300 employees multi-location production sites and an R&D centre, Global Technology Platform

BASF- FINANCIALS NETWORTH Rs. 339.68 Cr. BOOKVALUE Rs. 120.50 Cr. P/E 9.47 TURNOVER Rs. 1031.86 Cr. PAT Rs. 59.37 Cr. Market Capitalization Rs. 720.82 Cr.

TECHNICAL ANALYSISB A S F v s . S e n s e x a s o n 1 8 th S e p ., 2 0 0 8270 265 260 Index SensexIndex 350 300 250 200 150 100 50 0 1 2 3 4 5 D a te 6 7 8 9

B A S F v s . S e n s e x (J a n 2 0 0 8 to S e p .

255 250 245 240 1 2 3 4 5 6 7 8 9 10 1112 T im e

BASF

BASF S ensex

B A S F v s . N if t y a s o n 1 8 t h S e p ., 2 0 0 8 . B A S F v s . N ifty (J a n 2 0 0 8 - S e p . 2 0 0 8270 265 260 N i ft yIndex 350 300 250

Index

255 250 245 240 1 2 3 4 5 6 7 8 9 101112 T im e

BASF

200 150 100 50 0 1 2 3 4 5 6 7 8 9 D a te

BASF N ift y

RATIO ANALYSIS ROE Trend - ROE0.18 0.16 0.14 0.12 0.1 ROE 0.08 0.06 0.04 0.02 0

Series1

1

2

3 Years

4

5

ROTAT re n d - R O T A (0 4 -0 8 )0 .1 8 0 .1 6 0 .1 4 0 .1 2 0 .1 ROTA 0 .0 8 0 .0 6 0 .0 4 0 .0 2 00 .3 0 .2 5 0 .2

T re n d - R O N A (0 4 - 0 8 )

S e rie s 1 R O N 0A. 1 5 S e rie s 2 0 .1 S e rie s 3 0 .0 5 1 2 3 Y e a rs 4 50 1 2 3 Ye a rs 4 5

S e r ie s 1

SALESTREND Analysis - Sales (04-08)1200 1000 800 Sale s 600 400 200 0 1 2 3 Ye ars 4 5 Series1 120 100 80 EB IT 60 40 20 0 1 2 3 Ye a rs

EBITT R E N D A n a ly s is - E B IT (0 4 -0 8 )

S eries 1

4

5

PATTREND Analysis - PAT (04-08)60 50 40 PAT 30 20 10 0 1 2 3 Years 4 5 Series1

Current AssetsT R E N D A n a ly s is - C A (0 4 -0 8 )295 290 285 280 275 C A 270 265 260 255 250 245

S eries 1

1

2

3 Ye a rs

4

5

CURRENT LIABILITIESTREND Analysis - CL (04-08)160 140 120 100 CL 80 60 40 20 0 1 2 3 Yea rs 4 5 Series1 TA 350 300 250 200 150 100 50 0 1 2

TOTAL ASSETSTREND Analysis - TA (04-08)

Series1

3 Years

4

5

NETWORTHTREND Analysis - NW (04-08)350 300 250 NW 200 150 100 50 0 1 2 3 Years 4 5 Series1 20 19.5 19 18.5 18 Dividend 17.5 17 16.5 16 15.5

DIVIDENDTREND Analysis - Dividend (04-08)

Series1

1

2

3 Yea rs

4

5

Conclusion Consistent Trend Increasing Returns Profitable

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