Deepak Nitrite's Unit To Invest Rs 5,000 Crore To Set Up Manufacturing Facility In Gujarat

Deepak Nitrite through its subsidiary company Deepak chem tech on 23rd May 2023 signed an agreemnet with the Gujarat government

<div class="paragraphs"><p>Deepak Nitrite's plant in&nbsp;Nandesari are of Vadodara, Gujarat. (Source: Company website)</p></div>
Deepak Nitrite's plant in Nandesari are of Vadodara, Gujarat. (Source: Company website)

Deepak Nitrite Ltd., through its unit, has agreed to invest Rs 5,000 crore to set up a manufacturing facility in Gujarat.

Deepak Chem Tech Ltd. has signed an agreement with the Gujarat government to set up a facility to manufacture specialty chemicals, phenol, acetone and bisphenol, at Dahej and Nandesari in Gujarat, the company said in an exchange filing. The proposed investment is expected to generate around 1,500 direct and indirect employment opportunities, it said.

Specialty chemicals cater to demands in the agrochemical and pharmaceutical industries. Phenol and acetone are used in segments like laminates, plywood, pharma, paint, and adhesives. Bisphenol caters to epoxy, adhesives and polycarbonate, which have various applications across automotive, electronic and consumer goods, defense and medical equipment.

The proposed investment will also help reduce India's import bill, according to the company.

Deepak Nitrite had laid out a capital expenditure of Rs 2,500 crore over the next two years as they aim to double their revenues in the next four to five years from the base of FY2023 and are entering into downstream products, the company said in con call after the release of its fourth-quarter results earlier this month.

Emails sent by BQ Prime seeking clarity on whether the Rs 5,000 crore capex is inclusive of the company's earlier announcement of Rs 2,500 crore capex remain unanswered at the time of publishing this article.

The company's net profit declined 20.12% to Rs 852 crore in the full year ended March 2023, according to an exchange filing. Revenue grew 17.19% to Rs 7,927.96 crore during the same period. Ebitda was down 19.62% year-on-year to Rs 1,289 crore.

The company carries borrowings of Rs 43.02 crore on its books, while the net cash flow from operations stands at Rs 649.92 crore as of March 31, 2023. Considering the operating cash flow that the company earns, it is likely that the company will have to raise some debt to fund the capex along with internal accruals.

Shares of Deepak Nitrite Ltd. ended 9.33% higher at Rs 2,132 apiece on Wednesday, compared with a 0.34% decline in Nifty 50.

Out of the 17 analysts tracking the company, 11 maintain a 'buy' rating, three recommend a 'hold' and three suggest to 'sell' the stock, as per Bloomberg data.