AMAL Ltd (BSE Code 506597) CMP 22.80

Brief description of the Company:   Amal Ltd is basically a pure case of prospective turnaround. The company was a loss making entity till FY 10 and even got registered with BIFR as a sick company. The company has a huge negative net worth of Rs 20 crore, however things are set for complete change.

Amal (AMAL) is engaged in the manufacture of dyes and dye intermediates. It was incorporated on July 4, 1974.

 Company manufactures sulphuric acid, oleum 65%, sulfur trioxide and sulphur dioxide.

 Manufacturing site of the company is located at Ankleshwar.

 There's another plant at Valsad, however that has now been completely shut down by the company.

 The company was registered with Board of Industrial Finance and Restructuring (BIFR) for 

restructuring in 2006. It's been a loss making company since long and has negative net worth at present.

 For FY10 the company made a loss of 93 lacs with its operations, however after receiving the approval from BIFR to the revival scheme, waivers from creditors were credited to the Profit and Loss Account resulting in a net profit of Rs 378 lacs for FY 10.

 Once the BIFR approved the revival scheme on July 17, 2009, the Company took initiatives to build the foundation for the future.

 The company also recently saw a complete change in management with Atul Ltd taking over the control. Atul Ltd itself is a reputed and Rs 500 crore market capitalization company. 

 Amal has already started with production at it's Ankaleshwar site under the able guidance of the new management.

 The company has identified two projects for revamping the existing facility:-

1. To debottleneck the capacity of the existing plant from 100 tpd to 140 tpd and

2. To introduce a new product in which the company will be effectively competing worldwide.

 Company has also signed an agreement on June 01, 2010 to supply excess steam coming from Sulphuric Acid plant to a neighbouring company.

 The Company has an accumulated loss of Rs 38.84 crore and management is looking to wipe out the loss as well as the consequent negative net worth as soon as possible.

 Mr. Sunil S Lalbhai did his MS degree in Chemistry from the University of Massachusetts 

and MS Degree in Economic Policy and planning from the Northeastern University. He 

has been functioning as Chairman & Managing Director of Atul Ltd.

 Mr T R Gopi Kannan has done FCA, FCS, FICWA followed by Post Graduate Diploma in 

Management Studies from IIMA & ACMA (LONDON). He has over 25 years of experience 

including around 9 years in Pfizer Ltd and Nestle India Ltd in the areas of Finance and 

Accounting and over 16years as Head of Finance in Atul Ltd.

 Mr Bharat M Trivedi has done B. Tech (Chemical Engineering) from the Indian Institute of 

Technology (IIT), Mumbai in 1984. He has over 25 years of industrial experience in 

Technical fields like process-development, manufacturing operations, materials 

management, project execution, information technology etc.

 Mr Naresh C Singhal has done his post graduation in subjects of Economics, Statistics & 

Administration, Professional courses from IIM, Ahmedabad and Kolkatta, IIT, Kanpur 

and Administrative Staff College, Hyderabad.

"Ernst & Young has been appointed as the Internal Auditors of the company"

 On an annualized basis the company is expected to record a net profit of Rs 2.5 crore.

 However this is without taking into account the 40% expansion that will result on carrying 

out de-bottlenecking.

 Currently the company is operating at 100tpd capacity however in subsequent quarters 

one can expect more sales with improvement in capacity utilization.

 So with better efficiency and capacity utilization we may also see an improvement in 

operating margins of the company.

 Currently the market cap is 15 crore. So, on the basis of annualized forward earnings the 

company is quoting at a PE of 5.83 (without taking into account de-bottlenecking and 

margin expansion)

 As mentioned earlier, the intent is clearly there to turn around the company especially 

with the appointment of reputed Ernst & Young as the internal Auditors of the company. 

They will be basically ensuring the improvement in internal efficiency.

 And lastly the Gross block of the company is Rs 60 crore i.e. almost 4 

times the market cap of the company. The Management is looking at 

revaluing the same as per current valuations. The same can have a 

positive bearing on the balance sheet and thus the overall valuation of 

the company.

The effect of the initiatives taken by the management has already started reaping results with company posting a turnover of Rs 4.49 crore for Jun'10 and a net profit of Rs 0.6 crore (Rs 5 crore turnover for FY 10 with an operating loss of Rs 0.93 crore)

2 Phase Buying Strategies Suggested [Always buy in SIP ways]

ü  1^st Phase  : Buy at the current price range Rs 21-23 [50% of investment]

ü  2^nd Phase :  Add if the price fall down to Rs 17.5-19.5 [50% of investment]

>>> Expect at least 60-100% return in next 12 months time frame!!!