KRC RESEARCH 1

Daily Corporate News Analysis By KRC Research

Atul Ltd.

Initiating Coverage March 23rd, 2005

Key Data

CMP Rs.72

Date March 23rd, 2005

Sector Dyes and Dyestuff

Reuters Code ATLP.BO

Face Value 10/-

52 Week H/L Rs.94.45/28

Market Cap Rs.240.03 Crs

Atul Ltd is engaged in the business of manufacturing Colours and specialty chemicals. The company gets around 35% of its sales from Colours (Dyestuff), and the remaining from specialty chemicals like Aromatics, Agrichemicals and Bulk drugs. The core business of the company is witnessing a highly competitive scenario from low cost manufacturers of China. Hence despite the growth in the usage of its core product –dyes and dyestuff, it expects the business to remain flat in the near future. However, the company expects growth in its specialty chemicals business, particularly Agrichemicals and Aromatics. The company is currently available at a reasonable price in relation to its size. However, the low price is mainly due to the high competitiveness in its core business and increase in raw material costs which the company is unable to pass on to the consumer, which have resulted in low margins. Hence we recommend a hold on the stock. Key Developments Atul Ltd. to restructure capital High Court of Gujarat granted its approval to Atul Ltd.’s scheme of restructuring. As per the scheme, the credit balances in securities premium account and capital redemption reserve account which can be utilized for various write offs. Aggregate write offs would be to the tune of Rs. 75.86 crore of which Rs. 52.86 crore would be utilized for writing off miscellaneous expenditure and Rs. 23 crore against contingencies. This measure will ensure that the future profits of the company will not have to bear the burden of VRS amortization and any unfavorable outcome from past contingencies.

Investment Rationale

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Atul Ltd

March 23rd, 2005

KRC RESEARCH 2

Financials Net Profit up at Rs 8.46 crores The quarter saw a turnaround in the profits as compared with Q3 FY04 with net profit at Rs 8.46 crores from a loss of 1.59 crore earlier in spite of the profit margins being adversely impacted by the rise in the raw material cost front. Valuations Atul currently trades at a EV/EBIDTA of 6.6x its trailing twelve months EBIDTA for quarter ended December 2004.

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