Analysis: Indo Borax & Chemicals Limited

Modified on July 4, 2020

This article provides in-depth fundamental analysis of Indo Borax & Chemicals Ltd, a company producing Boric Acid and related products.


Indo Borax & Chemicals Ltd Research Report by Reader

Q 1: Hi sir. Since coming across your blog a few weeks back, I have really enjoyed researching companies using your method. My query is regarding a company named Indo Borax & Chemicals Ltd. Using your approach has got me these answers-

  • Sales growth for past 10years-10% Profitability growth-16%
  • Npm -15-18%
  • tax payout >30%
  • debt free company
  • current ratio >5
  • cash flow>0
  • cPAT – INR 66cr vs cCFO – INR50cr
  • p/e -6.65
  • peg<0.5
  • earnings yield-15%
  • p/b-1.26
  • price to sales<1.5
  • dividend yield -0.6
  • receivable days is decreasing
  • inventory turnover is steady
  • fixed asset turnover is increasing
  • ROE-15-20%

My only 2 gripes with the company are:

  • cCFO is lesser than cPAT. But this maybe because of the growth of the company.
  • Secondly, very low dividend payout ratio of 5%.

I am holding the stock since 6 months. My main attraction towards this stock was low p/e with good growth potential. Average cost of purchase is INR 260. The company has taken up a plan for expansion of capacity by 40% .

Your inputs on the above data will be really helpful. Thank you.

Q 2: Sir, Please go through following stock analysis. If CFO < NP how much leeway one has to consider for selecting stock if other parameters are good. Indo Borax & Chemicals Ltd: – Indo Borax & Chemicals Ltd manufactures and sells chemicals (Boric Acid)



i) Sales Growth & Profitability:

  • Sales have been growing at 13.6 % CAGR over 10 years (05-15) and 17.4% CAGR over last 4 years (12-15).
  • OPM is at 23% CAGR for 10 years and at 20.5% CAGR for last 4 years.
  • NPM is at 16.6 % CAGR for 10 years and at 16.4 % CAGR for last 4 years.

Indo Borax & Chemicals Ltd has good OPM & Although NPM is at 16.6 %. It contains good amount of other income. Without other income, NPM is at 11 %


ii) Operating Efficiency:

  • Cumulative net profit of Indo Borax & Chemicals Ltd over last 10 Years is INR 66 cr. & CFO over same period is INR 50 Cr. Therefore, company is not able to convert Profit in cash on time.
  • Although sales of Indo Borax & Chemicals Ltd has risen from INR 24 cr. to INR 73 cr. in 10 years its fixed assets has reduced from INR 4 cr. to INR 3 cr. in the same period. Its current Fixed Asset turnover ratio is 21.5. Its debtor days have reduced from 23 to 17 and inventory turnover has risen from 4 to 7.

The company has mixed operating efficiency.


iii) Debt

  • D/E = 0.0. Interest Coverage = 378.6


iv) Tax

  • Company is paying the tax at corporate tax rate.



  • Its PE is at 6.6
  • Its EY is 15 %
  • Mcap /Sales = 1.1



  • Company is showing mixed operating efficiency.
  • Component of other income is higher in total net profit.

I am not able to gauge the future growth of Indo Borax & Chemicals Ltd through its annual report or website.


D) To Invest:

  • Indo Borax & Chemicals Ltd has good OPM (20 %) & NPM (16 %) with sale growth of 17%
  • Promoters have increased its stake from 51% to 55 % in March to June quarter. No FII holding.
  • No Debt. PE of 6.5 on price of INR 261. E Y of 15 %.


Dr Vijay Malik’s Response

Thanks for writing to me! I am happy that you have started your own stock analysis and have pointed out the important parameters for analysis of Indo Borax & Chemicals Ltd.


Financial Analysis of Indo Borax & Chemicals Ltd:

Indo Borax & Chemicals Ltd Financials

Indo Borax & Chemicals Ltd has been growing its sales at a moderate pace of 10-15% year on year since last 10 years (FY2005-14). However, this sales growth seems to have come at reduced profitability, nevertheless, the profitability margins are at decent levels. Operating profit margins (OPM) of Indo Borax & Chemicals Ltd have reduced from 33% in FY2009 to 19% in FY2014. Similarly, net profit margins (NPM) have decreased from 22% in FY2008 to 16% in FY2014.

Other income as rightly pointed out by you, is a significant portion of net profits and needs to be analysed in detail by the investor, to judge whether it consists of recurring items or one time items.

Indo Borax & Chemicals Ltd has been paying taxes at 32-34% rate, which is a very good sign.


Operating Efficiency Analysis of Indo Borax & Chemicals Ltd:

You have rightly pointed out that over the years; Indo Borax & Chemicals Ltd has been reflecting improved operating efficiency. This is shown by increasing fixed assets turnover, which has improved from 5 in FY2006 to 21.5 in FY2014. Inventory turnover, though fluctuating, has increased from 5.5 in FY2011 to 6.5 in FY2014. Receivables days are stable at 17 days, indicating that the credit terms with customers are stable over the years

Cash flow data provided by screener in exported excel is not comparable to the profits data. The exported excel has sales & profitability numbers at consolidated level and cash flow numbers at standalone level. Therefore, the conclusion of cumulative cash flow from operations (CFO) INR 50 cr (standalone) being less than net profit after tax (PAT) of INR 66cr (standalone) is not right. An investor would have to take the cumulative CFO data at consolidated level, from annual reports of Indo Borax & Chemicals Ltd, to do this comparative analysis.

Otherwise also, if receivables days are stable and inventory turnover is increasing, then there is very little avenue left for profits to be stuck in working capital or any other thing. In such scenarios, cumulative CFO is usually equal or higher than cumulative PAT. However, it needs to be confirmed by the investor by taking cumulative CFO data (consolidated) from annual reports.

Another sign that suggest that cumulative CFO should be equal or greater than cumulative PAT, is that the company is debt free. It must be able to meet its day-to-day and capital expenditure requirements from cash generated from operations. There were news of Indo Borax & Chemicals Ltd doing a stock buyback in FY2015, which also indicates that company has good liquidity.

As pointed by you, the fact of promoters increasing stake by about 4% in June 2014 quarter, also indicates that promoters have faith in the company.

Indo Borax & Chemicals Ltd has been paying regular dividend to its shareholders. These are signs of a shareholders’ friendly management. Low dividend payout should not be an issue until the company is able to make good use of retained profits. However, if a company starts to squander the cash in unprofitable ventures, then investors should expect higher payout from management.


Margin of Safety in the market price of Indo Borax & Chemicals Ltd:

Indo Borax & Chemicals Ltd is currently available at a P/E ratio of 7.7, which offers good margin of safety as described by Benjamin Graham in his book The Intelligent Investor.

However, we recommend that an investor may read the following articles to assess the PE ratio to be paid for any stock, takes into account the strength of the business model of the company as well. The strength in the business model of any company is measured by way of its self-sustainable growth rate and the free cash flow generating the ability of the company.

In the absence of any strength in the business model of the company, a low PE ratio of the company’s stock may be signs of a value trap where instead of being a bargain; the low valuation of the stock price may represent the poor business dynamics of the company.


Analysis Summary

Overall, Indo Borax & Chemicals Ltd appears to be a company growing at a moderate pace with reducing profitability margins. However, profitability margins are still at respectable levels. Operating efficiency of Indo Borax & Chemicals Ltd has improved over the years. Company is showing signs of healthy cash generation from operations; however, an investor needs to verify the same by checking consolidated cash flow numbers from annual reports.

These are my views about Indo Borax & Chemicals Ltd. However, you should do your own analysis before taking any investment related decision about Indo Borax & Chemicals Ltd.

You may use the following steps to analyse the company: “How to do Detailed Analysis of a Company

Hope it helps!





  • The above discussion is only for educational purpose to help the readers improve their stock analysis skills. It is not a buy/sell/hold recommendation for the discussed stocks.
  • I am registered with SEBI as an Investment Adviser under SEBI (Investment Advisers) Regulations, 2013.
  • Currently, I do not own stocks of the companies mentioned above in my portfolio.

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