Analysis: Excel Industries Limited

Modified: 08-Jun-21

This article provides an in-depth fundamental analysis of Excel Industries Ltd, an Indian manufacturer of speciality chemicals (speciality polymer additives and veterinary APIs).

In order to benefit the maximum from this article, an investor should focus more on the process of analysis instead of looking for good or bad aspects of the company. She should learn the interpretation of different types of data and transactions and pay attention to the parts of annual reports etc used to get the information. This will help her in improving her stock analysis skills.

Excel Industries Ltd Research Report by Reader

Q: Hello Dr.Vijay. I found your website a few days back . Thank you very much for this excellent website which is extremely useful for the newcomers in analyzing and picking the right stock. I would like to know your views on Excel Industries Ltd.

Excel Industries Ltd although listed in Pesticides and Agrochemicals is a diversified company with Pharma API, Veterinary Medicine and most impotently a high potential futuristic Environment& Biotech Division.

  • Improving sales growth. 7.5% CAGR for last 10 years and 15 % for last 3 years.
  • Improving profit margins, OPM -17%, NPM – 8 % (for the last few Quarters).
  • Decreasing debt to equity – 0.7
  • Consistently tax and dividend paying
  • Valuation seems attractive with P/E ratio of around 8.
  • Increasing promoters’ holding; currently 47%

The most attractive thing I found about Excel Industries Ltd is that the Environment & Biotech division, which deals with Organic Waste Conversion reported a growth of about 50% last year although it constitutes only around 5% of total income.


Dr Vijay Malik’s Response

Thanks for your feedback & appreciation! I am happy that you found the articles useful!

Financial Analysis of Excel Industries Ltd:

Excel Industries Ltd Financials

Excel Industries Ltd has been growing its sales at a moderate pace of 10-15% year on year since last 10 years (FY2005-14). However, profitability margins (both OPM & NPM) have been fluctuating wildly. Operating profit margins (OPM) have been varying from 8-15% and net profit margins (NPM) have been fluctuating from 0-8% over the years.

Such fluctuating margins are characteristic of companies, which have low bargaining power with their customers. In such businesses, companies find it difficult to pass on the increase in raw material costs to their customers quickly and thus take a hit on their profitability margins.

Over the years, the tax payout ratio of Excel Industries Ltd has been fluctuating a lot. Tax rate is varying from 15% to 33%. An investor should study it in detail to understand whether Excel Industries Ltd has received any tax concessions etc. from govt.

Operating Efficiency Analysis of Excel Industries Ltd:

Operating efficiency parameters of Excel Industries Ltd reflect that it has been able to improve its efficiency levels over the years. Net fixed assets turnover has improved from 1.9 to 3.2 over the years. Similarly, inventory turnover ratio of Excel Industries Ltd has also improved from 7.3 to 9.2. These are good signs.

Excel Industries Ltd has been able to convert its profits in to cash flow from operations. PAT for last 10 years (FY2005-14) is INR 72 cr. whereas the CFO over the similar period is INR 136 cr. Receivables days, though high, but are nearly stable at 80-82 days.

Debt levels of Excel Industries Ltd have been increasing year on year. Total debt of the company has increased from INR 52 cr. in FY2011 to INR 95 cr. in FY2014. Increasing debt levels with growing business are the features of companies operating in capital-intensive businesses.

Investors should be cautious of investing in companies, which have continuously increasing debt levels, as high debt has the potential of increasing the risk of bankruptcy and reduced profitability under tough business conditions.

You should read the analysis of two other companies: Ahmednagar Forgings Ltd and Amtek India Ltd, to understand the impact low fixed asset turnover can have on the debt levels of companies. You may read their analysis here:

You have mentioned that Excel Industries Ltd has been working on an environment & biotech division, which might hold great potential. However, currently, the size of this division seems small. It would not be able to have a big impact on the overall business of Excel Industries Ltd. Therefore, I believe that an investor should focus more on the existing agrochemicals business while taking any investment decision about the company.

Margin of Safety in the market price of Excel Industries Ltd:

Excel Industries Ltd is currently available at a P/E ratio of about 10, which offers very low 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, Excel Industries Ltd seems to be a company growing at a moderate pace but unable to maintain its profitability margins due to low bargaining power with its customers. The company has been able to improve its operating efficiency over the years; however, it has witnessed increasing debt levels due to its capital-intensive business. An investor should keep a close watch on its debt levels. Investors should analyse the company  further to understand the reasons for fluctuating tax payout ratios.

These are my views about Excel Industries Ltd. However, you should do your own analysis before taking any investment related decision about the company.

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

Hope it helps!




Registration status with SEBI:

I am registered with SEBI as a research analyst.

Details of financial interest in the Subject Company:

I do not own stocks of the companies mentioned above in my portfolio at the date of writing this article.

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