Tata Group stock involved in manufacturing and exporting chemicals surged nearly 3 percent to Rs.1,078.6 per share after gaining profits in Q1 FY25 from net losses incurred in the previous quarter.
Share Price Variation
In Tuesday’s trading session, the share price of Tata Chemicals Ltd. reached an intra-day high of Rs.1,078.60 per share, from its previous closing price of Rs.1,051.65 apiece. The share surged nearly 3 percent in the session.
Financial Performance
The chemical industry is currently grappling with significant challenges, including high operating costs and reduced demand, leading to widespread losses across various companies.
As a result, Tata Chemicals’ revenue from operations dropped from Rs.4,218 crore in Q1 FY24 to Rs.3,475 crore in Q4 FY24 but rose to Rs.3,789 crore in Q1 FY25. This represents an 11 percent year-over-year decrease and a 9 percent quarter-over-quarter increase.
The company’s Profit After Tax (PAT) fell from Rs.587 crore in the first quarter of FY24 to a loss of Rs.841 crore in the fourth quarter of FY24, but it recovered to a profit of Rs.190 crore in the first quarter of FY25. These financial improvements on a quarter-on-quarter basis, highlight Tata Chemicals’ resilience and ability to recover in a challenging market environment.
Despite the fluctuations, Tata Chemicals has shown stable growth in liquidity and earnings ratios. The company showcases a strong current ratio of 1.68 and a low debt-to-equity ratio of 0.25, reflecting solid liquidity.
In terms of return ratios, the Return on Capital Employed (ROCE) and Return on Equity (ROE) stand at 7.86 percent and 3.43 percent, respectively.
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Industry Constraints
The Indian chemical industry is currently facing a challenging period marked by declining orders, soaring raw material prices, and reduced profit margins. As a result, many factories are operating below capacity, leading to cash flow issues, delayed capital expenditures, and a stagnant job market.
Despite these challenges, there are signs of recovery in the industry. Chemical exports saw a 2.8 percent increase in April-May 2024 compared to the same period last year. Looking ahead, the industry is expected to see robust 7-9 percent growth in FY 2025, driven by resurgent domestic and international demand.
Segment Revenue Mix
Tata Chemicals Ltd. operates in two key business segments: Basic Chemistry Products and Specialty Products. In the quarter ended June 2024, the company generated approximately 78.4 percent of its revenue from Basic Chemistry Products and 21.6 percent from Specialty Products.
Capacity Enhancements
Tata Chemicals is expanding its core product capacities, commissioning 2.3 million tonnes of soda ash and 0.7 million tonnes of bicarbonate in Q1 FY25.
The company aims to increase soda ash capacity by approximately 20 percent, bicarbonate by around 30 percent, and silica production by five times, with a total project cost of about Rs.4,600 crore from FY 25 to FY 28.
Company Profile
Tata Chemicals Ltd. currently is the world’s third largest producer of soda ash with manufacturing facilities in India, United Kingdom, Kenya and the United States. It is also the sixth largest producer of sodium bicarbonate. Tata Chemicals Ltd manufactures and exports basic chemistry and specialty products.
Written by – Siddesh S Raskar
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