Tata Chemicals, the leading soda ash manufacturer, with a market share of 31%, and amongst the top urea producers in the private sector is expanding its soda ash capacity to 1.15m tons. Revenues from the fertiliser segment are expected to grow due to improved utilisation in Diammonium Phosphate and increased focus on non-subsidised complexes with higher realisations. TCL is considering global expansion by setting up a unit overseas where natural gas is cheap and local demand for urea is high.
TCL is also looking at domestic as well as overseas acquisition opportunities in soda ash. The stock currently trades at 10.1 times FY06E EPS of Rs 19.7 per share and 7.7 times FY07E EPS of Rs 25.7 per share. TCL has an investment book of Rs 1,750 crore, which translates into Rs 65 per share at a discount of 20% to current market value. Excluding the same, the stock is effectively available at an attractive P/E of 5.4 rimes FY07E. The stock also provides an attractive dividend yield of 3.4%.