Kiri Industries - Where Cash > Market Cap
A typical dye manufacturer's fortunes are likely to turn due to winning an arbitration case. Can Kiri 2.0 investors fortunes also turn ?
India is not a market where you find stocks at deep discount, it’s very rare where you can find stocks where your cash and cash equivalents is higher than the enterprise value.
Kiri Industries is an interesting case where the same will be true, company currently has a market cap of ~3325 crores and is the company is likely to receive ~5000 crores of cash (post-tax) in the near future as part of arbitration win against Senda.
We deep dive on this interesting company-
What they do, where they are and where they can be in the future ?
Founded in 1998, Kiri Industries Limited (Kiri) is a leading manufacturer and exporter of a wide variety of Dyes, Dyes Intermediates, and Basic Chemicals from India. Headquartered in Ahmedabad Gujarat, the company manufactures a vast array of products at three manufacturing facilities.
The Company started to export the products to China and Taiwan from the year 1999. The company was was given Two star Export house rating in the year 2004 along with converting its facility into a EOU. Subsequently the management in 2005 and 2007 started backward integration into Vinyl Sulphone and H-acid. Company in 2010 acquired assets of Dystar (Investment of roughly 100 crores).
Currently, the bulk of valuation comes from settlement of Dystar (more details below) and future prospects including setting up a smelting copper plant.
The article is split on 3 parts - Dystar JV, Kiri’s legacy business and Future expansion into Copper plant and fertilizers.
Dystar JV -
The DyStar Group is a leading dyestuff and chemical manufacturer and solution provider, offering a broad portfolio of colorants, specialty chemicals, and services to customers across the globe.
DyStar has 16 manufacturing plants with a combined production capacity of 176,000 TPA.
The company has market share of over 21% when it comes to Global markets. It has expertise in dyes, dyes solutions, leather solutions, performance chemicals, and custom manufacturing of special dyes/ pigments.
Chronology:
DyStar was founded in 1995 as a joint venture between Hoechst AG and Bayer Textile Dyes.
In 2000, the textile dyes business from BASF was integrated.
In 2010, Kiri has a 37.57% stake in the company. (Adjusted cost of Acquisition would be around Rs 100 crores)
In 2013, Acquired Lenmar chemical business. Also in 2013 Dystar became profitable.
In 2015, Kiri Filed minority oppression suit against Senda and DyStar in Singapore Court.
In 2016, Dystar Acquired Emerald Performance materials specialities group.
In 2018, Singapore Court delivered milestone judgement in favour of Kiri for buyout of stake in Dystar.
In 2019, KIL won appeal in Singapore case.
In 2021, SICC awarded a valuation of US$481.60Mn for Kiri’s stake in DyStar.
In 2022, Kiri won the appeal on valuation judgment and appeal of cost award of SICC.
In 2023, Singapore Court awarded value of US$603.8 mn for Kiri's stake in Dystar.
In 2024, SICC Order En Bloc sale of DyStar through the court appointed receiver and award priority payment of US$ 603.80 Mn to the company.
Further in 2024 Deloitte & Touche LLP, Singapore wass appointed to oversee the process.
In 2025, Supreme Court of Singapore awarded Interest of 5.33% on USD 603.80 Mn from September 2023 till payment. (USD 70mn roughly) Also legal fees would be reimbursed to the tune of USD 10mn.
Total payout post tax is expected to be ~5074 crores (Refer chart).
As per Singapore Supreme court its expected that the hard deadline is December 2025, though the sale is expected to close in few months. Currently the Mcap of the company is below the total amount of cash expected to receive post tax.
Kiri’s standalone business -
The standalone business consists of Dyes, Dyes Intermediates and Sulphur and Bulk Chemicals.
Below is the manufacturing process and where the plants of Kiri are located along with capacities.
There are key 4 variants of Dyes where Kiri deals in namely Reactive Dyes, Disperse Dyes, Direct Dyes and Intermediates to Dyes.
Reactive Dyes -
About - This are most versatile and popular class of Organic Dye. These are water soluble dyes which react to fibre, forming a direct chemical linkage with the application materials, which is not easily broken and offers good wash fastness.
Colours available: Red, Yellow, Black, Orange, Blue, Green, Violet, etc.
Types of Dyes: Kirazol VS dyes, Kirazol KR/KX dyes, Kirazol S &W dyes, Kiractive ME dyes etc.
Use cases - The popularity of Reactive dyes with textile processors is due to its versatility in the application by various dyeing method.
Properties : Found in power, liquid and print paste form which are water soluble. The dyes have very stable electron arrangement and can protect the degrading effect of ultra violet rays. It requires less time and low temperature for dyeing and are comparably economical.
Disperse Dyes -
Disperse dyes are synthetic organic dyes and is a kind of organic substance which is free of ionizing group. They are less soluble in water and are used for dyeing synthetic textile materials. Disperse dyes are mainly used for dyeing polyester yarn or fabric.
Advantages: Fastness to wet treatment and dry heat. Dispersed dyes do not fade away when left exposed to sunlight for prolonged periods. Disperse dyes can be applied to a whole range of chemically diverse, hydrophobic manmade fibres.
Acid dyes -
Dyes which can be applied directly to the application materials from an aqueous solution. The Company has been working on developing Acid dyes since a decade.
Advantages:
1) Easy in application
2) Complete colour range with very good bright shades.
Direct Dyes -
Direct dye, also known as Substantive Dye, is a class of coloured, water-soluble compound that has affinity for fibre and is taken up directly, mostly it is sodium salt of aromatic compounds.
Advantages of Direct dyes: Direct dyes are easy to apply after proper training and they can be used in almost any dye house equipment by exhaust or continuous Direct dyes are less affected by variations in liquor ratio than reactive dyes.
Dye Intermediaries -
Dye intermediates are the main raw materials used for manufacturing dyestuffs.
The manufacturing chains of dyes and dyes intermediates can be traced back to petroleum-based products Naphtha and natural gases are used for the production of Benzene and Toluene, which are subsequently used for manufacturing nitro-aromatics.
Examples of major dyes intermediates are Vinyl Sulfone, Gamma Acid, H Acid, CPC, J Acid, α-Naphthyl Amine, etc. Management is backward integrated in Vinyl Sulfone and H acid.
Future business - What is Kiri planning to do with the money ?
Company plans to invest money on building 1 million tonnes capacity copper plant and 1.65 million tonnes per annum Fertilizer facility.
The company plans to spend ~12000 crores in next 5-6 years (~4000 crores in equity).
This Phase 1 and Phase 2 is expected to come in 2027-28 and 2028-29 respectively.
The plan is to bring in entire 10 lakh tonnes by 2030.
The project would be setup in Gujarat and this includes smelter and forward integration into copper products.
EC clearance has been received for both copper and fertilizer project.
The Current LME prices is around 9500 USD or so for per tonne.
The company would be led by Mr Sarkar who is ex Birla Copper and who used to sit in Hindalco board and has extensive experience in this area.
Conclusion -
Kiri is an interesting company where there is definite value at current market cap.
Historically, the company has not been the best allocator of capital and with diversification to fertilizers and copper, there are some concerns about future allocations as well.
However, the management has indicated there will be a reasonable payout and the promoter has infused ~100 crores in Kiri Industries which shows a sign of confidence.
With arbitration case likely to be settled, future prospects and capital re-distribution becomes more clear by end of year, there can be interesting times for Kiri Industries.
Disclosure - We are not registered under SEBI. All information above is based on public sources and due diligence conducted by us. We may or may not have invested in stocks which write above.
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For other posts - Kindly refer to -
Hindustan Construction Company (HCC) - https://cashcows.substack.com/p/hcc-highway-to-heaven
IGI Limited - https://substack.com/home/post/p-159670347
Tata Motors - https://cashcows.substack.com/p/tata-motors-global-auto-behemoth
Vishnu Chemicals - https://cashcows.substack.com/p/vishnu-chemicals
Panacea Biotech - A global vaccine powerhouse in making - https://substack.com/@cashcows/p-158207990
It is a bet on management's ability to handle a large copus and how do they execute. On paper, a dye company should have no visible moats running a copper plant.
However, risk-reward can be extremely favourable (at a negative enterprise value) if they execute it.
It's a very interesting situation, especially in india where there are not a lot of companies in India which are deep value.
Thanks for the interesting read. What are your thoughts on the fact that there is an oversupply of smelting capacity of copper globally and domestically ( with Kutch Copper's first unit having already come online and to be ramped up to more than the current entire capacity India has including the shutdown Sterlite unit) resulting in global TC/RCs dropped significantly(currently negative) by last month ? I wonder what this means for the return on that capital planned.