A microcap chemical stock, Lords Chloro Alkali Limited, saw its shares jump 16.5% after the company revealed plans for a significant capacity expansion to meet growing market demands.
Stock Price Spikes on Expansion News
Lords Chloro Alkali Limited, a company with a market capitalization of ₹436.80 crore, witnessed a sharp uptick in its stock price during the day’s trade. The stock touched a day’s high of ₹184.95 per share, marking a 16.5% increase. It later settled at ₹183, still 15.35% higher than the previous close of ₹197.80 per share.
This notable surge in price reflects investor optimism following the announcement of its capacity expansion plans.
Expansion Details and Strategic Goals
The company has outlined plans to boost its annual production capacity of caustic soda from 210 tonnes per day (TPD) to 300 TPD, adding 90 TPD. This move addresses increasing demand in the market while leveraging cutting-edge technology from Asahi Kasei.
Currently operating at 80-85% of capacity, Lords Chloro Alkali expects the expansion to result in over a 40% increase in output. The adoption of advanced “Zero Gap Technology” is also expected to enhance operational efficiency.
Key benefits of the expansion include:
- Lower production costs due to economies of scale.
- Enhanced margins and improved profitability.
- A strengthened competitive position in the market.
Management’s Perspective on Growth and Innovation
Ajay Virmani, Managing Director of Lords Chloro Alkali, described the expansion as a pivotal milestone in the company’s growth strategy. He emphasized the importance of upgrading technology and capacity to maintain market relevance and ensure operational efficiency.
Virmani stated, “This milestone represents a key step in our long-term growth strategy, enabling us to meet rising market demand while strengthening our competitive edge.” He also highlighted the financial benefits, noting that the expansion will bolster the company’s margins and profitability.
Madhav Dhir, the Executive Director, echoed this sentiment, adding, “The increase in capacity and adoption of advanced electrolyser technology come at a time when demand for our products is surging. This upgrade allows us to enhance operational efficiency, optimize production processes, and deliver higher volumes with improved productivity.”
Company Overview and Market Presence
Founded in 1979, Lords Chloro Alkali specializes in the production of caustic soda and other chemicals. Operating primarily in North India, the company serves industries such as textiles, pharmaceuticals, and plastics. Its product lineup includes caustic soda, liquid chlorine, hydrochloric acid, and stable bleaching powder.
The company’s focus on transitioning from mercury cell technology to membrane cell technology has improved efficiency and sustainability in its manufacturing processes. Despite facing financial challenges in the past, Lords Chloro Alkali is betting on capacity expansion to secure its position in the market.
Financial Snapshot: Growth Amid Challenges
The company’s revenue from operations grew by 26% year-on-year, rising from ₹48.12 crore in Q2FY24 to ₹60.62 crore in Q2FY25. This growth coincided with a turnaround from a loss of ₹1.22 crore to a profit of ₹0.36 crore during the same period.
However, return ratios still reflect lingering challenges, with a return on equity (ROE) of -2.88% and a return on assets (ROA) of -1.83%. The company maintains a debt-to-equity ratio of 0.2, indicating relatively low leverage.
Shareholding Pattern
As of September 2024, the company’s ownership structure reveals:
- Promoters holding a commanding 74.66% stake.
- Foreign Institutional Investors (FIIs) holding a marginal 0.03%.
- Domestic Institutional Investors holding 0.04%.
- The public holding the remaining 25.27%.
This concentrated promoter ownership underscores their confidence in the company’s future prospects.
Expansion Fuels Investor Optimism
Lords Chloro Alkali’s decision to increase production capacity and upgrade technology demonstrates its commitment to meeting market demands and improving operational performance. The stock’s sharp rally underscores investor confidence in the company’s strategic direction, positioning it as a key player in the chemical industry.
