Phillips Carbon pays for IPL?

This Goenka group company, Phillips Carbon Black is down in the red today morning. Down over 2%, it dropped to an intra day low of Rs.120.90 and is now at Rs.121. Overall sentiment on the counter remains weak.

The market is not happy with the TV interview with Chairman Sanjiv Goenka, who said that Phillips Carbon could see some cash outflow on account of its purchase of the new IPL team, Pune.

CESC, a group company ‘s franchise – New Rising Promoters Pvt Ltd won the bid floated by BCCI for a new IPL team. CESC won the rights for Pune team for the April’16 matches. The company will be paying Rs.16 crore to BBCI for every year, for two years till it owns the franchise. The Chairman said very categorically in the TV interview that no other group company, apart from Phillips Carbon could see a cash outflow for this IPL team.

A part of the RP Goenka Group, Phillips Carbon Black is one the largest makers of carbon black in India and seventh largest in the world. This product is a raw material used in the production of automotive trye is produced using carbon black feedstock and tar oil. But all this does seem to be getting translated into good numbers. In Q2FY16, it was only thanks to the 71% (yoY) drop in raw material costs that the company, despite a 23% fall in net sales at Rs.505 crore, posted a 25% jump in net profit of Rs.5.39 crore. Total costs came down 25%.

Its debt stands at Rs.975 crore over Rs1000 crore and quarterly interest outgo is over Rs.20 crore. Thankfully, in current Q2, interest outgo came down 16% at Rs.21 crore. The company has two segments – carbon black and power. Its margins from carbon black are wafer thin, with EBIT margin coming in for the quarter at less than 5%. Dumping by China and Korea is affecting the margins further. Its main demand is from the auto and tyre sector and given the improvement in both these sectors, H2 could see better numbers.