Chemfab Alkalis Ltd – From Caustic Soda to Caustic Drama (₹563 Cr Capex and Counting)
1. At a Glance
Chemfab Alkalis Ltd (CAL) is that smallcap chemical stock which produces caustic soda, chlorine, hydrogen, hydrochloric acid, sodium hypochlorite and—because why not—PVC-O pipes. On paper, it’s ISO-certified, membrane-technology loving, and diversified. In reality, it’s a ₹952 crore company trading at a P/E of 345 while barely scraping ₹2.7 crore in annual profit. That’s like buying a Maggi packet at Leela Palace rates. With a ₹563 crore Karaikal greenfield project and debt creeping up, this is one smallcap that thinks it’s playing in the chemical IPL. Whether it becomes SRF or Chemplast Sanmar 2.0… well, that’s the ₹657-per-share question.
2. Introduction
Chemfab Alkalis has the vibes of a South Indian family-run enterprise with a taste for heavy chemicals and ambitious projects. Started in 2009, they’ve done the basics: Pondicherry caustic soda plant (185 TPD), Andhra PVC-O pipe plant (6,000 MTPA → 14,000 MTPA expansion underway), and now a new subsidiary in Karaikal aiming to produce caustic soda + aluminium chloride.
The problem? Earnings are thinner than a wafer. Last five years show double-digit sales growth but profits evaporating like hydrochloric acid on a hot plate. FY25 ended with negative net profit, and yet, the market still values it like it’s SRF’s long-lost cousin.
Why? Because chemicals as a theme has investor FOMO written all over it, and Chemfab is riding that pipe dream (literally).
Question to you: would you rather trust a caustic soda smallcap with ₹563 crore capex, or just stick to a big boy like Tata Chemicals who at least won’t blow up your PVC irrigation line?
3. Business Model – WTF Do They Even Do?
CAL runs on three tracks:
1. Caustic Soda & Chlor-alkali Products (88% of FY23 revenue):
Mainline caustic soda lye (74%).
Caustic soda flakes, liquid chlorine, hydrogen, HCl, sodium hypochlorite.
End industries: textiles, FMCG, petrochemicals, pharma, paper.
2. PVC-O Pipes (12%):
Irrigation pipes up to 400mm diameter.
Customers: farmers’ associations + EPC contractors doing water supply projects (70–80% order book).
Expansion from 6,000 MTPA → 14,000 MTPA with 2 new lines.
3. Salt Division:
Industrial + edible salt. Not core, but useful backward integration.
Business model summary: sell commodity chemicals in a cyclical industry, add pipes for glamour, throw in a mega-project for spice, and pray margins improve.
4. Financials Overview
Quarterly Numbers (₹ Cr):
Source table
Metric
Jun’25 (Latest)
Jun’24 (YoY)
Mar’25 (QoQ)
YoY %
QoQ %
Revenue
91.5
76.5
92.3
19.6%
-0.9%
EBITDA
11.3
8.3
13.3
36%
-15%
PAT
2.55
0.90
-9.19
183%
NA
EPS (₹)
1.78
0.63
-6.40
183%
NA
Commentary:
YoY: Strong rebound from last year’s chemical slowdown.
QoQ: PAT turned positive after a disastrous Mar’25 (-₹9.2 crore).
Annual EPS is still negative (-₹3.68), so P/E of 345 is a cosmic joke.
5. Valuation – Fair Value Range Only
Method 1: P/E Multiple
Normalized EPS (last 3-year avg): ~₹15–20.
Industry P/E: ~20x.
Fair Value = ₹300–400.
Method 2: EV/EBITDA
FY25 EBITDA: ~₹47 crore.
EV/EBITDA range 10–12x → EV = ₹470–560 crore.
Current EV ~₹1,030 crore.
Implies overvalued.
Method 3: DCF (rough)
Assume Karaikal expansion delivers EBITDA doubling in 5 years.
Discounting at 12% → fair range ₹350–500.
Fair Value Range (Educational Only): ₹300 – ₹500 (Disclaimer: For educational purposes only, not investment advice.)
