Dalmia Bharat Refractories Unlisted Share

Dalmia Bharat Refractories Limited is a subsidiary of Dalmia Bharat Group. DBRL is a leading manufacturer of refractory products in India. DBRL operates primarily in the refractory industry, which plays a crucial role in sectors such as steel, cement, glass, non-ferrous metals, and petrochemicals. Refractory products are vital for lining furnaces, kilns, reactors, and other high-temperature equipment to withstand extreme heat and chemical corrosion.

In a strategic move to boost operational efficiency and growth, DBRL has divested its refractory business, retaining only its magnesia carbon division and China manufacturing. The company is now concentrating on its Magnesia Carbon business, branded as DMC. DBRL has recently divested from its core refractory business and is currently not actively seeking new avenues for growth to enhance shareholder value. Instead, the company is directing its focus towards investments in the cement and construction material industries, and startups. DBRL has announced recent investments in Dalmia Bharat Limited and HippoStores Technology Private Limited, to maximize shareholders return through the growth of these companies.

Corporate Restructuring:

1. DBRL is formed by the amalgamation of the refractory business of the Dalmia group from 3 units of Dalmia-OCL: Dalmia Refractories Ltd, Dalmia Cement Bharat Ltd and Refractory Unit and GSB India.
2. DBRL underwent significant corporate restructuring, consolidating its Indian refractory business into Dalmia OCL, which was later acquired by RHI Magnesita. This acquisition involved a combination of cash and equity shares, resulting in DBRL holding a 13.27% stake in RHI Magnesita.
3. DBRL acquired Dalmia Mining and Services Private Limited, while divesting its stake in Dalmia GSB Refractories GmbH, Germany, to RHI Magnesita Deutschland AG.
4. Dalmia Cement (Bharat) Ltd sold its 42.36% shareholding in DBRL to Sarvapriya Healthcare Solutions Private Limited for 800Cr, while the Total Market Cap being 750Cr. 
5. DBRL, in collaboration with Himadri Speciality Chemicals Limited, obtained approval from the NCLT for the joint acquisition of Birla Tyres Limited through insolvency proceedings.
6. Dalmia Bharat Sugar and Industries (DBSIL) Ltd siad it will demrge it's refactory unit Dalmia Magnesite Corportion (DMC) and Tour service Govan Travel (GT) and it will get vested into Dalmia Bharat Refractories (DBRL). DBSIL share holders will receive 1 share DBRL for every 39 shares of DBSIL.

To read more about their corporate restructuring, please visit: https://altiusinvestech.com/blog/detailed-analysis-of-dalmia-bharat-refractories-limiteds/

Financial Insights:

While revenue growth and PAT surge indicate positive aspects of the company's performance, the significant decline in EBITDA and the negative PBT raise concerns. The exceptional item is based on profit on disposal of refractory business on slump sale basis. Decline in EBITDA indicates lower operational effeciency leading to a massive decline in PBT.

*The revenue for FY22 is calculated only for the continuing operations, i.e. only from the business that has been retained post the sale to RHI Magnesita.

The table below shows the calculation of the total worth of the business taking into account its liquid assets, long term investments and the remaining existing business.

The worth of business is calculated on the basis of 1.5x of previous year's revenue, that takes it to be 525Cr. The basis for 1.5x is is attributed to benchmarking against competitors, who are currently valued at twice the revenue. The relatively lower multiple is influenced by factors such as reduced market share, operational losses, and recent divestment activities. With cash equivalents and marketable securities comprising a substantial portion of the company's total assets, it indicates a strong liquidity position.

Additionally, holding shares in RHI Magnesita and Dalmia Bharat demonstrates strategic investments in related sectors. The book value per share of 680 suggests an undervalued position compared to the current market price (CMP) of 171. Considering the steep discount of 75%, it's evident that the market has not fully priced in the growth potential and asset value of the company.

DBRL currently lacks strategic influence in the decision-making process of RHI Magnesita, despite their significant stake in the company. This situation suggests the potential for DBRL to divest its stake in RHI, which could bolster the company's cash reserves. This will positively impact DBRL's financial position in the near term.

Sale of Indian Refractory Business

Prior to the sale, the Indian business of DBRL reported revenue of INR 1,100 crore and expenses of INR 1,151 crore, indicating operational losses. However, despite this loss, the company proceeded with the sale of the business, valuing it based on 27 times of DBRL EBIDTA.

The fair value of shares received as part of the sale of the Indian business to RHI Magnesita amounted to INR 1,707 crore, with an additional INR 484 crore received in cash. The net value of assets and liabilities transferred as part of the business amounted to approximately INR 400 crore. Consequently, the ultimate gain realized from the sale of the business amounted to INR 1,759 crore.

In the fiscal year 2023, DBRL successfully divested its entire Indian operations to RHI Magnesita, representing a significant portion of its revenue at 27%. Beyond this transaction, DBRL maintains a robust international clientele, contributing to the remaining 73% of its revenue. The company is strategically focused on expanding its global footprint and exploring opportunities for growth in overseas markets.

Share price journey:

On March 1st, 2022, born from the merger of Dalmia Cement (Bharat) Ltd. - Refractory Division, Dalmia Refractories Ltd & GSBIndia. The shareholders of Dalmia Retractory in the unlisted market got shares of Dalmia Bharat Refractory.Those holding 100 shares of Dalmia Refractory got 768 shares of Dalmia Bharat Refractory. This transaction resulted in falling of share price from ₹829 per share to ₹124 per share.

Revised Scheme of Demerger

Dalmia Bharat Refractories Annual Report 2022-23

Annual Report 2021