Buy Vishnu Chemicals Ltd for the Target Rs. 650 By Emkay Global Financial Services Ltd
Chrome ore mine’s acquisition completed
Vishnu Chemicals (VCL) completed the acquisition of the chrome ore mine for ~USD10mn on a debt-free, cash-free, and liability-free basis on 21-Nov-25. VCL’s wholly owned subsidiary would own 74% of the mining entity and 100% of the chrome beneficiation plant, along with mining and infrastructure assets. The chrome mine is spread over ~1,800 hectares and has >10mmt of reserves. Postbeneficiation, the actual usable chrome ore would be ~5.5-6mmt, which can last 50Y (ie basis VCL’s current demand). With further expansion in chromium chemicals, VCL estimates the life of the reserve at 30Y. We expect it to benefit from a) integrated sourcing and manufacturing, b) stable supply of chemical-grade chrome ore without price volatility, and c) a faster ramp-up of the acquired plant. We expect annual EBITDA improvement of Rs300-400mn (basis current chrome ore prices) at optimal utilization, which will help meet VCL’s annual chrome ore requirement. We retain BUY with an unchanged TP of Rs650 (20x Dec-27E EPS).
Chrome ore mine’s acquisition – a key trigger for margin improvement
VCL began to backward integrate in FY21 which reduced the cost of manufacturing SDC and external dependence on key raw materials. VCL also acquired Ramadas Minerals in FY24 which has a barite beneficiation plant, to manufacture barium chemicals. The completion of acquisition of the chrome mine and beneficiation plant in South Africa will ensure supply security and reduce cost of chrome ore (thus, improving margins). The company has invested ~USD10mn on a debt-free, cash-free, and liability-free basis. The chrome mine is spread over ~1,800 hectares and has >10mmt of reserves. Postbeneficiation, the actual usable chrome ore would be ~5.5-6mmt, which can last 50Y (ie basis VCL’s current demand). With further expansion in chromium chemicals, VCL estimates the life of the reserve at 30Y. Per our channel checks, the average cost of mining chrome ore, with transportation cost from South Africa to the plant in India, is ~USD250/mt. We believe this acquisition will lead to significant optionality benefit for VCL, in terms of gross margin, eventually leading to better EBITDA margins. We expect cost-savings of Rs300-400mn (basis current chrome ore prices) at optimal utilization, which will help meet VCL’s annual chrome ore requirement. Thus, we build EBITDA CAGR of ~20% over FY25-28E, compared to revenue CAGR of ~11%.
Strontium carbonate plant commissioned in Q2FY26
Vishnu incurred capex of ~Rs825mn in H1FY26 (FY25: Rs880mn). We believe the amount was primarily spent on the strontium carbonate project (12,000mtpa) and on regular plant maintenance. The company commissioned the plant in Q2FY26; it expects commercial sales to start in the current quarter (ramp-up in CY26). Strontium carbonate is a cost-effective alternative to permanent magnets (ferrite magnets). It is also used in electronics, advanced ceramics, and metallurgy industries. Asia Pacific accounts for 50% of the strontium carbonate demand, followed by the EU and the US. We believe the company will primarily focus on import substitution and subsequently exports.
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