By – Deepansh Krishna
SAP ID – 80012100942
INTRODUCTION
COMPANY OVERVIEW
Since 1972, Deepak Nitrite has been a leading intermediates company in the Indian chemical industry . We serve numerous industries & 56 applications with a portfolio of over 100 international quality products.
OBJECTIVE
To calculate beta of the company and find its significance
VIEWS by BOBCAPS
Announces blueprint for embracing new energy in O2C: With the development of a renewable energy portfolio (solar, use of biomass and hydrogen), Deepak Nitrite plans to repurpose syngas for the production of blue hydrogen and also aims to capture and monetise carbon in phase-1. As the company evolves its electrolyser ecosystem with cost-effective green hydrogen, it aims to once again repurpose syngas as a feedstock for chemicals.
Syngas subsidiary to involve strategic partners and investors: Deepak Nitrite is carving out a gasification business with a net asset value of US$ 9.6bn as a separate subsidiary. It aims to structure the arm as a job work contractor to produce syngas, hydrogen and carbon for Deepak Nitrite and also to provide a minimum offtake guarantee. Management has guided for an initial valuation of US$ 4bn for this subsidiary.
Upside from use of H2 as fuel: In the first stage, Deepak Nitrite expects the subsidiary to see valuation upsides from better utilisation of the syngas plant via production of blue hydrogen and carbon capture. Deepak Nitite too will derive upsides from the shift away from fossil fuel as well as from monetising hydrogen and carbon.
Upside from use of syngas as feedstock: As green hydrogen becomes competitive and Deepak Nitirite’s electrolyser ecosystem develops, the subsidiary will derive higher prices for syngas as a feedstock as against fuel use. Management plans to add value by expanding into the specialty chemicals chain, involving strategic partners and technology licensors.
Front-loading of value unlocking: Deepak Nitrite aims to tie up with strategic partners and investors to derisk the use of new technologies. The approach also helps unlock value at an early stage.
Maintain HOLD: We retain our SOTP-based TP of Rs 2,520 which values Deepak Nitrite’s refining business at 7.5x FY24E EV/EBITDA, petrochemicals at 8.5x. Our TP includes Rs 111 for the value of its venture into digital services and Rs 47 for the new energy division.
DATA COLLECTION
Data of index and equity were collected from https://www1.nseindia.com/ and https://www.nseindia.com/ respectively. Daily returns from 1st March-2021 to 28 Feb-2022 were downloaded in excel format from these websites and it was sorted into weekly format. Then weekly returns were calculated for both index and equity and then regression analysis was done.
DATA ANALYSIS
Predicted Y = 0.058006+0.505015X
N=47, R Square= 0.135527, F= 6.898041
Tstat (beta) = 6.24053832901454
Tstat (0.05,45)= 2.0141
The above regression equation tells us the relationship between X and Y. Where X is NIFTY’s weekly returns and Y is Deepak Nitrite Ltd’s weekly returns.
The positive sign of Beta tells us the that there is a positive relationship between NIFTY and Deepak Nitrite Ltd’s weekly returns.
From the equation, it can be seen that if X rises by 1 unit, Y will rise by 0.505015 units.
T calculated is more that T tabulated which means, β is statistically significant at 5% confidence level.
R^2 is 0.469523 which means 47% of Y (Deepak Nitrite) is explained by X. And the balance is explained by error.
F is 38.944318 which is more than table value which means model is statistically significant at 5% level.
CONCLUSION
β is statistically significant in case of NIFTY and Deepak Nitrite. Also, it can be concluded that Deepak Nitrite ltd is a low beta share. Since it is less than 1.
from here.