Refex Refrigerants Ltd: Some Thoughts:

1. Refex Refrigerants Ltd is the only player in the country which has the distinction of refilling and marketing hydrofluorocarbons, which is a non-ozone depleting, environmentally safe refrigerant developed to replace chloro-flouro-carbons in several air conditioning and refrigeration applications. Refex is also planning a big push of HFC gas cans for car air-conditioners. Refex earlier launched HFC gas in cans. All air-conditioned cars need to change gas once in 24 months. With this initiative the cost will come down by 50% for the car owner. Refex Refrigerants Ltd has applied for Carbon Credits and hopes to get the same from the international authorities. But there is an arugment here: It is well known that the companies like Guj Fluoro/Navin Fluorine being manufacturers of HFC can claim carbon credits however, since Refex just imports and packages them, there is a question mark regarding its approval of getting Carbon Credits, from International Authorities. However, its renewable energy initiatives could help it get the same without much hassle.

2. A couple of years back, Bennett, Coleman & Co (BCCL) inked an agreement to pick up around 3.5% stake in the equity capital of Chennai-based Refex Refrigerants. The company is in the process of building Refex as a national brand and BCCL can add tremendous value to its branding initiatives.

3. Poor offtake in Automobile and Consumer durable sectors contributed to the drop in business in 2008-09 and Q1FY10. However, with both these sectors picking up, the company is expected to do well going forward.

4. Today the current market for HFCs is about 34,000 tonne in the country. So after the implementation of the Montreal Protocol by January 2010, the shift will be to HFC-based business. So, definitely the market is big for this and undoubtly Refex Refrigerants Ltd with its expanded capacity by March, 2010, will be a major beneficiary.

5. Refrex plans to export hydro fluorocarbons or HFCs to developed markets like the US and Europe after importing it from China and Singapore. The company imports refrigerant gases in liquefied form, regasifies it and packages it in cans in India.

6. A couple of years abck the company received a special import licence for importing 2000 MT of HCFC-based refrigerants from DGFT. Sales to automobile companies would contribute about 40% to both topline and bottomline in FY10.

7. Clients of Refex Refrigerants Ltd, include Hyundai Motors, Tata Motors, Hindustan Motors, Reva Electric Car Company, sports car maker San Motors, Toyota Kirloskar, Godrej and Boyce, Blue Star, Carrier Aircon, and the like.

8. Television Eighteen India Ltd and Bennet Colomen & Company Ltd (BCCL) holds 1.78% and 2.5% stake in the company. This shows that the company has a good background. Moreover, its partnership with BCCL and TV18 for print and Television, will help it in its initiative of big brand building exericise.

9. At the current price of Rs.32.15, the dividend yield is a whooping 6.22%. Moreover, the company has decided to pay dividend during FY10 also. The market cap is only Rs.49.75 Cr for such a huge company. Moreover, market cap/sales is only 0.6 for FY09. If the company indeed achieves what they are aiming to do by 2010, the stock can turn out to be at least 6-7 bagger in just 18 months.

10. The company's renewable energy projects would be ready by December, 2009. Hence this is expected go give some cushion against the escalating interest cost. Its subsidiaries, Sherisha Technologies (S) Pte Ltd, Singapore and its step-down subsidiaries namely, Kaltech Engineering & Refrigeration Pte Ltd, Singapore and Global Refrigerants (S) Pte Ltd, are expected to contribute substantial parts to its revenue basket going forward. The pledging of the shares by the promoters is just a temporary arrangements and is expected to be released soon.

The stock of Refex Refrigerants Ltd should be purchased on all declines for a price target of Rs.150--Rs.170, in the next 18 months time frame.