The Hindu Business Line : BASF India: Buy

FOR investors who are willing to wait for a three-four year period, BASF India appears a reasonable addition to the portfolio. The stock price has weakened in recent times after peaking at over Rs.170 in April. Investors can use opportunities presented by any decline in price to accumulate the stock.

A product basket which is directly pegged to the levels of economic activity, a strong research-driven manufacturing base and technological support from its parent, one of the world's largest chemical companies, are BASF India's key strengths. Prospects for many of the products that make up BASF India's portfolio are now on an upswing. The engineering plastics division appears well set to take advantage of the boom in construction activity and automobile demand. As a big supplier of eco-friendly textile and leather chemicals, the company is also likely to benefit from the ramp-up in capacities in these sectors, in preparation for the removal of textile quotas in 2005.

The key near-term risks to BASF India arise from the spike in input costs, some of which are pegged to crude prices and the unsteady progress of the monsoon that may impact agrochemicals offtake. A price earnings multiple of 10 times and a dividend yield of 5 per cent would also cushion downside risk.

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