Global Economy Overview
The IMF predicted in its World Economic Outlook (WEO) for April 2023
that global growth will decline to 2.8% in 2023 from 3.4% in 2022. The growth rate is
projected to increase marginally to 3.0% in 2024, but not enough to surpass the growth
rate of 2022. IMF forecasts that the increase in global trade volume will decrease from
5.1% in 2022 to 2.4% in 2023, and then increase to 3.5% in 2024. The global economy is
facing headwinds from high inflation and slowing growth and decrease in economic activity.
The recent break down of the several financial banks in the United
States and the European Union heightened concerns about financial instability. Despite
this event, global central banks such as the US and EU continued to increase interest
rates in an effort to control inflation. Drop in OPECs production has further elevated
the global crude oil prices which in turn has added to the economic uncertainty.
On the other hand, the growth rates in developing markets, are
predicted to be higher, at 3.9% in CY 2023 and 4.2% in CY 2024. Strong labour market, high
levels of consumer spending, and corporate investment will empower the global economys
recovery, with help from rising consumer demand in the emerging countries. Tight monetary
and fiscal policies are expected to be important tool to control inflationary pressures in
an effort to ensure economic stability and support sustainable growth. Indian Economy
Overview Even though the geopolitical feud has made the global economy more erratic in the
previous year, Indian economy has resisted the headwinds with its domestic consumption.
Echoed by major global institutions, it is expected that the economy will grow by 7%,
which is faster than the growth of the other major economies. Improved current account
deficit, easing inflation pressure, and a strong banking system, has made the growth rate
further sustainable. India is expected to be the fastest- growing economy in FY24,
according to a report of the WEO from April 2023. Both the Economic
Survey 2022-23 and the RBI think that the Indian economy will grow by
6.5% in real terms in 2023-24. The projections are in line with the World Banks
prediction of 6.3% and the ADBs prediction of 6.4% for 2023-24. Forecasts of El Nino, at
the margin, have elevated the risks to Indian monsoon rains. Further troubles in the
financial sector in advanced nations can increase risk aversion in financial markets and
impede capital flows.
Indian Chemical Industry Overview
Approximately 7% of the Gross Domestic Product (GDP) is contributed by
the Indian chemical industry, which is one of the most important sectors of our economy.
India is home to the production of over 80,000 chemical products with diverse
applications. India maintains a strong position in global exports and imports of
chemicals. The Indian chemical industry is exceedingly diverse and can be broadly
categorised as follows: bulk chemicals, specialty chemicals, agrochemicals,
petrochemicals, polymers, and fertilisers.
The Indian speciality chemicals industry has witnessed a significant
business jump in the last two fiscal years. This growth is primarily driven by strong
domestic demand and increased demand for exports, which has been bolstered by major global
economies adopting the China +1 policy. All sub-segments of the bulk & speciality
chemicals have undertaken significant capex in the past three fiscal years and a similar
size of capex is currently underway and expected to be completed in the next two years.
The next phase of growth is expected to occur post-completion and stabilization of this
capex. Despite the large size of capex, the capital structure of the majority of
sub-segments in the speciality chemicals sector remains at the steady level. This is due
to healthy internal accruals, which are expected to enable them to pursue substantial
capex in the future.
Key Opportunities
• The structure of Chinas chemical industry is changing due to
stricter environmental norms, tighter financing, and consolidation.
While these shifts may benefit select large players in the long run,
they could cause uncertainty for international players that source chemicals from China.
That could create opportunities for Indias chemical companies in certain value chains and
segments, especially in the short term.
• Several global oil and gas majors are turning their sights on
downstream chemical opportunities. This may increase the focus on petrochemicals in India,
and higher investment in the sector could ease feedstock challenges and boost
self-sufficiency.
• Around the world, multiple trade disputes have arisen. These
have caused changes in international supply chains that have impacted bilateral trade
agreement amongst the large countries. Indian chemical companies may have access to
sizable chemical markets that are still open in this situation.
• Sustainability is becoming an imperative, not a buzzword, with
various stakeholders placing a premium on it. Chemical companies could prioritize
environmental sustainability to protect long-term shareholder value, while continuing to
comply with local regulations.
Key Challenges
India has a clear goal of becoming a digital economy worth $5 trillion.
The Indian chemical industry will play a significant part in making this vision a reality.
The industry frequently encounters significant obstacles like outdated technological
infrastructure, expensive fundamental raw resources like natural gas and crude oil, high
capital expenses, and the need to modernise its facilities. The government has already
established the stabilisation charter through PLI (Production Linked Incentives)
programmes like Aatmanirbhar Bharat, Make in India, etc.
However, one of the biggest challenges faced as an industry is uneven
raw material costs, dependence on imports and increasing operating costs due to higher
logistic cost .
OUTLOOK
The Indian specialty chemicals market will continue to expand due to
rising exports and a strong local demand. Manufacturers of bulk & specialty
chemicals are increasing their production capacity in response to the
sectors strong performance and the rising demand for their products. Furthermore, certain
segments of the Indian chemical industry will benefit from Chinas anti-pollution
initiatives.
Additional financial assistance in the form of tax breaks and special
incentives provided through PCPIRs or SEZs is planned to encourage downstream units that
will improve the industrys growth and production. By 2035, it is anticipated that the
designated integrated industrial centres created under the Petroleum, Chemicals and
Petrochemicals Investment Regions (PCPIR) programme will draw investments totalling Rs. 20
lakh crore (US$ 276.46 billion).
In conclusion, given how quickly the Indian chemical sector is
expanding, a shift to specialised materials will inevitably occur as user industries
continue to develop. With a fresh perspective on its products and solutions, the specialty
chemicals sector is reshaping the economic landscape of Indias future. If Indias demands
and mega trends materialise, the specialty chemicals sector will need to further ramp up,
possibly more quickly than we anticipate.
Bromine Industry Overview Bromine is a halogen chemical element. The
most recoverable form of bromine is from soluble salts found in seawater (chief commercial
source), salt lakes, inland seas and brine wells. Bromine is produced from brine after
separation of most of the sodium chloride and potash. Bromine in much higher
concentrations are found in inland seas and brine wells. Much of the bromine and
brominated compounds are manufactured at the Israel, Jordan, United States and in India at
Rann of Kutch. It is widely used as a reactant and catalyst for manufacturing a variety of
products, such as agrochemicals, biocides, water disinfectants, pharmaceuticals
intermediates, dyes, completion fluids, flame retardants, and photographic chemicals.
In 2021, the market volume of bromine worldwide amounted to 933,410
metric tons. It is forecast that the market volume of this halogen will grow to around
1.18 million metric tons worldwide in the year 2029.
According to industry report, the bromine global market size was
US$3.13 billion in CY2021, and the market is expected to grow at a CAGR of 5.8% between
CY2020 and CY2025. The demand for bromine and bromine performance derivatives will be
driven by a host of factors including an increasing demand for flame retardants,
increasing consumption of oil well chemicals and increasing use of hydrogen and zinc
bromide in flow batteries. Indias bromine production is from Bittern and produced from
the underground brine mainly concentrated towards the western state of Gujarat. In bromine
production, India is among the top five cost competitive producers globally with China and
Japan being more expensive and the United States (Arkansas), Israel and Jordan less
expensive than India.
Industrial Salt Industry Overview
Industrial salt is the principal material used in chlorine and caustic
soda production (together, known as chloralkali) and is widely used in the chemical and
food and beverage industries. Chlorine finds end-uses in vinyl, phosgene, chloromethanes,
chlorinated C3, water treatment, synthesis HCI, bleach, and other organic and inorganic
chemical material. Caustic soda finds end-uses in alumina, paper and pulp, soap and
detergents, textiles, water treatment, bleach, and other organic and inorganic chemical
material. According to Frost & Sullivan, global demand for industrial salt was 173
million MT in CY 2017, 171 million MT in CY 2018 and 173 million MT in CY 2019 and
declined to 153 million MT in CY 2020 but is expected to grow at a CAGR of 2.8% between
CY2020 and CY2025. A growing demand for industrial salt will be driven primarily by
increasing industrialization owing to its wide range of end applications. In particular,
demand is expected to increase from the food and beverage industry, the chlor-alkali
sector in the chemical industry as well as chemical processing, water treatment,
agriculture and de-icing.
Sulphate of Potash Industry Overview
Sulphate of potash, also known as potassium sulphate, is a high-end,
specialty fertilizer for chlorine-sensitive crops. It is one of the most popular forms of
low chloride potash, largely due to its high 50-52% K2O content, which contains about 50%
of plant food.
Sulphate of potash has major application in agriculture, providing both
potassium and sulphur in soluble forms. This stimulates the growth of strong stems and
provides disease resistance to crops and plants by promoting thickness of the outer cell
walls. Further, sulphate of potash can reduce moisture loss from growing plants, thereby
providing drought resistance, and has been proven to improve yield, nutritional value,
colour, flavour, and storing quality of fruits and vegetables. It has proven to be
particularly effective in the cultivation of citrus fruits, pomegranates, grapes,
vegetables, tobacco and nuts. In addition, due to its low saline index, sulphate of potash
can also benefit soil containing a high-salt content.
According to Frost & Sullivan, global demand for sulphate of potash
was 6.9 million MT in CY 2021 and is expected to grow at a CAGR of 6.0% between CY2021 and
CY2025. The sulphate of potash market is being driven by the advantages of sulphate of
potash over muriate of potash and growing demand from a growing middle-class population
driving the use of fertilizers primarily for growing fruit and vegetables.
SEGMENT WISE AND PRODUCT WISE
PERFORMANCE
Product wise performance
| Revenue |
FY |
FY |
| (Rs in Million) |
2022-23 |
2021-22 |
| Bromine |
7083.92 |
6052.84 |
| Industrial Salt |
7281.27 |
5128.99 |
| Sulphate of Potash |
30.55 |
113.99 |
Bromine is one of the main products and contributes almost half of the
FY23 revenue. It is a starting point for making many of the value added products that
company intend to make in the coming years on the Bromine derivatives side. It is also
used in industries like pharma, agrochemicals, water treatment, flame retardants,
additives and oil and gas segments. There is a large end application use but the
production of Bromine is from very limited sources. The company hold the leadership
position in Indias Bromine merchant sales. We are the largest exporter out of India. For
the last few years, we have invested in building capacity in bromine and we have moved
from 10,000 tonnes
per annum size to 28,500 tonnes in FY21. In FY23 we have expanded the
incremental 14,500 tonnes per annum inching total capacity to 43,000 tonnes. This
incremental capacity will be captively used for derivatives downstream products.
Industrial salt is another main product for us. This comes during the
process of manufacturing bromine. About half of our revenue comes from industrial salt.
100% of industrial salt is sold overseas and have a strong association with Sojitz
Corporation a large Japanese trading conglomerate who is also one of our major customers
for the product.
Sulphate of potash again, we are only one of the few in the world who
makes it from natural sea brine and hence we have a low cost of production. It is a fairly
green process as there is no chemical additives involved. Globally, only 15% of sulphate
of potash is produced through the brine route and the balance 85% is produced through the
non-green or chemical route which
is a bit energy intensive. We are one of the few companies who received
REACH certification in Europe which allows us to export our sulphate of potash products to
European customers for direct application of blending purposes. Over the last few years,
we have had some challenges on the raw material preparation for the potash plant and we
have worked over the last few months to solve this technical issue and we have found some
ways of dealing with this hence we feel that the production numbers will improve on this
particular product in the coming years.
RISKS AND CONCERNS
All of the Companys business activities include some level of risk.
The Company recognises, assesses, and manages risks by putting in place suitable
mitigation measures. The Company has a well-developed risk management structure that aids
in its resilience. In the constantly changing environment in which the Company operates,
risk analysis and mitigation are crucial.
| Risk |
Impact |
Mitigation |
| Competition Risk |
- The Company might fail to act on the underlying
opportunities in a timely manner - Increased and intensified competition might hurt the
Companys market share, margin profile, and return on capital employed |
- The Company is always aware of new prospects in the
chemical industry and responds proactively by introducing new products to its portfolio -
Our long-standing client connections help us manage this risk as a chosen supplier and
dependable partner |
| Foreign currency exchange rate risk |
- Foreign exchange rate changes might have a substantial
influence on our financial performance with our exports accounting for more than 70% of
our revenue, and significant portion of our raw material being imported |
- Our strong foreign exchange hedging mechanism and
processes, such as forward contracts, help us to manage this risk |
| Raw material price risk |
- Sharp increases in crude oil prices and the pricing of
other raw materials acquired by the Company might have an impact on the bottom line |
- Our backward integration enables us to receive a consistent
supply of raw materials at a low cost. The Company is working to progressively lessen our
reliance on outside vendors, reducing the risk |
| Labour disputes risk |
- Industrial conflicts might result in strikes, limiting our
capacity to fulfill client demands |
- The Company has open lines of communication with its
workforce and maintains a friendly and open connection with its employees, workers,
subcontractors, and others, thereby reducing the risk |
| Quality risk |
- A reduction in product quality might compromise customer
relationships, lowering profitability |
- We have a rigorous quality-control system in place and
adhere to all external requirements |
INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY
The Management is responsible for establishing & maintaining
internal controls for financial reporting. The Statutory Auditors have evaluated the
system of internal controls of the Company and also reviewed their effectiveness and have
reported that the same are adequate & commensurate with the size of the Company and
the nature of its business.
They have also reviewed the internal controls pertaining to financial
reporting of the Company to ensure that financial statements of the Company present a true
and fair view of the state of affairs of the Company. In addition, Auditors in their
report have also opined that the Company has in all material respects adequate internal
financial control systems over financial reporting and the same were operating effectively
as on 31st March 2023.
DISCUSSION ON FINANCIAL PERFORMANCE / OPERATION PERFORMANCE
The Companys total revenue has grown by 27.48% on a standalone basis
to 14,410.66 million. In FY 23, the EBITDA stands at 6785.47 million, compared to
4799.48 million in FY 22, a growth of 41.38%. In FY 23, the PAT has grown by 103.41 %
reaching 3836.54 million, compared to 1886.14 million in FY 22. In comparison to 18.26
in FY 22, EPS has climbed to 34.76.
On a consolidated basis, the Companys total revenue has increased by
27.48% reaching 14410.66 million. EBITDA stands at 6772.68 million in FY 23, compared
to 4795.44 million in FY 22, growing by 41.23%. While PAT stands at 3825.59 million in
FY 23, compared to 1882.09 million in FY 22, a growth of 103.26%. In comparison to 18.22
in FY 22, EPS stands at 34.66 in FY 23. A stronger product mix and improved price
realisation were the main drivers of this rise.
MATERIAL DEVELOPMENT IN HUMAN RESOURCE & INDUSTRIAL RELATIONS
The Company is a people centric organisation. It treats its employees
as most integral asset. The Company has an excellent HR system and well- structured
policies for the healthy development of this asset. The Company strives to achieve
inclusive growth for its employees, thereby ensuring its goals are aligned with its
employees. Further, the Company has a strong people policy aimed at recruiting the best
talent, training the people, engaging with them continuously, and ensuring strong
retention, thereby, laying foundation to a robust human capital. The Company periodically
conducts programs and initiatives to strengthen talent management, capability development,
and performance of its employees. As on 31 March 2023, the Company had 265 employees
working at both plant and Registered Office.
KEY RATIOS
| Name of Metric |
FY 2022-23 |
FY 2021-22 |
% Change increase (decrease) |
Explanation in case change is 25% or more, as compared to the
previous year |
| Inventory Turnover |
9.99 |
9.77 |
2.25% |
- |
| Current Ratio |
3.36 |
2.24 |
49.9% |
Increase in investment from proceeds of IPO |
| Debt Equity Ratio |
0.02 |
3.51 |
(99.6%) |
Repayment of NCDs of Rs. 8400 million |
| Debtors Turnover |
10.65 |
10.23 |
4.1% |
- |
| Operating Profit Margin |
45.69% |
41.99% |
8.8% |
- |
| Net Profit Margin |
26.62% |
16.69% |
59.6% |
Increase in revenue and reduction of interest cost |
| Return on Net Worth |
45.26% |
112.05% |
(59.6%) |
Increase in share capital on account of IPO |
| Interest Coverage Ratio |
6.29% |
2.56% |
146.2% |
Reduction of interest cost on account of repayment of NCDs |
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