In an interaction with Shweta Papriwal, Editor, indiainfoline.com Aarti Jhunjhunwala, Executive Director, Fineotex Chemical Limited, said, "We have achieved working capital efficiency during the last year, therefore our Cash flow conversion to EBIDTA was very strong on a consolidated basis".
Tell us more about the business of Fineotex Chemical Limited?
Fineotex Group was founded in 1979 and is engaged in the manufacturing of Specialty Chemicals and Enzymes. We are one of the most progressive specialty textile chemical manufacturers with a market-leading position in the international textiles industry We manufacture the entire value chain for the textile industry including pretreatment, dyeing, printing, and finishing process. We have recently entered fast-growing home care and hygiene and drilling speciality chemicals segments. Our Malaysian subsidiary, Biotex, spearheads R&D solutions, application research, and product development. Fineotex India (standalone entity) and Biotex complement each other’s strengths and offer distinguished speciality chemical solutions globally.
How many product categories do you operate and what are your key strengths?
We are present in more than 450+ product categories and caters to various industries. The industry dynamics are attractive with technical barriers to entry and high levels of development and product customization. Our key strength lies in a strong balance sheet with zero debt; High ROE and ROCE. Our net cash positive balance sheet allows us to invest in new growth through internal accruals. We have consistently paid dividends to all our shareholders and even though it a family business, we have people with strong industry knowledge with over three decades of operational experience, and strong R&D capabilities help them increase customization level of products. We have a successful acquisition track record, having turned around our Malaysian subsidiary into a debt-free company and its net profit has grown by a factor of 4x since acquisition in 2011.
Tell us more about your global presence.
We have gained good traction in the textile chemical business in the last few years and hold a presence in more than sixty countries where we cater to the entire value chain for the textile industry including pre-treatment, dyeing, printing, and finishing process.
Fineotex recently announced the buyback of the shares. What’s was the idea behind that?
Board of Directors has approved a share buyback of 11 lacs shares up to a maximum price of Rs40 through a market scheme in which promoters will not participate. It is a tax-efficient method of distribution of profits to shareholders.
How do you see the specialty chemical industry reacting in the post-C-19 era?
Indian specialty chemical industry is likely to be a global manufacturing hub, a substitute to China post-COVID-19, and also because of likely import ban due to ongoing tension between India-China. I believe that the Company will benefit from its strategy to tap new global markets and efforts of our business development team. The textile chemical business is likely to benefit from FY22 onwards with lower chemical manufacturing in China due to strict environmental norms. Fineotex has responded to the COVID-19 pandemic by foraying into health and hygiene specialties to tap into the large market opportunities for health and hygiene products which have emerged post the outbreak of COVID-19. We are in early-stage dialogue with select FMCG companies for chemical solutions for branded detergents, which we envisage is a large addressable business opportunity. COVID-19 has also brought up opportunities for textile and garments to feature more technical chemistries like stain release, water repellents, antimicrobials, etc. which are strengths of BioTex Malaysia. We are optimistic about the strong demand being created for chemical applications in textiles and other allied industries.
What are your plans for the second half of the year?
We have achieved working capital efficiency during the last year, therefore our Cash flow conversion to EBIDTA was very strong on a consolidated basis. We expect the industry to do better in the coming months which will lead to better performance of the company. We have revamped our marketing model and we are aggressively engaging in marketing activities, exhibitions, and all. We are actively expanding our product range in developing specialties for drilling in the oil and gas industry. We have made significant progress in product development and are in discussion with a leading Oil and Gas Company in India. We are hopeful of achieving a breakthrough in the fast-growing hygiene segment and we are currently providing feedstocks like surfactants and other chemicals to select players in the detergent industry.
What is the strategic outlook for Fineotex?
We aim to leverage Fineotex’s industry insights and long-standing customer relationships with Biotex’s high-end product expertise and regional positioning to serve global customers. We are aggressively entering fast-growing synergistic segments such as Home Care and Hygiene and Drilling Specialties while continuing to focus on the core Textile Chemicals business. Our strong in-house development capabilities should enable us to grow market share across existing and new customers in both Indian and International markets. We continue to develop direct customer relationships and expand the distribution network. Fineotex has a conservative approach to funding acquisitions, capacity expansions, and greenfield developments through internal accruals. We are currently exploring greenfield opportunities for our next leg of growth and we shall continue to explore partnership opportunities with international companies who wish to establish manufacturing facilities in India.