Kamalkumar Aggarwal, Chairman & MD, Chemcon Speciality Chemicals Ltd

We are the leading manufacturers of HMDS (Hexamethyl Disilazane), CMIC (Chloromethyl Isopropyl Carbonate) and Inorganic Bromides in the global markets.

Mar 25, 2021 11:03 IST India Infoline News Service

Mr. Kamal Aggarwal is the Chairman & Managing Director of the Company with more than 23 years of experience in the specialized chemicals industry. He holds Diploma in Petrochemical Technology (Plastic Technology) from the Maharaja Sayajirao University of Baroda, Gujarat. He has played a vital role on taking key strategic decisions and business plan of the company. Under his visionary leadership, the company has emerge as a long term business partner for various clients across the globe.


In an interaction with Shweta Papriwal, Editor, indiainfoline.com, Mr Kamalkumar Aggarwal, Chairman & Managing Director of Chemcon Speciality Chemicals Ltd said
, "Our manufacturing facilities are located at Manjusar which is about 20 km away from Vadodara in the state of Gujarat. Currently, we have 7 operational plants within the state premises". 

Tell us a brief overview about your company?
 
We started our journey in 1990. Initially, we were in the business of Pyridine Hydrobromide, Para Nitro Benzyl, Bromide, Methyl Iodide etc. During early 2000, we discontinued few products due to lower demand and enter into the business of HMDS. Gradually, we added few other products like CMIC and various Bromides over the period of time. Today, we are the leading manufacturers of HMDS (Hexamethyl Disilazane), CMIC (Chloromethyl Isopropyl Carbonate) and Inorganic Bromides in the global markets.
Can you throw some color of business insight and revenue breakup of these business?
 
HMDS: As per CY19, we were the largest manufacturers of HMDS in India and second largest in the world, in terms of production and capacity. It is primarily used in pharmaceuticals industry, it can also be used in semiconductor industries and for organic synthesis. Globally, our market share would be between 10% and 11% of the global production. It contributes around 51% of our total revenue of which 82% is contributed from the domestic market and around 18% is contributed from the exports.
 
CMIC: It is an antiviral drug intermediate product which is a key intermediate for the anti-aid and anti-hepatitis B drug which is Tenofovir. We are the largest producer of this product in the global market with a market share of around 30% in terms of the productions. CMIC contributes around 36% of our total revenues with an equal share of domestic as well as export market. Currently, we witness high demand for this product, not only in the domestic markets but also in the international market.
 
Oilwell completion chemical: We produce inorganic bromides, called Calcium Bromide, Zinc Bromide, Sodium Bromide, which are mainly used as completion fluids in the Oilfields Industry also known as. These bromides are generally used in new Oil Well projects. As per CY19, we were the only manufacturers of Zinc Bromide and largest manufacturers of Calcium Bromide in India in terms of production. Globally, our market share would be ~2-3% in terms of production across all bromide capacities. This segment has been soft for the H1FY21 primarily due to lower expansion projects in Oil & Gas Industry. Since October 2020, inquiries for this product has been marginally better on the back of better business environment globally.
 
Apart from these three products, we also have added 4 CBC and 2,5 DHT products to our basket. 4 CBC is widely used in the pharmaceutical and agrochemical industry in the preparation of Pyrazinamide, a medication used to treat tuberculosis. It is also used for weed control in maize and sugarcane. 2,5 DHT is predominately used in the pharmaceutical industry in the preparation of potential antiviral and antitumor agents. Company is in the process of commencing the manufacturing of 2,5 DHT whereas we executed initial sale of 4 CBC in the current year.
What would be the market size and usage of this new products 4 CBC, 2,5 DHT & High Purity HMDS?
 
For 4 CBC, we have already initiated the commercial supplies. We have supplied around 45 tons of this product. Our production capacities are ~1200 tons per annum and tentative market size for 4-chlorobutyryl chloride is ~8,000 tons per year. With respect to 2,5 DHT, it is a key starting material for the Lamivudine. It is part of the molecule, so it requires lot of approvals and it requires lot of stability studies etc. which is a time-consuming factor. So demand is there but gestation period will defer the commercialization. So, we are in the process of getting it approved. Our production capacities are ~600 tons per annum and tentative market size would be ~2500 tons per annum. Our high purity HMDS facility is in trial run for some end applications apart from Pharmaceutical industry. We have capacity of ~ 600 MTPA. We expect above three business to contribute substantially in FY22.
Can you highlight more on manufacturing facilities and recent expansion?
 
Our manufacturing facilities are located at Manjusar which is about 20 km away from Vadodara in the state of Gujarat. Currently, we have 7 operational plants within the state premises. In addition to these 7 operational plants, we have started construction work of 2 additional plants, plant number 8 and plant number 9 which is at same premises. We call it as P8 & P9 unit. The additional plants will be used for the manufacturing of chemicals which are used in pharmaceutical industry. Post expansion of P8 & P9, the total volumetric reactor capacity available to the company for processing would increase from 375 kl to ~625 kl. P8 is expected to commercialization in next 5-6 months and P9 is expected to go for the commercial production in ~12 months. Our facilities are ISO certified, Reach Certified and various other necessary certification. We have an inhouse lab to test the raw materials procured and all ongoing product which are at the various stages of the manufacturing process.
Are we going to get any benefits from PLI scheme announced by Government of India?
 
The Production Linked Incentives scheme which aims to promotion of manufacturing of critical key starting materials, that is KSM or the drug intermediates for the API industries in our country. We are likely to benefit indirectly on approval of Penicillin products. Penicillin G was imported from China for most of the volumes and India was not manufacturing that. All the antibiotics manufacturers in the country are our regular customers. So as the volumes will grow, there will be additional volume requirement and Chemcon will be benefitted by having a larger market volume.
Our capacity will be expanded in similar products or new products?
 
It will be mix of new and old products. We will be adding few more capacity for CMIC and other new products catering to high demand in the domestic market.
We have received some 44 products approval from Govt., can you provide more details on it?
 
We are evaluating few products which are viable and scalable in long term. Those few products which will be added in P8 & P9 Unit which are multiproduct plant.
Can you highlight more on our geographic presence?
 
We supply a product to countries like USA, Italy, South Korea, Germany, China, Japan, UAE, Serbia, Russia, Spain, Thailand, and Malaysia. These are the countries wherein we have already supplied the products and we have our presence on regular basis.
What are the key entry barriers to your business?
 
Customer acquisition involves a long gestation period, resulting in a very few players being involved in this business. These chemicals are complex chemistry which are difficult to commercialize at a large scale and handling these chemicals requires a high degree of technical skill & expertise. Therefore, only handful of manufacturers can do it who comply with all regulatory norms. As per the global standard, We adhere all necessary protocols which is evident in our customers profile and export presence.
How our bromide business shaping up?
 
As crude oil price has started moving up beyond $50-60 per barrel. We have started getting the inquiries as well as clearances from customers for the earlier pending orders. So, the dispatches have been initiated and there is good volume requirements from customers. So, we hope this will be getting recovered to most of the extent in the next couple of quarters.
Can you highlight more about company’s financial performance, Capex & IPO proceeds?
 
For 9MFY21, our total revenue stood at Rs. 172 Crores. This was primarily lower by ~18% as compared to last year due to the lower offtake of bromide business in H1FY21 which has been partially negated by moderate business recovery in Q3FY21. Domestic market contributes ~ 71% whereas international market contributes ~ 29%. Segment wise revenue for 9MFY21 are as follows: HMDS revenue stood at Rs. 87 Crores, CMIC revenue stood at Rs. 62 Crores, Oil Well completion revenue stood at Rs. 18 Crores. EBITDA stood at Rs. 16.3 Crores in 9MFY21, a growth by 6.3% on Y-o-Y basis. Net profit for the 9MFY21 stood at Rs. 40.9 Crores, a growth of 4.7% on YoY basis.
 
Total capital expenditure incurred for the 9MFY21 has been Rs. 25 Crores of which is Rs. 21 Crores has been done through internal approval and balance from IPO process. Rs. 4.3 Crores has been utilized for expansion of manufacturing facilities whereas Rs. 40 Crores has been incurred for working capital requirement.
What are the growth prospects of the company?
 
New products, new capacity expansions, new opportunities within the existing products & new geographic market are going to be the growth lever for our organization. We are still a net importer of HMDS and CMIC and hence there is an ample room for us to serve the market. Our bromide business is also showing sign of recovery led by few projects revival in oil industry. With our new capacity expansion and technical expertise, we are well equipped to garner this opportunity.

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