Bodal Chemicals Ltd Management Discussions.


The global economy has gone through several different phases over the past decade. These include financial crisis in 2008-2009, European sovereign debt crisis of 2010-2012 to realignment of the global commodity prices and increasing fears of recessionary slowdown across the developed economies till 2016. Since 2017, there were signs of stabilisation with a GDP growth of 3.1%, before getting moderated to 3.0% in 2018. The second half of 2018 witnessed US-China trade wars and rising uncertainties of Brexit that led to financial stress and volatility across the leading economies globally.

The developed economies recorded a moderate GDP growth of 2.1%, largely contributed by the US, Australia and New Zealand. In the US, the growth was largely contributed by several fiscal stimulus measures in the form of corporate tax rate cut as well as additional Government expenditure on domestic programs. In Australia, strong contribution from the household sector and net exports contributed to the growth, while New Zealand also grew on the back of strong exports, booming tourism, growing high-tech capabilities, sizeable manufacturing and service sector.

(Source: World Economic Prospect 2019, Deloitte, Bloomberg)

Emerging countries witnessed a growth of 4.3% in 2018, with BRICS emerging as a clear winner. Brazil steadily recovered from two-year recession (2014 to 2016) with an optimism of pension reforms under the new Government. In India, strong Government reforms, thrust on productivity, infrastructure and moderating fiscal deficit contributed to a steady growth. Chinas dominance on manufacturing and export of goods remained a strong factor in the overall aggregate growth of developing and world economy. However, the environmental concerns led to slowdown in production across crucial sectors. Russias oil output reached all-time high of 555.838 Million tonnes last year, against 547 Million tonnes in 2017, reaching an all-time high since Soviet era (Source: https://fp.brecorder. com/2019/01/20190103436941/). Countries like Argentina, South Africa and Turkey faced challenges owing to higher burden of debts.

(Source: World Economic Prospect 2019, Reuters, Guardian) OUTLOOK

The world economic growth is expected to be steady around 2.6% levels owing to uncertainties of outcomes of the US China trade wars, Brexit fallout and environmental challenges in China. Several large commodity-exporting countries, such as Brazil, Nigeria and the Russia will also help the developing economy to grow at a rate of 4% in 2019 before picking up by 60 basis point in 2020 to 4.6%.

Indian economy

The Indian economy witnessed a GDP growth of 6.8% in 20182019 as against 7.2 % in the last fiscal year.

The economy has expanded from being a USD 1.85 trillion economy in 2014 to USD 2.7 trillion in 2018-19.

The year 2018-19 largely witnessed a temporary slowdown in momentum owing to global pressures from the ensuing trade wards, volatility in crude oil price and rupee depreciation. Being an important part of the global ecosystem, the Government is taking serious efforts by pushing India as a global manufacturing hub through initiatives like Make in India, boosting exports, curbing imports through import duties and initiating strong efforts to keep the current account deficit (CAD) in check. Gradually, the tax base has also strengthened, where direct tax collection clocked र 11.18 Lacs Crores and GST collection touched र 11.77 Lacs Crores during the fiscal.


The Indian Government has set an ambitious target of making India a USD 5 Trillion economy by 2024-25.

This growth will be supported by robust consumption, continued implementation of structural and financial reforms and efforts to reduce public debt. It is also forecasted to improve its position on the World Banks Ease of Doing Business parameter through progression in the key indicators such as paying taxes, insolvency resolution, trading across borders and easiness in getting a permit for starting a business.

Chemicals industry overview

The Chemicals industry plays an important role in meeting basic needs and touching all spheres of human activity. It is divided into basic chemicals, specialty chemicals and agrochemicals. The highly diversified covers over 80,000 commercial products that find its application across various industries such as textile, leather, paper, plastic, detergent and water treatment etc.

Globally, the chemical industry occupies the fifth position among the manufacturing sectors. The European Union (EU) and the United States (US) were the key chemical hubs contributing 40% of global sales until 2006. Postrecession, the momentum shifted towards the developing economies owing to cost benefit and consistent quality.

The Indian chemical Industry plays a significant role in contributing to the overall growth of the economy. The current size of the Indian chemical industry is र 6.3-6.8 Lacs Crores and has significantly evolved at a CAGRof 7-8% between 2014-2019 fiscal (Source: DNA). Demonetisation and GST has strengthened the scalability of the industry through consolidation. Besides, production slowdown in China owing to environmental concerns has further made India a prominent destination for production and export of chemicals.

Speciality chemicals

Speciality chemicals include application-based chemicals. It has been consistently growing at the rate of 8-9% over the past three fiscals. Of lately, there has been an increasing importance on sustainability and green chemistry with the motive of reducing the Carbon emission into the atmosphere. Presently, the Indian speciality chemical market accounts for around 1/3rd of the overall chemical industry market size, which is guite smaller in size as compared to other countries. With strong innovation and consistent quality, the segment is forecasted to grow around 12-14% over the near term.


The global Dyestuff industry is growing at 3.5% annually, dominated by China and India, in terms of production. This growth is supported by diverse end user applications like paint, ink, textile, paper and leather. The global textile industry is expected to reach USD 1.23 trillion by 2025 which will positively impact the Dyestuff industry going ahead.

India enjoys 16% of the world production of Dyestuff and dye intermediates (Source: in/sector/chemicals) as it meets the global standards for quality products. The Governments consistent endeavours towards formalisation of the economy has been very beneficial for the organised players in the industry. Major dyestuff manufacturing locations in India are situated in Gujarat and Maharashtra owing to easy availability of raw materials and dominance of textile industry in these regions.

Key growth drivers and opportunity for Indian chemical industry

Structural advantage: The developing market, industrialisation, purchasing power and increasing urbanisation have fuelled the end user utilisation for paints, textile, leather, paper and water detergent etc, which will ultimately help to boost the growth for chemical companies.

End user industry growth

Key industries CAGR (2018-19 to 2022-23) Comments
Textiles 9-10% Increase in domestic demand led by rise in disposable income coupled with high export growth
Auto 7-8% Better income prospects, subdued cost of ownership and fast-paced road development to help clock better demand
Construction 8-10% Increase in housing and infrastructure investment
Consumer durables 7-8% Healthy growth driven by increased spending in rural markets which will boost consumer sentiments continued economic recovery, rising disposable incomes and low penetration levels to also support growth

(Source: Crisil Report, 2019)

Slowdown in Chinas chemical production: The chemical industry is currently dominated by China just like any other manufacturing activities. Globally, USD 430 Billion of chemicals are exported, amongst whom European Union and China are the major players with a ~20% share by each. However, with the growing focus around environmental pollution standards and stricter authorisation in China has led to closure of several units. The scenario has made India an automatic choice in meeting the domestic and global demand.

Indias share of global chemical exports has increased from ~3% to~4.5% over the last few years.

Higher cost in developed countries: Low cost skilled workforce and easy availability of raw material have shifted the demand from the West to the East. Wages in chemical producing countries is the highest in Germany followed by the US and Japan. While, in China the labour cost is increasing at a faster rate. India stands to benefit from the low wage cost, thus driving several outsourcing opportunities.

Capex slowdown in developed countries: The slowdown in gross domestic product and consumption growth has led to reduction in the capex by chemical companies in developed countries. This makes India the suitable location as it is the one of the fastest growing nation around the globe with rising disposable income and strong consumption-led growth story.

Focus on R&D: The need for the end user industry has been evolving, this makes it vital for chemical companies to update the product mix by adding speciality chemicals in the portfolio through innovative solutions. Besides, complying with the domestic and international regulatory norms by making eco-friendly chemicals, is also a very crucial aspect. This necessitates the need of continuous R&D to ensure right and consistent quality with optimum production. Several players in the organised segment of India invest heavily into the R&D, thus driving innovation and quality.

Government initiatives

The Government of India has introduced several policies and regulations to promote the industry. Make in India has been one such initiative which has encouraged domestic players in setting up strong infrastructure. Besides, 100% FDI, the Government has also levied anti-dumping duty on several chemicals to safeguard interests of the domestic manufacturers. Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIRs) and plastic parks have been setup which will provide state-of-the-art infrastructure for Chemicals and Petrochemicals sector as well.


The Indian chemical industry is projected to reach USD 304 Billion by 2025 largely driven by increasing per capita consumption, import substitution and increasing end-user applications. Besides, the Governments target to increase the share of manufacturing in the GDP to at least 25% by 2025, supported by R&D, will boost the growth of the Chemical industry.

Company overview

Bodal Chemicals Ltd, incorporated in 1989, is an integrated manufacturer of Dyestuff, Dye intermediate and basic chemicals. It produces 25 types of dye intermediates, 175+ types of Dyestuffs and 12 types of basic chemicals. The Company has successfully expanded its capacities over the years and at present operates through nine manufacturing facilities in Gujarat, one in Uttar Pradesh and seven depots across the nation. Moreover, it has also got four operating subsidiaries. It caters to domestic as well as 150+ global customers across 45+ countries.

Financial performance (Consolidated)

(र in Millions)

2018-19 2017-18 Y-O-Y growth
Revenue from operation 14,235 11,661 22.07%
EBITDA 2,495 2,039 22.36%
Profit aftertax 1,413 1,219 15.91%
Earnings per share (?) 11.56 10.62 8.85%

2018-19 was a very much satisfactory year for Bodal Chemicals Ltd and its subsidiaries. Revenue from operations increased to र 14,235 Million, growing by 22.07% over the last fiscal. EBITDA increased to र 2,495 Million, growing by 22.36% over the last fiscal. Net profit surged to र 1,413 Million, increasing by 15.91% over the previous year. The overall improvement in performance was an outcome of productivity gains, volume growth and sustained margins during the year. However, there was decline in the EBITDA as well as PAT margin, owing to inventory loss, increasing depreciation and financial cost.

Segment performance Dyestuff

Dyestuff witnessed 21% growth in its production to 18,588 MT from 15,412 MT owing to increase in production capacities during the year. This has also led to an increase in contribution of Dyestuff business from 32% in previous year to 36% in the current year.

Dye intermediate

The share of revenue in product segment of Dye Intermediate decreased by5% incurrentfiscalyearto48%. However,there was increase in the production rate by 6% from 22,343 MT to 23,674 MT in 2018-19. The Company has effectively utilised 71.74% of the installed capacity of 33,000 MT.

Basic chemicals

Basic chemicals grew by 500 basis point on yearly basis to 188,534 MT, utilising about 83.42% of its capacity. While its share of revenue in product segment increased from 10% to 12% in 2018-19.


Other business saw a decrease of 100 basis point in its revenue share in the business segment.

SPS and Trion

Trion is yet to cross the breakeven point, while SPS registered a PAT of र 16 Million in the current year.

Strategic plans going ahead

Several strategic initiatives have been planned to expand the business operations going ahead. These include expanding Dyestuff capacities to meet the global demand, setting up of Chlor Alkali plant to produce Caustic Soda Flakes, Caustic Soda Lye, Chlorine and Hydrogen, thus strengthening the raw material base. The Company is gradually transforming its business model from B2B to B2C in Dyestuff segment to establish direct contact with the end customers and strengthening the margins in the process. The Company shall be further strengthening its base in the European region by acquiring 80% stake in the Turkey-based company named ?EN-ER BOYA KIMYA TEKSTIL SANAYIVE TICARET LTD. ?TI. involved in marketing, purchase and sale of various Dyestuff and other chemicals.

Human resource management

At Bodal, we always ensure implementation of the best industry practices to evolve the working methods and recruiting and nurturing the right talents. This has allowed the Company to successfully evolve over the years amidst challenging environment. To ensure the smooth functioning of the organisation, the Management and HR department work together in sync to develop employee bonding initiatives and break the boundaries and silos within the organisation.

The Company also believes in harnessing the young talent by giving them challenging tasks and making them ready to adapt future leadership. The Company also implemented new technologies and skill developments for improving efficiencies of its employees. It has also introduced ESOPs for deserving employees to increase their belongingness to the Company and assume responsibilities with stronger dedication. The Company also celebrates several events like World Environment Day, Safety Week Celebration and Independence Day (15th August) to engage with the team members.

Safety health environment

For our people

It is of the topmost priority for the Company to safeguard its people working at the project sites and manufacturing facility as they deal with hazardous chemicals ranging from Dye intermediate, Dyestuff, and basic chemicals to speciality chemicals. The Company implements industry-best safety measures and conducts strong drills and ensures strong channel of communication, safety awareness and sound training practices. All safety initiatives are driven through well-defined SOPfStandard Operating Policies).

The Company has doctors and medical representatives at the health centre who are present 24 x 7 and are well-versed to tackle any emergencies. Besides, regular medical check-up is also conducted.

For the surrounding

The Company ensures all the people living in the vicinity of the manufacturing facilities remain unaffected by the plant operations. It conserves natural resources through reduce, recover and reuse model. In addition to this, the Company also has got in-house environmental facility for water treatment.

Certified and licensed to facilitate safe operation

The Company has procured all the mandatory licenses and approvals under environmental and regulatory norms.

Besides, the Company is also certified with ISO 9001: 2015 and ISO 14001:2015 for its quality.


1. Macro environment Risk

The Company operates in an uncertain environment. Its regular business operations may be impacted through fluctuating raw material prices and unfavourable currency fluctuations.


Being an integrated player, major proportion of the raw materials are produced in-house. The Company passes on the increase in raw material prices to the customer. Besides, the Companys exports allow the Company a natural hedge against the fluctuating rupee.

2. Environmental sustainability Risk

The industry in which we operate in is accountable for impact on the environment. The pressure for the chemical industry is to not only meet the environmental norms, but also to deliver societal value.


The Company complies to all the required environmental acts and regulations. In-house environmental facility minimises the depletion of the natural resource leading to sustainable growth. Apart from this, the machinery operated at the site is ISO certified and well tested before being use.

3. Financial Risk Risk

The capital intensive nature of the business necessitates the need of funds to efficiently manage the regular operations of the business.


The Companys integrated business model coupled with best quality offerings has allowed itself to manage a healthy cash flow situation. Besides, it has successfully reduced debts over the years, further leading to improvement in overall profitability.

4. Competition risk Risk

The chemical industry is intensively competitive, consisting of large number of manufacturers. The risk emerges when the Company does not initiate timely action against the underlying opportunity.


The Company remains aware of emerging opportunities in the chemical space and proactively responds to the same. It is leveraging on the opportunity of the slowdown in the Chinas chemical factories and shift in the chemical landscape from the West to the East region.

5. Dependency risk Risk

The risk arises when Company fails to expand the product portfolio due to its failure in meeting the R&D to Sales ratio of the average industry benchmark. Also, the Company constraining from supplying to different location and fragmenting itself from opening of new plant narrow down the chances of growing.


The Company has diversified its product portfolio ranging from basic chemical, dyestuff, dye intermediate to speciality chemical exporting to 45+ countries to more than 150 customers under its four subsidiaries.

Internal Control system and their adequacy Supply Chain Management

About 200 products are manufactured and sold across more than 45+ countries which has resulted in a widespread supply chain network. Bodal Chemicals continually invests in initiatives for supply chain optimization, capability building of trade partners and the sales force on a continuous basis. The constant observation and revision for all the manufacturing facilities help to get a better response. The key to an efficient supply chain management system is the use of technology solutions and predictive analytics for capturing accurate data and making proper decisions.

Information Technology

Information Technology provides continuous support to business operations and offers competitive advantages for the Company. A comprehensive ERP system has been implemented which helps the Company to increase the supply chain and provides accurate forecasts for the sourcing and supply. The IT system and infrastructure is continuously examined and improved with any new upgradation.

Cautionary Statement

Statements in the Directors Report, Management Discussion and Analysis or elsewhere in this Annual Report contain forward looking statements including, but without limitation, statements relating to the implementation of strategic initiatives and other statements relating to Bodal Chemicals future business developments and economic performance. While these forward-looking statements indicate our assessment and future expectations concerning the development of our business, a number of risks, uncertainties and other unknown factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, general market, macro-economic, Governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with us, legislative developments, and other key factors that could affect our business and financial performance. Bodal Chemicals undertakes no obligation to publicly revise any forward-looking statements to reflect future/likely events or circumstances.