deepak nitrite ltd share price Management discussions


The global economy began a slow march towards a recovery at the start of the fiscal year in face of the continued impact from the events of the prior year. The eventual and rapid spread of the Delta variant and the threat of new variants contributed to the increased uncertainty about overcoming of the pandemic. In addition, governments were faced with multidimensional challenges ranging from subdued employment growth, rising inflation, food insecurity to the the loss of human lives. The mass vaccinations drives along with governmental impetus have reset the pace of recovery even as the geopolitical crisis with the war in Ukraine looms large.

FY 2021-22 was characterised by shocks from rising commodity prices including energy and crude with inflationary pressures. Towards the end of the fiscal year, the conflict between Ukraine and Russia contributed to further disequilibrium for the global economy. As a result, in April 2022, the IMF reduced its global growth forecasts for the calendar year 2022 from 4.4% to 3.6% due to significantly worsening prospects for the world economy. The World Bank projects growth in CY2023 to further reduce on the back of a weaker near-term outlook for global growth, higher food and energy prices and detrimental supply chain disruptions due to fragmentation of the world economy into rival blocs. These stated factors have challenged the pace of recovery in developed nations around the world. A_er having bounced back to 5.2% in 2021, growth in advanced economies is projected to moderate to 3.3% in 2022 as the Omicron scare weighed on economic activity at the beginning of the year impacting the consumption patterns. In the United States, growth is expected to slow down to 3.7% in 2022 and 2.3% in 2023. In Japan, however, growth is expected to increase to 2.4% in 2022 from 1.6% in 2021 owing to the delay in the release of pent-up demand following last years pandemic resurgence and additional fiscal stimulus legislated in December. In Europe, growth is expected to moderate to 2.8% in 2022 and 2.3% in 2023. With heavy lockdowns, China too has seen remarkably slower growth than expected. Growth is expected to moderate to 4.4% in 2022.

Asia: Overcoming Challenges

Within Asia, the South Asian region witnessed recovery in economic activity following the second wave of COVID-19. Some of the economies reported resilient progress, witnessing a stabilisation in domestic demand. Moreover, macroeconomic and fiscal policies in the region remained generally accommodative to stimulate consumption. Vaccination in the second-half of 2021 increased to over four times the pace in the first half, registering a total of around 1.8 billion vaccinations in the region. In the East Asia and Pacific region, the recovery has gained momentum, with the exception of China. However, economic activity remains dampened owing to further localised waves of the pandemic and persistent supply chain disruptions which have impacted global trade.

In China, which emerged rapidly from the first wave, consumer spending has remained subdued due to the Delta variant of COVID-19 and recurring lockdowns and mobility restrictions. In addition, significant policy tightening, and property and financial market curbs also contributed to the slowdown in the second half of 2021. Growth is expected to slow down to 5.1% 2022-23 owing to the diminishing support from exports.

The World Bank has projected that growth in the South Asian region will accelerate to 7.6% in 2022 on the back of easing of pandemic-related restrictions and better prospects in Bangladesh, India and Pakistan, after which it is expected to slow down to 6% in 2023.

In the Eastern Asia and Pacific region, growth is projected to slow down to 5.2% on average in 2022-23, majorly due to slowdown in China. Countries that rely largely on tourism like Thailand, Philippines and Malaysia are expected to remain impacted due to subdued international travel.

Global GDP growth forecast (%)
Particulars Actual Projections
2021 2022 2023
World Output 6.1 3.6 3.6
Advanced Economies 5.2 3.3 2.4
United States 5.7 3.7 2.3
Eurozone 5.3 2.8 2.3
Japan 1.6 2.4 2.3
United Kingdom 7.4 3.7 1.2
Other Advanced Economies 5.0 3.1 3.0
Emerging Market and Developing Economies 6.8 3.8 4.4
China 8.1 4.4 5.1
India 8.9 8.2 6.9

Source: International Monetary Fund (IMF)

Indian Economic Scenario

Shrugging off the significant impact of the highly transmissible Omicron variant, India is projected to deliver a faster rate of recovery compared to the rest of the world, as per IMF. This robust recovery is expected to be achieved due to wide ranging reform, sustained fiscal and monetary initiatives supported by a successful vaccination drive at scale. India is also set to benefit from collaborations and partnerships including multiple free-trade agreements.

In February 2022, the Ministry of Finance, in its Union Budget, projected an economic growth of 9.2%, the highest among all large economies, while the RBI expects GDP growth for to be 7.8%. Through the Union Budgetfor FY 2022-23, the Government of India announced host of a initiatives to stimulate growth and increase spending across sectors. It expects 6 million new jobs in 14 different industries to be created under the PLI scheme, generating an additional revenue of Rs 30,00,000 crores. The PM Gati Shakti National Master Plan is expected to give major boost to economic transformation, seamless multimodal connectivity, and logistical efficiency across roads, railways, airports, ports, mass transport, waterways and logistics infrastructure. Towards the agricultural economy, the Government announced direct payment of Rs 2.37 lakh crores to 16.3 million farmers for wheat and paddy procurement. NABARD will facilitate a blended capital fund to finance agricultural and rural enterprise startups. Moreover, the RBI in its Monetary Policy Committee meeting held in February 2022 kept repo rates unchanged, thereby maintaining an accommodative policy stance. This shows the efforts of both the Government and RBI in creating an environment conducive to growth.

National Statistical Offices First Advanced Estimates (% change of Indian GDP over fiscal years)

2019-20 2020-21 2021-22
GDP 4.2% -7.3% 9.2%

Source: Ministry of Statistics and Programme Implementation (MOSPI)

The spread of Omicron variant towards the end of FY 2022-23 and the inflation in input prices and utility costs, combined with the international geopolitical tensions in Asia and Europe have hampered the ongoing growth momentum in the Indian economy. Having said that, the country has done well in navigating through some of these challenges given the high level of integration plants. IMF has forecasted Indias economic growth for the fiscal to be 9%. Meanwhile, the World Bank expects Indias real GDP to grow at 8.7% in 2022.

Overall, the Indian economy is expected to benefit from resumption of contact-intensive services and fiscal & monetary support. Further, the investment outlook is expected to improve with more private investment coming in, particularly in manufacturing, as a result of PLI schemes announced and increased infrastructure investment. In addition, the structural reforms and recovery in the financial sector will support the growth outlook.


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Industry Outlook and Trends

The global chemical industry is presently valued at about US$5,027 billion, with China accounting for the majority of market share at 39%, followed by the European Union at 15%, and the United States at 13%. India holds a 4% market share in the worldwide chemical market. Within the global chemical industry, ‘Commodity chemicals form ~80% of the market, with rest 20% being constituted by ‘Speciality chemicals. In terms of trade, globally around 25% of the total speciality chemical production is exported, with China being the largest exporter contributing ~18% to the total exports (Source: FICCI). The global chemicals market is expected to grow at a CAGR of 6.2%, to achieve US$ 6,780 billion by 2025, driven by swi_ revival in the speciality chemicals segment. Growing demand for speciality inputs in essential services segments such as pharmaceuticals, personal health & hygiene and agrochemicals etc. are likely to act as key drivers.

Past few decades have witnessed a structural shi_ in Chemical manufacturing from EU and North America to Asia and in particular China. On the back of rapid industrialisation, large scale manufacturing facilities, low manufacturing costs and availability of finance at optimal cost, Chinas share of speciality chemical manufacturing grew manifold over last two decades, from about 6% in 2000. APAC is likely to continue to grow at a comparatively rapid pace with a CAGR of 7-8% over 2019-24 led by China and India. As the industry moves into 2022, strong demand for both commodity and speciality chemicals should keep prices robust throughout the year. The industry will also experience increased capital expenditure as leading industry players focus on building capacities through both organic and inorganic routes. Having said that, the pressure on margin persists amid raw material cost inflation across the value chain.

Domestic Chemical Industry

The Indian chemical industry stood at US$ 213 billion in FY21, and is expected to reach US$ 304 billion by FY 2024-25 registering a CAGR of 9.3% from FY 2018-19 to FY 2024-25. To achieve this, an investment of Rs 8 lakh crores is estimated in the Indian chemicals and petrochemicals sector by 2025.

The speciality chemicals constitute 22% of the total chemicals and petrochemicals market in India. The demand for speciality chemicals is expected to rise at a 12% CAGR between 2019-22. Indian manufacturers have recorded a CAGR of 11% in revenue between FY 2014-15 and FY 2020-21, increasing Indias share in the global speciality chemicals market to 4% from 3%. The petrochemicals demand is expected to record a 7.5% CAGR between 2019 and 2023, with polymer demand increasing at 8%. The Indian agrochemicals market is expected to register an 8% CAGR to reach US$ 3.7 billion by FY 2021-22 and US$ 4.7 billion by FY 2024-25. In October 2021, exports of organic and inorganic chemicals increased 42% Y-o-Y to reach US$ 2.56 billion.

Improving macro-economic factors would fuel growth in end user segments such as textiles, personal and home care, agrochemicals etc. This along with increase in Indias per capita speciality chemical consumption, which remains significantly lower compared to developed markets, will drive incremental upside. Tighter environmental norms have caused multiple plant shutdowns in China and other developed economies, causing MNCs to shi_ their manufacturing requirements to alternate geographies like India, resulting in strong demand visibility for Indian manufacturers. Consequently, acceleration in capex plans of domestic chemical companies, incremental integration in value chain and exploration of newer opportunities (high-margin businesses) is expected to materially contribute to revenue and margin expansions.

Focus on Reducing Chemical Imports

In the past two decades, the world has witnessed significant rise of China as a major supplier of chemicals where its share of global chemicals production has increased from mere 6% in CY2000 to ~25% in CY2020. Having said that, Chinas cost-competitiveness has recently deteriorated as a result of rising environmental costs and diminishing Government subsidies. For instance, the Chinese Government brought about stringent policies for environment protection in January 2015, such as mandatory e_luent treatment plants, green tax levy. These steps have impacted profitability dynamics of local Chinese chemical companies as they would require more CAPEX to ramp up production while complying to safety norms. China has also made it mandatory for medium and small enterprises (MSME) chemicals companies to relocate to dedicated chemical zones which has further elevated costs for setting up new facilities. Chinas carbon neutral commitment target by CY2060 is one major reason behind stringent environmental norms and tightening of financing options for polluter companies. Subsequently, its industry is facing structural headwinds, which has impacted global supply chains. These factors are increasingly forcing global majors to relook at Chinese supplies, which is why they are building an alternate presence, thereby benefitting Indian chemicals players who are making sustained investments in R&D and environment, health and safety protocols. In addition, cost-competitive manufacturing and adequate technical knowledge makes India a suitable choice for global majors.

The Government of India is focused on improving chemical industrys competitiveness and manufacturing share in the overall economy. Its FY 2033-34 vision for the chemicals and petrochemicals sector emphasises on ways to enhance domestic output, reduce import dependency and promote investment. It also overhauls the Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) policy to encourage investment of _ 20 trillion by FY 2034-35. All this is likely to meaningfully reduce Indias import dependence of basic raw material coming from neighbouring countries including China.

Structural Growth Drivers for India

Shi_ in customers preferences – Customers are increasingly getting interested in environmentally friendly and socially responsible products and services. Moreover, they are becoming conscious of health and hygiene and are demanding greener and safer products.

Increasing middle class and working population - By 2025, Indias working population is expected to increase by 33% to reach 1.14 billion along with tripled income levels. The average median age of the country shall be 37 years by 2050.

Source: pdf/ageing/WorldPopulationAgeing2019-Highlights.pdf

Increasing adoption of speciality products - Growing health and hygiene awareness has resulted in increased adoption of nutraceutical ingredients such as vitamins, amino acids, and so on, as well as personal and home care ingredients such as emollients, surfactants, active ingredients, and so on. With rapid urbanisation and industrialisation, demand for engineering plastics and high-performance materials is increasing, driven by growth in automotive, electronics, consumer goods, construction, and other sectors. With increased demand for personal and public place disinfestation following Covid19, the chloro-alkali, ethanol, personal care, and surfactant industries are expected to grow significantly in the near future.

Increasing focus on R&D - Chemical companies are investing in R&D activities to develop their niche in the market. They are also trying up to develop green products and chemistries.

Energy efficiency - The Government of India is prioritising energy a_ordability and security measures as an integral part of the countrys economic development. Industrial sectors achieved an energy savings of 1.4 exajoule between 2014-2018 driven by the Perform, Achieve and Trade (PAT) scheme. Continued energy efficiency measures are leading to an increase in the demand for plastic insulations – polystyrene and polyurethanes, low thermal conductivity and light-weight polycarbonates, etc.

Source: Knowledge Paper on Indian chemical and petrochemical industry (PWC and FICICI)

Increasing per capita consumption – The current per capita consumption of chemical products in India is about one-tenth of the global average and is expected to double by 2025.

Digitalisation and Industry 4.0 – Digitalisation offers competitive advantages through improved integration, better operations management, and innovation and new-age digital business tools. Chemical companies are implementing digitalisation initiatives and tools in their supply chains, demand planning and pricing strategies.

Increasing M&A and investment related activity – Downstream value-added opportunities, healthy demand of speciality chemicals and realignment of portfolios are the key drivers of strong M&A and investment activities. Global oil and gas majors, and leading chemical companies are looking for downstream opportunities in India and other high-growth economies. The trend has already begun with Saudi Aramco, Total and BASF showing interest in the Indian chemical industry.

Structural shi_ from China – Consolidation in the industry, environmental reforms and tightened financing is changing the structure of Chinas chemical industry, resulting in uncertainty for companies dependent on the country for their supply of raw material. In addition, the Covid-19 outbreak has compelled companies to move their supplier base and look for alternative locations such as India that offer stability as well as advantage on low-cost labor and favorable investment policies.

Innovation and sustainability – Adding value by balancing the economic, social and environmental impact of the pandemic is becoming an overarching management principle in the chemical industry value chain. Chemical companies are incorporating sustainability and green-chemistry initiatives by constantly innovating products, technologies and processes, while closely working with customers and suppliers across the value chains.

Favorable Government Policy – Various policies announced by the Government of India to strengthen the Indian chemical sector will help in potentially doubling the revenues by 2025. Key initiatives include consent for 100% FDI in chemical sector under automatic route, redesigned the Petroleum Chemicals and Petrochemicals Investment Region (PCPIR) policy (2020-2035) which targets to attract a combined investment of US$ 142 billion by 2025, US$ 213 billion by 2030 and US$ 284 billion by 2035. Further, it introduced a Production-Linked scheme (PLI) to boost Indias manufacturing capabilities and exports, with a total outlay of Rs 18,600 crores. Reduction in custom-duty for various products, providing research & development support and the Make in India campaign will further benefit the sector. The Government aims to increase the manufacturing sectors share in GDP to 20% by 2025.

Industry Outlook

Going forward, the potential for strong growth in Indian economy, with GDP likely to double to US$ 5 trillion over next decade, creates a large opportunity for Indian Chemical companies. End-use sectors such as agriculture, consumer and retail, infrastructure, auto and electronics, and healthcare could drive ~50% of incremental demand in chemicals. In addition, low labor cost, lower CAPEX requirement (than developed countries) for capacity expansion and supportive Government policies would be additional levers contributing to growth. Moreover, the Government of India identifies the Chemical industry as a key growth driver, with this sector expected to account for 25% of GDP in manufacturing by 2025. Under the Union Budget 2022-23, the Government has allocated Rs 209 crore (US$ 27.43 million) to the Department of Chemicals and Petrochemicals.

(Source: IBEF)

Key growth influencers

a Improving disposable income, population median age, urbanisation, and increased penetration and demand from rural markets

a Transition of consumption and production to Asian and Southeast Asian countries in several industries, resulting in increased demand for chemicals and petrochemicals

a Consumer preferences moving toward healthy lifestyle and eco-friendly products

a By 2023, there is an opportunity to manufacture US$111 billion worth of chemical products for domestic application

a Under the Atmanirbhar Bharat Abhiyaan, a roduction-linked incentive scheme has been introduced in the chemical sector to increase domestic manufacturing and exports of various chemicals

Furthermore, as global conglomerates look to de-risk their China-reliant supply chains, Indias chemical sector has the potential for enormous expansion. Moreover, to prevent dumping of chemicals into the country, the Government has initiated several actions, including ADD, mandating BIS-like certification for imported chemicals, etc. It has also established a 2034 vision for the chemicals and petrochemicals sector to explore opportunities to enhance domestic production, reduce imports, and encourage investment in the sector. The intention is to establish an end-to-end manufacturing ecosystem through cluster development approach across the country.

(Source: IBEF)

Sources: 2022 chemical industry outlook – Deloitte Indian%20Specialty%20Chemical%20Industry.pdf

Performance of the Company

Deepak Nitrite Limited (‘the Company) delivered an encouraging performance during the year, despite a challenging macro environment. Strong gains in Strategic Business Units (SBUs) drove healthy revenue growth, that was specifically bolstered by superior performance across all segments. Deepak continues to employ a dynamic strategy based on expected demand for key products, thereby fueling growth and aiding profitability. This is possible as the Company remains vigilant to the newer opportunity presented by improving operating environment and changes in global supply chains. Operational environment during the year under review was challenging, with escalating costs across value chain. Raw material prices remained elevated together with heightened utility costs including power and fuel. This was in addition to logistical issues that persisted throughout year. Within this backdrop, the Company implemented its planned production strategy effectively and efficiently, to meet its supply commitments, and ensure reliable and steady supplies without much disruption.

As a process, the Companys business segments are interconnected. As a result, increased margins in one segment may result in lower margins in another. This year has been extremely successful for the BI, PP and Phenolics segment supported by positive industry dynamics. In the Fine & Speciality Chemicals segment (FSC), since most of the contracts are long-term, there is some latency in passing on input costs. Price increases are being deferred tactically in some instances to build relationships and increase wallet share of customers. Your Company has been able to either maintain or gain market share in almost all products. By proactively assessing the market situation and ensuring supplies, the Company has been able to pass on the rise in raw material costs in most cases, thereby protecting margins. Although this has been done with some time lag, the effect of which will be more visible in the ensuing year.

In the recent times, undercurrents of Ukraine-Russia war are being felt across economies. Every commodity, from oil to wheat to chemicals, is facing a price increase due to congested supply chain network. Gaining ground from Covid-19 spurred higher logistics and freight costs, as well as China-plant shutdowns, particularly in the chemical sector. Today, the chemical industry is under pressure due to heightened volatility in the crude oil prices and related petrochemical intermediates owing to the Russia-Ukraine conflict. This will also cause margin pressure for some chemical companies who are highly dependent on imports.

In the Financial Year 2022, Revenue from operations including other income stood at Rs 6,845 crores, higher by 56% when compared to last year. Despite a challenging backdrop, the Company has demonstrated immense agility to continue its operations uninterrupted, while fulfilling the supply commitments of customers. EBITDA registered 30% gains over the previous year and stood at Rs 1,646 crore. The Company undertook several enhancements in the product mix, improved realisations and made cost reduction efforts which helped deliver better margin profile. Profit Before Tax (PBT) came in at

Rs 1,434 crores, up by 38% from last year. Profit A_er Tax (PAT) stood at Rs 1,067 crores, delivering a growth of 37% compared to the previous financial year.

The Company was able to maximise utilisation at its facilities while competing in both domestic and export markets, leading to improved profitability. Overall, the demand outlook remains resilient, with most industries returning to pre-COVID production levels and incremental demand coming from strategic shi_ in the global supply chain from China to other countries, notably India.

Headquartered in Vadodara, Gujarat, Deepak Nitrite is one of Indias leading chemical intermediates companies. Your Company offers a wide range of products that are defined as Basic Intermediates (erstwhile Basic Chemicals), Fine and Speciality Chemicals (FSC), Performance Products (PP), and Phenolics. It has a diverse portfolio of chemical intermediates that satisfy a wide range of end-user industries in India and around the world, including dyes and pigments, agrochemicals, laminates, auto, construction, pharmaceuticals, plastics, textiles, paper, home & personal care. The Companys facilities are strategically located in Gujarat, Maharashtra, and Hyderabad (Telangana), with the R&D facility in Nandesari (Gujarat). Its products are manufactured in six primary sites and are certified by Responsible Care. Today, the Company is seen as an Indian multinational that continues to expand its market share in nearly all of its core products. Over the years, it has significantly extended its global footprint in major countries such as Europe, the United States, Japan, Latin America, the Middle East and Far East Asia among others, with exports to about 30 nations. In terms of cost leadership across major products, it has been an unchallenged leader for several decades now. Your Company has a vision of growing its footprint in high-value intermediates, and is on track to accomplish this through tactical initiatives and aggressive growth plans.


The Basic Chemicals (BC) SBU has been renamed as Basic Intermediates (BI). This was done in line with global shi_ in supply chain, and to realign towards a model of providing security of supply of high-quality intermediates Deepak Nitrite produces nitrites, toluidines and fuel additives. Cost leadership is key to achieving the competitive advantages essential to stimulate profitable growth.

User Industries for Basic Intermediates:
• Colorants
• Rubber chemicals
• Explosives
• Dyes
• Pigments
• Food colors
• Pharmaceuticals
• Petrol & diesel blending
• Agrochemicals

In FY 2021-22, BI segment registered total revenues of Rs 1,261 crores, higher by 66% over the previous year. This segment has been the key beneficiary of shi_ in global supply chains which is expected to further elevate based on promising demand trajectory. Despite adverse macroeconomic situation and temporary disruption in RM availability, the Company continues to meet its delivery commitments. EBIT stood at Rs 313 crores, and grew by 61% over the previous year.


In the Fine & Speciality Chemicals segment (FSC), the Company manufactures specialised products which are customised to clients specification. It includes niche products that require better understanding of multiple chemistries with greater value addition. They are manufactured in-house by leveraging the Companys expertise in process engineering and technical expertise. Company manufactures Speciality Chemicals such as Xylidines, Oximes, and Cumidines, among other products. As these products are custom-made to the clients specifications, they are offen produced in smaller quantities but commands higher price. Product quality, deep linkages, reliable and efficient supply chain, and conformity with worldwide standards are all essential for these products.

User Industries for Fine & Speciality Chemicals:
• Agro-chemicals
• Colorants
• Pigment
• Pharmaceuticals
• Personal Wellness

Fine & Speciality Chemicals segment revenue increased by 10% to Rs 846 crores in FY2021-22. EBIT for this segment de-grew by 23%. FSC segment demonstrated agility, and navigated through multiple headwinds during the year, from logistic disruptions to elevated RM costs and utilities.Despite these aberrations, the Company reported resilient performance and expects solid demand across end-user segments that will drive incremental gains in the ensuing years. Due to the nature of contracts in this segment, prices are not immediately passed on, but rather with a time lag. Better demand visibility, higher revenues from new multiyear contracts, and ability to pass on cost increases will aid performance in the FSC segment consequently increasing wallet and market share for all key accounts.


Your Companys Performance Products (PP) segment is responsible for manufacturing two core products: Optical Brightening Agents (OBA) and DASDA. These products are unique in nature and contribute distinct features to the final output. The Company is a completely integrated manufacturer of OBA, employing toluene as a feedstock for PNT and then DASDA and OBA. These products meet strict efficiency and technical requirements. The Company has created a strong global clientele and strategically put the right products in the correct geographical areas, owing to its competence and technical know-how.

User Industries for Performance Products:
• Paper
• Detergents
• Textiles

During the year, PP segment delivered strong performance with revenue of Rs 529 crores, higher by 74%. EBIT improved at the rate of 335% to Rs 99 crores. Better demand for DASDA resulted in higher realisation gains. Overall volumes in the PP segment increased by 26%. This growth trajectory is projected to continue due to favorable market dynamics. Based on the fully integrated approach, the Company is well positioned to capture incremental demand from key end-use sectors which have all resumed production to pre-COVID levels.


Deepak Nitrite Limiteds wholly owned-subsidiary Deepak Phenolics Limited (DPL), commenced its commercial production at its mega Phenol & Acetone plant in Dahej, Gujarat, in November 2018. In addition, your Company established a plant to manufacture 30,000 MTPA of Isopropyl Alcohol (IPA) from acetone, in-line with its objective of moving into value-added downstream products with captive raw material usage. Later, it undertook a brownfield expansion of IPA which was commissioned in December, 2021. This has doubled IPA capacity to 60,000 MTPA. Your Company will continue investing in downstream products to sustain business momentum and profitability.

DPLs market share in Phenol has expanded to more than 50% inline with favorable demand in India and key export geographies. Your company has already positioned itself as the most trusted player in the domestic phenol and acetone sector. Phenolics business has delivered promising gains, during FY 2021-22. Increased contribution has resulted from forward integration into value-added derivatives such as IPA. The doubling of IPA capacity will further allow your Company to reduce Indias dependency on imports. In the Phenolics business, revenues grew by 68% to Rs 4,291 crores in FY 2021-22. While EBITDA Rs 974 crores, translating into EBITDA margin of 23%. Isopropyl Alcohol (IPA) contributed 7% to phenolics revenue, with 22% of Acetone consumed captively.


Domestic Revenues for FY2021-22 stood at Rs 5,272 crores when compared to Rs 3,088 crores in FY2020-21. Revenue contribution from Exports stood at Rs 1,530 crores, up by 20% when compared to Rs 1,272 crores in the previous financial year. On a Standalone basis, mix of Domestic versus Exports has been 58 :42 in FY2021-22.

Domestic revenues increased by 71% during the year, owing to steadfast demand recovery in key end-user industries as well as benefit accruing from global supply chain disruptions. The Company maintained its position as a leading supplier of choice for key domestic customers with cost leadership. Production efficiencies combined with favorable product mix resulted in robust volume growth for select products.

Exports delivered a growth of 20% in the period under review as a result of deepening customer engagements in key geographical regions and overall shi_ in the global supply chain on the back of China+1 strategy. This momentum was further elevated by your Companys efforts of running plants at optimum utilisation levels with streamlined processes. During the year, Europe contributed 44%, as compared to 46% in the previous Financial Year. Contribution from Asia stood at 36%, while the contribution from US improved to 18%.


Your Company is subjected to a broad range of risks as a leading participant in the chemical sector with worldwide scale of operations. A systematic structure-based strategy is used to implement risk management. The risk management and prevention frameworks are intended to fortify the Companys operational capabilities by leveraging a portfolio of best-in-class products serving a diverse range of end user industries.

The Company continues to prioritise the establishment of integrated leadership and succession planning strategies, as well as the evaluation of alternatives to improve institutional performance. Therefore, risk management has consistently been an essential part of the operations. Effective internal control systems, well defined risk management framework, and adopted strategies support the responsibilities of various business segments in respect of risk mitigation. These responsibilities also serve as a solid foundation for effective risk management policies, their successful implementation, independent supervision, internal audit reporting, and corporate management community.

The Company has implemented suitable measures to assess and manage underlying business risks effectively. The Company has a system of identifying risks from the lowest rung of the Company which is periodically assessed for mitigation by the relevant departmental head. As a result, the competent and experienced team handles the challenges of raw material pricing, commodity risks, and currency fluctuations with efficiency. Management has put in place appropriate measures and is working hard to reduce the adverse impact of these uncertainties on its operational activities.


The Company has a Corporate Governance structure that governs its operations, and the management team follows sound financial policies, as well as processes and systems. Your Companys Risk Management Framework and Planning & Review Processes offer the required foundation for internal financial controls on its financial statements. The planning is anchored on major operating policies that have been carefully chosen by the Management and approved by the Committees

Significant changes in key financial ratios (standalone)
Key Financial Ratios FY 2021-22 FY 2020-21 Change (%) Reason
Debtors Turnover Ratio 5.56 5.03 11% Amidst higher revenue, efficient collections from trade receivables
Inventory Turnover Ratio 5.21 4.09 27% Revenue growth and efficient inventory operations during the year has led to faster inventory churning and thereby this ratio has improved
Interest Coverage Ratio 1533.74 173.71 783% Major improvement due to minimum borrowings
Current Ratio 4.95 2.95 54% The current assets include current investment which has increased by Rs 311 Crores as compared to previous year.
Also, the Trade Receivables are higher on account of higher sales realisation.
Debt Equity Ratio 0.01 0.00 - The Company is Net Debt-free as on the Balance Sheet date.
Return on Net Worth (%) 23.71% 21.27% 12% Higher revenue resulted in higher profits
Operating Profit Margin (%) (EBIT) 24.90 26.50 -6%
Net Profit Margin (%) (PBT) 24.90 26.30 -5%

and the Board. These policies are reviewed and enhanced on a routine basis. These processes, SOPs, and controls are evaluated by key management and audited by an Internal Audit Team, whose findings and recommendations are reviewed by the Committee and accordingly implemented. The Company has effective internal financial controls in place in terms of financial statements. These controls are evaluated throughout the year, considering the most significant features of internal controls. Based on the findings of such an assessment undertaken by key management, no reportable material deficiency, or substantial deficiencies in the implementation of internal financial controls were found. The company utilises regular audit and review techniques to reinforce the programmes on an ongoing basis.


As of March 31, 2022, Deepak Group had 2006 permanent employees. The Companys Human Resource Development strategies are guided by the essential concepts of relevance, continuity, and fairness. Numerous methods are being applied across segments to improve talent management, skill development, and efficiency. All of this has resulted in significant increase in talent management, retention, and commitment.

In order to build and develop value for the Indian chemical industry and its stakeholders, HR department continues to align its strategic interventions and procedures with a long-term vision. This is one of the most critical variables in increasing business performance. The assurance of talent management remains critical in attracting and maintaining ‘best-in-class talent. Individual and team performance are also linked to the Companys overall strategic goals through performance management. Our diversity, equity and inclusion approach focus on hiring, developing, and retaining the best people. A diverse workforce, supported by an inclusive and caring environment that respects and nurtures people, is a way to improve our safety and business performance.



Comprehensive Product Portfolio for a Wide Range of End-use Sectors: Products are segregated into four segments, namely Basic Intermediates, Fine and Speciality Chemicals, Performance Products and Phenolics. With a diversified product offering, the Company satisfies the requirements of key customers who procure multiple products across different categories. Broad product portfolio caters to wide range of end-use sectors like dyes & pigments, agrochemicals, pharmaceuticals, plastics, textiles, paper, home & personal care segments, petro-derivates laminates, auto, plywood in India and overseas. This assists the organisation in obtaining new clients and addressing a huge spectrum of their demands. As a process, the Company reorganises and enhances its product offerings time to time by leveraging its production expertise and knowledge of complicated chemistries to build a differentiated portfolio catering to variety of applications. This protects your Companys business from any risks associated with the obsolescence of a specific product or category.

Global Customer Base & Strong Relationships: The Company has a strong distribution network that spans 30 nations across six continents. It has established a strong presence in key regions around the world, such as the United States, Europe, and China, in addition to India. Its customer-centric approach, combined with long-term relationships, has helped create and sustain strong connections with majority of Indias and worlds key customers. The Companys customer commitment is a key virtue, and its diverse product line ensures that the company is not dependent on a particular application to achieve success. Moreover, Deepak Nitrite is uniquely positioned to ride on the growing demand trajectory from overseas customers because of China+1 strategy. As significant volumes of existing and future products are supplied as part of long-term formula-linked arrangements, your company anticipates a deeper engagement between Deepak and its strategic customers.

Strong Focus on EHS and Sustainable Manufacturing: Customers have recognised your Companys ability and its manufacturing practices with keen focus on environment, health, and safety to drive business sustainability. As the Company approaches the next stage of transition into a diversified chemical company, it will be able to maintain its leadership position in its present value chain while also dedicating itself to innovative platforms and greener products. Your company will continue to emphasise on the twin pillars of process intensification and operational excellence in a responsible and sustainable manner.

Efficient Supply Chain Management: Over the years, the Company has implemented its operational schedules effectively and efficiently, as well as fulfilled its supply commitments, to assure consistent and predictable deliveries to consumers. Your Companys manufacturing expertise in the chemical value-chain has ensured that it can handle logistics and supply chain with huge volumes. With proper use of technology, the Companys pan-India supply chain fosters tight relationships with vendors and consumers, assuring quality service and in-market performance. Deepak Phenolics is a prime example of a worldwide mega-scale plant, with massive flow of both raw materials and finished items transported in the most efficient and timely manner possible.

Innovation & Technical Expertise: The Companys R&D efforts are geared towards innovating new compounds and developing value-added products from by products, in addition to consistently evaluating existing opportunities and processes to drive efficiencies and cost savings. Your Company has carved out a position for itself by introducing newer and more innovative products premised on strong technical skills and knowledge of complex chemical processes. The Companys excellent execution capabilities and proven track record are key components in enabling it to actively shi_ into an R&D and innovation-led business.

Robust Management Team: The Companys key management personnel comprises of renowned individuals with vast industry experience and an insight of market nuances. The Code of Responsible Care and Ethical Principles are highly imbibed amongst the management. The present management team has tremendously contributed to the Companys success. It remains focused on driving gains for high-margin products, with emphasis on R&D and greater wallet share from existing customers.


Uncertainty in Raw Material Prices & Other Costs: Challenging operating environment can be defined with increasing input costs and supply limitations, particularly higher utility costs such as power and fuel. Demand & supply, overall political and economic conditions, supply chain natural calamities, pandemics, and competitive pressure are all factors that can affect the availability and prices of raw materials, and there are underlying unknown variables in estimating such factors, regardless of the methodologies and forecast mechanism. Your Company has agile material and logistics team to mitigate such adverse implications.

Limited Availability of Renewable Resources: Given the increasing magnitude and scope of reactions within several chemistries, manufacturing processes require an uninterrupted and clean source of energy. The Company usually depends on conventional fuels such as coal and furnace oil for power generation as non-traditional energy sources are unsustainable and other alternative sources have their own challenges. Your Company continues to evaluate and implement various techniques to grow its ecological footprint. It also recognises that improving energy efficiency is one method of lowering greenhouse gas emissions.

Foreign Exchange Fluctuations: Exchange rate fluctuation is an operational risk for all export businesses, and how you minimise this risk is fundamental to the business. In recent years, the level of uncertainty has escalated, and the Company has taken several precautions to safeguard itself from unexpected movements. The Company is exposed to some exchange rate risk as a result of increased exports; however, this risk is addressed through dynamic hedging techniques.


Enhanced Scope for Import Replacement: From the Companys first product ‘Sodium Nitrate to its latest foray into ‘Phenol and Acetone, the Company has aligned its focus on products where domestic demand was largely import dependent. Import substitution has always been a major driver of the Companys overall business plan. Your Company has effectively replaced imports of critical products like phenol and acetone among others, sparing millions of dollars in foreign exchange and achieving self-reliance. Your Company continues to focus on launching value-added downstream products with the goal of substituting imports primarily to capitalise on the more favourable demand scenario.

Beneficial Government Schemes: As a result of Governments ‘Make in India campaign, several companies have been invited to manufacture their products in India. Other initiatives like ‘Atmanirbhar Bharat and several PLI schemes, should place India on a solid footing in comparison to the global players. This will not only make it easier for businesses to secure regulatory approvals, but it will also open a plethora of opportunities for overseas partnerships. Your Company will take effective advantage of all these initiatives and Government support to achieve its growth aspirations.

Promising Outlook of Exports from India: As global majors seek to reduce their dependency on China, a number of possibilities have arisen for established chemical intermediates companies located in India to showcase their competencies on a worldwide scale. Owing to favorable demand scenario, Indian chemical exporters are building scale by expanding their horizons to leverage this structural shi_ in demand. This will help India demonstrate its capabilities on a global stage and encourage Indian exporters to reinvest in R&D to strengthen production efficiency.


Obsolescence Risk: Existing products are constantly at risk of becoming obsolete as a result of introduction of fresh technologies and techniques. The discovery of innovative products with more efficient processes for generating chemical compounds could undermine the viability of current product lines. This might result in lower demand for older products or replacement of existing processes where companys competence has been accumulated over the years. Given its leadership position in numerous product categories, your Company is rather protected from such threats. It also evaluates and enhances its processes on a continuous basis, for any technological advancements.

Availability of Skilled Workforce: Chemical processes and mechanisms involve specific expertise and recruiting capable workers with this knowledge can be challenging at times. Likewise, there are times when technically trained personnel are in short supply in India. In order to retain and expand the current talent pool, your Company undertakes initiatives to provide intensive training for professional advancement, awareness of industry complexities, and adherence to international best practice.

External headwinds: The Company delivers to a diverse set of end-user industries. Therefore, while alleviating concerns regarding client concentration, it exposes it to the demand-supply dynamics of multiple sectors. India is a key market for the Company, accounting for majority of total revenue. Any slowdown in the domestic market will place earnings visibility at jeopardy.


The Company is a leading chemical intermediate company with a diverse product portfolio that encompasses through three Strategic Business Units (SBU) namely, Basic Intermediates (erstwhile Basic Chemicals), Fine and Speciality Chemicals, and Performance Products. Deepak Phenolics Limited (DPL) is a wholly owned subsidiary of the Deepak Nitrite, formed with an intention of seizing the import substitution opportunity in Indias chemical industry. Currently, it manufactures phenol, acetone, and IPA, and has reportedly achieved a more than 50% market share in the country by substituting majority of phenol and acetone imports. It also aims to expand its footprint in high-value intermediates to leverage and synergise the Company with DPL and has announced the formation of a new subsidiary named Deepak Chem Tech Limited (Formerly known as Deepak Clean Tech Limited).

The Company is in an advantageous position to accomplish its ‘Make in India for the World goal, thanks to strong end-user demand, expanding Indian economy and China+1 strategy. The Companys diverse business model with comprehensive experience of building mega-scale projects for chemicals such as phenol demonstrates its best-in-class process management capabilities and provides assurance about its future plans. The Company is transitioning from a bulk chemical-focused entity to a high-margin chemical intermediates-focused Company. Over the next 2-3 years, the business plans to invest ~Rs 15 billion in new downstream products and sophisticated chemistry platforms as a part of its next phase of expansion, thus elevating itself towards path of solvents major in the world.

Looking ahead, the Companys future growth will be driven by planned expansion projects across SBUs as well as strategic introduction of numerous downstream chemicals and complex chemical platforms. The Company will continue to be vigilant and will capitalise on the opportunities that arise as a result of swi_ transformations in the industry landscape. Entry into newer solvents will diversify the Companys product portfolio, broaden its client base, and increase the percentage of complex, high-margin products in the mix, thereby improving the business proposition.

Basic Intermediates (erstwhile Basic Chemicals) – Legacy business riding on healthy demand trajectory

Basic Chemicals, now renamed Basic Intermediates (BI), are standardised commodity chemicals manufactured and delivered in high volumes with moderate margins. It is a key building block for the chemical value chain. The entry barriers are significantly low, and your Company leverages its cost leadership and largescale production within the segment to increase volumes and profitability. The perks of cost leadership have enabled the company to achieve a market share of more than 75% in products such as sodium nitrate/ nitrite. It will continue to be a major revenue contributor since India has a large local demand that is growing at a rapid pace. Moreover, the Company has realigned this segment to provide security of supply of high-quality intermediates to strategic customers. The Company is implementing the backward integration project which shall make it much more sustainable and margin accretive.

The Companys basic intermediates revenues have increased by 66% in FY22 despite the adverse macro environment. Your company has recently completed a brownfield expansion that has increased its capacity in the BI segment. Furthermore, it anticipates that the performance will be sustained owing to shi_ in the global supply chain as well as a promising demand landscape.

Fine & Speciality Chemicals (FSC) – Niche products targeted for varied end-use cases; moving up the value-chain with multiyear contracts

Under the FSC segment, the Company produces specialised products that require multiple steps with sound process engineering capabilities. The products are created in-house, utilising the companys process expertise and technological skills. Since they cater to niche segments and are highly customised, these products have higher and more sustainable margin trajectory. A_er building its competence in basic chemicals over the last five decades by perfecting the processes of nitration, hydrogenation, oxidation, and diazotization, it is now putting this knowledge to right use by incorporating it into value-added products and platforms. Sticky relationships and presence across the value chain is a key differentiator.

FSC segment has grown at an annual rate of 16% from FY19 to FY22, owing to a rising product portfolio complemented by R&D investments and brownfield expansions. Forward integration of basic chemicals is generating attractive gains for the company, while deepening relationships is leading to higher wallet share. Key levers will be solid demand trajectory and benefits from multiyear deals contracted. Furthermore, it intends to enter the contract manufacturing market (CRAMS) by leveraging its existing relationships with large customers. However, exceptional rise in raw material prices is being vigorously monitored to limit any significant impact on the margin profile.

Performance Products (PP)– Fully integrated model safeguards from volatility in prices and demand-supply dynamics

Within PP segment, the Company manufactures DASDA (di-amino stilbene disulfonic acid) which it acquired from Vasant Chemicals in FY07 and OBA (optical brightening agents), which it started manufacturing at Dahej in FY14. Your Company sources its DASDA requirement for OBA from its Hyderabad plant. Rest is sold in the open market. PP has continuously upgraded its manufacturing facilities along with innovative formulations focussing customer delights which has substantially increase customer confidence and dependability on the Company products supply, quality and price. The Company distinguishes itself as a fully integrated manufacturer of OBA, with processes beginning with the conversion of basic input toluene into PNT, then into DASDA, and last into OBA. Due to continuous disruption in China which is a dominant player, DASDA prices have remained volatile over the past couple of years.

PP segment grew at a CAGR of 15% between FY17 to FY22 due to sustained demand and limited expansion by existing players. DASDA and OBA prices have firmed based on solid demand recovery in key end-user industries of textiles, detergent, and paper. This is likely to continue and the Company stays well poised to capture incremental demand.

Deepak Phenolics (DPL) – Import substitution holds key; performance to elevate post introduction of value-added downstream derivatives

DPL is a market leader in the domestic phenol and acetone segment. It also manufactures IPA with captive consumption of acetone. In December 2021, it has doubled the IPA capacity to 60,000 MTPA. With domestic market share of more than 50%, DPL is presently well established and moving in the right direction to expand its presence in value-added downstream derivatives of phenol and acetone.

Based on elevated utilisation levels and a strong demand environment, net imports of these products have reduced considerably, while demand has been rapidly growing due to varied end-user applications. During FY22, DPL has consistently reported higher average capacity utilisation on a sustained basis backed by production efficiencies. The Company aims to add high-value solvents, which are forward integrated projects at an investment of _ 7 billion, which is expected to be completed by FY24. Life sciences, paints and coatings, among other industries will greatly benefit from these products. Given the rising demand from the laminates and plywood industry, the Company believes phenol consumption in India is likely to grow in double digits over near to medium term.

DISCLAIMER: This Report contains forward-looking statements that involve risks and uncertainties. When used in this Report, the words ‘anticipate, ‘belief, ‘estimate, ‘expect, ‘intend, ‘will

Financial Highlights for the last Ten Years

(Rs in Crore)
Ind-AS Indian GAAP
UOM* Consolidated Standalone
2021-22 2020-21 2019-20 2018-19 2021-22 2020-21 2019-20 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14 2012-13
1 Total Income _ in Crores 6,845 4,382 4,265 2,715 2,582 1,823 2,237 1,795 1,491 1,324 1,337 1,329 1,271 1,030
YoY Growth % 56.22 2.73 57.08 60.80 41.63 -18.52 24.67 20.38 12.56 -0.96 0.61 4.55 23.42 29.94
2 EBITDA _ in Crores 1,646 1,269 1,061 429 716 550 804 308 214 152# 168 140 114 81
3 Profit / ( Loss) _ in Crores 1,434 1,042 806 268 642 479 706 212 122 74# 91 68 58 53
Before Taxation
Percentage to % 20.96 23.78 18.91 9.87 24.87 26.28 31.56 11.84 8.19 5.58 6.83 5.10 4.57 5.10
Total Income
4 Profit / ( Loss) _ in Crores 1,067 776 611 174 486 355 544 138 83 52# 65 53 38 38
A_er Taxation
Percentage to % 15.58 17.71 14.33 6.40 18.83 19.47 24.32 7.69 5.60 3.92 4.87 4.02 3.01 3.67
Total Income
5 Equity _ in Crores 27 27 27 27 27 27 27 27 27 26 23 21 10 10
6 Net worth _ in Crores 3,338 2,347 1,572 1,072 2,256 1,845 1,491 1,058 944 732 476 347 308 281
7 Debt _ in Crores 301 578 1,099 1,187 14 - 208 328 462 574 495 545 505 335
8 Dividend on _ in Crores 95## 75 61** 27 95## 75 61** 27 18 16 14 10 10 8
Equity Capital
Percentage % 350## 275 225** 100 350## 275 225** 100 65 60 60 50 100 80
9 EPS _ 78.20 56.88 44.80 12.73 35.65 26.01 39.89 10.12 6.34 4.43 6.07 5.11 36.63 36.15
10 Book Value*# _ 245 172 115 79 165 135 109 78 72 62 44 34 294 268
11 Net Debt/ Equity x 0.00 0.15 0.68 1.08 0.00 0.00 0.14 0.30 0.43 0.64 0.89 1.56 1.62 1.16

*UOM: Units of Measurement **Interim Dividend

# Excludes Exceptional Income

## Proposed dividend is accounted as and when declared by the Company

*# In FY 2014-15, the Company has split its Equity Shares from face value of _ 10 each to _ 2 each and issued Bonus Shares in the ratio of 1:1. Hence, Book Value is not comparable.