Fine Organic Industries Ltd Management Discussions.

IndIan EconomIc REvIEw

India recorded a Gross Domestic Product (GDP) of 6.7% in 2017-18, establishing itself as the fastest growing economy. This can be accredited to an active and independent judiciary, a vibrant and uninterrupted parliamentary system of democracy. The Indian economy witnessed improvement in investments and consumptions after a temporary slowdown owing to demonetisation and Goods and Service Tax implementation. Going ahead, the economy is expected to flourish further owing to structural reforms and strong impetus on infrastructure as well as rural and agricultural segment. However, rising crude oil prices and inflationary pressures are the areas of concern. According to IMF predictions, the $2.6 trillion economy is forecasted to grow at 7.3% in 2018-19 and 7.5% in 2019-20.


Fine Organics has created a niche business for itself in the fields of oleo chemistry. Since 1950s, oleo chemistry has grown in diversity thanks to technological developments due to research in various institutions and industries. New and niche oleochemicals have been developed for utilisation across variety of industries such as food, coatings, surfactants, plasticisers, lubricant additives), cosmetics, soaps, detergents, textiles, plastics ,organic pesticides and several other fields. The global oleochemicals market size is estimated to reach $25.91 billions by 2019 and projected to witness a CAGR of 4.2% between 2014 and 2019. Asia-

Pacific is the fastest growing regions for oleochemicals market and is expected to clock in a CAGR of 5.10% between 2014 and 2019.Some of the key application markets include pharmaceutical & personal care, food & beverages, soaps & detergents and polymers, among others.

Industry segments Food

The Companys products acts as key additives in the food industries.Theseadditivescanbeintheformofemulsifiers, esters, preservatives and additive blends, among others.

Global scenario witness a Global food emulsifiers market size is

CAGR of 4.1% over FY2016-21 and is projected to reach US$

3.4 billions by 2021.The Asia Pacific region accounts for 26% global share and is expected to record a 4.6% CAGR, driven by strong growth prospects. Within Asia Pacific region, emerging economies such as China and India are envisaged to record the highest growth. Europe accounts for 33% global share and is expected to witness a steady 4.2% CAGR going ahead, with Germany and France driving this growth. Among the product categories, mono & di-glycerides and natural emulsifiers are expected to drive demand

The key global growth drivers include:

Increasing awareness among food processors about in advantages and applications of food emulsifiers various applications like bakery and confectionary industry and dairy

High consumption of ice creams, biscuits, mayonnaise, chocolates, bread, cakes, coffee-creamers and other processed foods, etc.

Growing population, strong economic growth and disposable income combined with changing lifestyles of emerging nations in Asia such as India, China and Vietnam

This is further leading to high growth of packaged and to convenience foods which require food emulsifiers sustain quality for longer hours and for enhanced taste, colour, appearance etc.

Increasing consumer demand for trans-fat products, which is driving food processors to use emulsifiers to reduce calories and fat content

Indian scenario

To The Indian food emulsifiers witness a CAGR of 10-12% over FY 2016-21 and is estimated to reach INR 9,000 Millions by 2021.The industry can be classified into four sub-segments of Indian consumer food industries: bread and bakery items, chocolates and confectionery, snacks and ready-to-eat (RTE)/ready-to-cook (RTC) items. Over the next five years, the consumer food industries is expected to witness a robust 13-15% CAGR, owing to higher market penetration in rural areas, wider variety of products and continuous innovation with changing consumer preferences for premium food products with increasing affluence in India following healthy GDP growth.

Indian consumer Foods Industry Growth

Category Market size (2016-17) n I R billion Estimated cagr over 2011-12 to 2016-17 Forecasted cagr over 2016-17 to 2021-22
Bakery items 400 12% 13-15%
Biscuits 280 13% 13-15%
Breads and others 120 10% 10-12%
Confectionery 200 15% 14-16%
Chocolate 108 14% 13-15%
Sugar based 92 15% 14-16%
Snacks 440 14% 13-15%
RTE/Rtc 90 10% 19-21%

The key growth drivers include:

Convenience and packaged food segments, especially premium food segments

Changing lifestyles and hectic work schedules are widening the market for processed and packaged convenience foods

Booming organised retail enhancing reach of processed foods

Change in eating habits and frequent introduction of new products and product lines, particularly in the functional food and beverage market for low-fat, low-calorie products, necessitates usage of food emulsifiers

Increasing number of nuclear families, rising affluence of the middle class, improvement in the living standards, rising urbanisation and changing consumer preferences


The Companys products acts as key additives in the plastic industry. These additives can be in the form of, slip additives, lubricants, mould release, flow improvers, anti-scratch, anti-fogs, anti-stats and processing aids.

Global scenario

The global market size of plastic additives is expected to witness a CAGR of 6% over 2016-21 and is estimated to reach US$30,000 Millions by 2021. The Asia Pacific region will be the key growth driver witnessing a 7% CAGR within the same time frame. Emerging economies like China and India are expected to record higher 8% and 6.4% CAGR, respectively. Steady recovery in the economies of Europe and the USA is also expected to aid the demand for plastic additives from these regions. Plastic additives are widely used for industrial and household purposes. The packaging industry comprises the largest share of the industrial usage, followed by consumer goods, construction and automotive, among others. Moreover, there is an increasing demand for plastic products which will also translate into further requirements of plastic additives. Increasing preference for non-toxic plastic additives and increasing environmental awareness by Governments across various countries will drive demand for natural derivatives like vegetable oil-based oleochemical derivatives.

The key global growth drivers include:

High growth in the Asia Pacific region owing to large demand from the packaging industry

Increased product substitution by of traditional materials such as metal, paper, and glass by plastic materials such as PE, PP, and PVC plastic

Higher usage of plastic material owing to low cost, better aesthetics, long life, superior properties and easy transportation & emollients used

Increasing preference for non-toxic plastic additives

Indian scenario

The Indian plastic additives market size is expected to witness a CAGR of 8-10% over 2016-21 and is estimated to be reach INR 90,000 Millions by 2021. The demand is driven by increased usage in the polymer (PE, PP and PVC) sectors, which are expected to flourish at a healthy 8-10% CAGR driven by premium packaging segments. The healthy growth of the automobile industry, packaging industry coupled with increased demand from the retail industry will continue to drive demand for plastic additives in India.

End-user wise plastic additives growth

Plastic material Industry size (Ktpa) in Fy17 Growth cagr (Fy12 to Fy17) Growth Forecast
Polyethylene (PE) 4,200 7.1% 9-10%
Polypropylene (PP) 4,200 2.0% 9-10%
Polyvinyl chloride (PVC) 3,200 8.4% 9-10%
Acrylonitrile butadiene styrene (ABS) 220 10.7% 6-7%
Polystyrene (PS) 260 2.0% 8-9%

The key growth drivers include:

Low per capita plastic consumption of ~11 kg compared with the global average of 30 kg

Higher plastic resins growth owing to recovery in major consumer segments such as packaging, automobiles, irrigation, construction and consumer durables

Continued substitution of metal pipes with plastic pipes and glass and metal containers with plastic containers, as well as from increasing use of plastics for packaging due to its superior quality and cost effectiveness The Companys products acts as key additives in the cosmetics and pharmaceuticals industry. These additives in thecan be in the form of emulsifiers creams and gels, pastes, lotions, lipsticks and ointments.

Global scenario

The global cosmetics industry is expected to record a robust CAGR of 4-4.5% over 2017-2022. Growth will be driven by rise in disposable incomes, changing lifestyles, rising demands of skin and sun care products due to varying climatic conditions. A shift of preference towards natural and organic beauty products, particularly in U.S. and the European countries will also be the key driver of growth.

Indian scenario

The Indian cosmetics industry is expected to record a strong CAGR of 10-12% over 2017-22 with volumes largely driven by the enhanced marketing in the semi-urban and rural areas. Growth in demand for relatively under-penetrated products like shampoos, hair dyes, and hair colours is being driven by better availability, increase in per capita consumption. With spread of organised retail to Tier II cities, development of non-traditional segments like mens cosmetics (with products like hair gels and fairness creams) and development of a wide range of products at different price points will contribute to growth of domestic cosmetics sector.

Rubber additives

The Companys products acts as key additives in the rubber industry. These additives can be in the form of processing aids, speciality plasticizers, slip additives, anti-stats and anti-stacking agents used across conveyor belts, automotive parts and engine components, tyres and dock fenders.

Indian scenario

Both Styrene-butadiene Rubber (‘SBR) and Poly-butadiene Rubber (‘PBR) domestic demand is expected to flourish at a CAGR of 6-7% between over 2017-22. The growth will be largely driven by a strong growth in the automobile sales, improving industrial activity, steady agricultural output and the governments focus on infrastructure.

Paint & coating additives

The Companys products acts as key additives in the paint and coating additives. These additives can be in the form of dispersing agents, emulsifiers, wetting agents, defoamers and slip additives used in paints, inks and coating materials.

Indian scenario

Paints and coatings additives demand growth in India will depend on the growth prospects and the end-use paints and coatings sector. The paints and coatings industry is forecasted to develop at an 8-10% CAGR between over 2017-22. The per-capita paint demand in India is still very low at 3.4 kg per year as compared to 4 kg in China and 20 kg in developed countries and the global average of 15 kg. Strong macroeconomic drivers such as rise in population, income, government initiatives towards affordable housing and housing for all, urbanisation, increase in number of nuclear families and the availability of retail financing options will continue to drive the demand for paints and coatings.


Incorporatedin2002,theCompanyisthelargestmanufacturer of oleo chemical-based additives in India and a renowned player in the global industry. The Company produces a wide range of specialty plant derived oleo chemical-based additives used in the food, plastic, cosmetics, paint, ink, coatings and other specialty application in various industries.

Fine Organics is the first company to introduce slip additives in India and is the largest producer of slip additives in the world. The Company currently has three production facilities in Ambernath, Badlapur and Dombivli in Maharashtra.

Food additives

The Company manufactures Emulsifiers, Anti-fungal agents and Specialty products for the food industry which help food to derive its unique properties. Overall, the Company manufactures a Total of 33 food grade additives, and the market for the same is spread across the globe including developed countries. The Company foresees its potential in the overseas market and going forward it is also optimistic about the growth arising from the domestic market.

Plastic additives

The Polyolefins, Company manufactures Additives for Polyolefin Compounds Masterbatch, Styrenic Compounds,

Engineering Plastics, Foamed Products, Rigid PVC Products,

Plasticized PVC Products and Thermoset Products. Overall, the Company manufactures a wide range of additive products. The Company targets and plans to expand its domestic reach for this category.


The Company posted a strong revenue growth over past year with an increase of 9.56% from Rs 7,776.86 Millions in 2016-17 to Rs 8,520.41 Millions in 2017-18. EBIDTA of the Company recorded an increase of 11.79% from Rs 1,639.76 Millions in 2016-17 to Rs 1,466.84 Millions in 2017-18. The EBIDTA margins rose 39 bps from 18.86% in 2016-17 to 19.25% in 2017-18. PAT of the Company recorded an increase of 26.71% from Rs 799.75 Millions in 2016-17 to Rs 1,013.35 Millions in 2017-18. The PAT margins rose 161 bps from 10.28% in 2016-17 to 11.89% in 2017-18.


At Fine Organics, we are proactively managing risks by identifying the demand using the resources available to mitigate them in a way that their effect on the Company is minimal. Some of the key risks identified include:

Raw materials: Since the Company is into manufacturing, the availability, quality and price of raw material plays a vital role. The strong regular offtake allows the Company to avail raw materials at competitive prices.

Quality: Quality plays a crucial role. A little inconsistency can cause a serious damage to the end product. The Companys products are accepted by the dominant players across the end-user industry. Consistency in quality has allowed the clients to stick to the Company on a long-term basis.

Innovation: Innovation is the key factor in companys business as many large clients approach Fine Organics for developing customised products for them.

Regulatory Bodies: Like all chemical companies, Fine Organics is subject to central, state, local and foreign laws and regulations relating to pollution, protection of the environment, greenhouse gas emissions, and the generation, storage, handling, transportation, treatment, disposal and remediation of hazardous substances and waste materials.

Moreover, changes in environmental regulations could inhibit or interrupt the Companys operations, or require modifications to its facilities, which can eventually affect returns and profitability. The Company ensures to abide by all the necessary requirements of the regulatory bodies and ensures environmentally friendly manufacturing processes.


The Company believes that the quality of the employees is the key to its success and is committed to equip them with skills, enabling them to seamlessly evolve. The Company continues to strengthen its people capabilities in its quest to build a growing and sustainable business. An increased focus is being maintained to further build employee retention at all levels in the Company. Several programs related to learning & development, reward & recognition and employee engagement activities are regularly conducted. Alongside professional training, we focus on conveying our corporate values, leadership, integrity, flexibility, efficiency and establishing a corporate culture based on trust, respect for diversity and equality of opportunity. Our responsible approach to structuring working conditions includes fair treatment at work, a transparent and equitable compensation system, the ability to combine working with family commitments, flexible worktime arrangements and a pleasant working environment.

During the year, the Company organised training programmes in different areas such as team building, communication skill, presentation skills, 5S, QMS (quality management system) As on 31st March 2018 the Companys employee strength stood at about 608


The Companys internal audit system has been continuously monitoredandupdatedtoensurethatassetsaresafeguarded, established regulations are complied with and pending issues are addressed promptly. The audit committee reviews reports presented by the internal auditors on a routine basis. The committee makes NOTE of the audit observations and takes corrective actions, if necessary. It maintains constant dialogue with statutory and internal auditors to ensure


The management discussion and analysis report containing your Companys objectives, projections, estimates and expectation may constitute certain statements, which are forward looking within the meaning of applicable laws and regulations. The statements in this management discussion and analysis report could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operation include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in the governmental regulations, tax regimes, forex markets, economic developments within India and the countries with which the Company conducts business and other incidental factors.