himadri speciality chemical ltd share price Management discussions

COMPANY OVERVIEW

Established in 1987, Himadri Speciality Chemical Ltd is one of Indias largest integrated speciality Carbon companies. Over the years, the Company has undergone massive transformation from a Coal Tar Pitch manufacturing company to being one of the worlds most extensive value chains in the Carbon segment. The Company is a market leader and a significant player in multiple product segments like Coal Tar Pitch, Carbon Black, Naphthalene, SNF, PCE and Speciality Oils, among others. The Company has diversified its product portfolio using the power of forward integration. This has empowered the Company to develop Advance Carbon Material and other value-added speciality products. Headquartered in Kolkata, the Company has nine state-of-the-art and Zero Discharge manufacturing facilities across India and China.

Himadri boasts of a strong and experienced R&D team, comprising global experts. Situated at Mahistikry, West Bengal, the lab is recognised by the Government of India. Over the years, the Company has garnered strong expertise to continuously innovate its products and processes. This expertise has helped achieve high efficiency levels through optimum usage of resources.

Himadri has established itself as a global Carbon conglomerate, optimally leveraging its robust research base to build a powerful product portfolio. The Company is the largest producer of Coal Tar Pitch and Naphthalene in India and the third largest producer of Carbon Black. It is also among the largest producers of Sulphonated Naphthalene Formaldehyde (SNF) and PCE in India. The Companys proven technological prowess assists it in gaining a sturdy traction, thereby reinforcing its position in the Speciality Black and Advance Carbon Material.

ECONOMIC OVERVIEW

Global

The Covid-19 pandemic took a severe toll on the global economic activity in H1:2020. Global demand plunged following a very sharp compression in consumption and a collapse in investment and international commodity prices. Propelled by massive policy support by both governments and central banks, however, major economies recorded a sequential pick-up in Q3:2020. Even as intensification of containment measures in response to a strong resurgence of Covid-19 infections across various countries posed downside risks, progress with vaccines and inoculation drives lifted expectations and reduced uncertainty on the global economic outlook, as reflected in improvement in global economic projections for 2020 by the International Monetary Fund in January 2021 and April 2021 (contraction of 3.5% and 3.3%, respectively) With demand conditions normalising alongside easing of supply and mobility disruptions in an environment of sustained policy support, a faster economic recovery is expected in 2021.

Indian

India joined the global economy in an unprecedented contraction in 2020-21, dragged down by the Covid-19 pandemic. Headline inflation was elevated for most part of the year led by supply chain disruptions due to the pandemic and spikes in key food prices. Inflation, however, moderated subsequently due to seasonal easing in food prices since December 2020, albeit with an upside push from adverse base effects during February-March 2021. Monetary and credit conditions remained expansionary and financial market conditions eased considerably on the back of abundant liquidity. Public finances were impacted by a cyclical slowdown in revenues, which was exacerbated by Covid-19, while pandemic-induced fiscal measures pushed up expenditure. On the external front, the sizeable contraction in imports relative to exports, under deep recessionary conditions, led to a current account surplus; along with robust net capital inflows, this led to a large build-up of foreign exchange reserves.

OUTLOOK

The year 2021 commenced with both hope and fear - several parts of the world are locking down and bracing against new waves of infections and speedily communicable mutations. Going forward, the outlook for Indias external sector will continue to be determined by pandemics impact on demand and supply side dynamics, globally and in India. The thrust in the budget on easy access to certain raw materials augurs well for export recovery. Waning terms of trade gains in view of rising global crude oil prices and subdued flows of remittances may pose downside risks. However, the improvement in terms of external vulnerability indicators, adequate level of foreign exchange reserves and sound domestic macroeconomic fundamentals would help the economy withstand spill overs of global adverse macro-financial shocks. Global financial conditions remain easy but can alter rapidly. Various reform measures undertaken by the Government have the potential to keep the external sector sustainable.

PRODUCT PORTFOLIO COAL TAR PITCH (CTP)

OVERVIEW AND INDUSTRY DEVELOPMENT

CTP is mainly used as a binder for the production of Carbon Anodes essential for aluminium smelting. An important variation of CTP also serves for impregnation of Graphite Electrodes employed by electric arc furnaces in steel production. It is a complex chemical obtained through distillation which also finds its application as a base for Paint & Coatings.

A large amount of the Coal Tar Pitch produced across the world is used to manufacture Carbon Electrodes. Its sustainability and economic feasibility as a binder makes it the best raw material for Carbon Electrodes that are used to produce Aluminium. And the rising demand for Aluminium is the biggest driver of the global Coal Tar Pitch market.

The number of infrastructure projects are increasing every year, especially in developing economies.

At the same time, stringent regulations on vehicle emissions have paved way for light-weight automobile components. Aluminium with its light weight property is considered as one of the best materials for automobile components. The same property keeps aluminium in demand in the aerospace industry. The affordability of air travel has grown over the years, resulting in demand for more aircrafts. This is expected to support growth of the global Coal Tar Pitch market in the near term.

Steel is also an important material required in infrastructure projects. Manufacturers across the world have shifted from conventional method to EAF steel manufacturing that requires Graphite Electrodes. The stable growth of the steel industry is expected to drive the global coal tar pitch market.

Application Industry

ALUMINIUM INDUSTRY

Aluminium is a material with a wide range of applications, e.g. vehicles, construction, packaging industry, and electronic production among other household appliances. The global demand for primary aluminium in 2020 was at approximately 65 million tonnes, whereas the overall aluminium demand was at approximately 84.5 million tonnes. The long-term demand for aluminium in India and the subcontinent will remain robust backed by increased industrial activity and Government focus on infrastructure sector in the country. Several Government initiatives like Make in India and Smart Cities project are expected to increase investment in the country. Indias government is investing over US$1 billion in its Make in India initiative. The aluminium consumption rise in India is inevitable with these initiatives lined up in the country, which is in line with Indias five-trillion-dollar economy vision. There is a huge potential for increasing aluminium usage in India in building and construction, automotive and packaging industries.

Further, the demand for automobiles has seen an exponential growth over the years on the back of rising household disposable income along with the increasing need amongst individuals for various means of transport. But, over the years, owing to high vehicular emission, stringent norms have been developed by nations across the globe as a measure to reduce the pollution from vehicles on road. One such important measures taken by the government of nations worldwide is the reduction of the overall curb weight of the vehicle, for which, there is an upsurge in demand for lightweight metals, such as aluminium by the vehicle manufacturers. The steady growth observed in the automobile industry and the increasing production of automobiles around the world is thereby anticipated to drive the demand for aluminium, which in turn will require metal manufacturers to produce aluminium in greater quantity thereby benefiting the growth of the Coal Tar Pitch market.

(Source: www.alcircle.com)

GRAPHITE INDUSTRY

Graphite Electrode is used in Electric Arc Furnace- based steel mills for conducting current to melt scrap iron and steel and is a consumable for the steel industry. The principal manufacturers are based in USA, Europe, India, China, Malaysia and Japan. Graphite Electrode demand is primarily linked with the global production of steel in Electric Arc Furnaces which is one of the two basic methods for steel production: Blast Furnace (BF); and Electric Arc Furnace (EAF). According to the World Steel Association (WSA), EAFs account for 42%, i.e. 416 million metric tonnes (MT) of global crude steel production (excluding China) in 2018. With average production increase of 3.5% per year between 1984 and 2011, EAF steel-making was the fastest-growing segment of the steel sector, based on WSA data. Several nations around the world have imposed stringent norms to regulate the process of melting materials, for instance, furnaces that are used in the production of metals, such as steel. As such, manufacturers using furnaces worldwide have shifted to Electric Arc Furnace (EAF), which uses Graphite Electrodes to melt the materials provided inside the furnace. Graphite Electrodes are made by the utilisation of a binder-grade Coal Tar Pitch (CTP) and calcined needle coke, followed by impregnation- grade CTP. The upsurge in demand for Graphite Electrodes worldwide and the rising consumption of CTPs for the manufacturing of Graphite Electrodes is thereby anticipated to drive the growth of the global Coal Tar Pitch (CTP) market in the upcoming years.

Carbon Black

OVERVIEW AND INDUSTRY DEVELOPMENTS

Carbon Black is a form of elemental Carbon that is manufactured in a highly controlled process to produce particles and aggregates of varied structure and surface chemistry, resulting in many different performance characteristics for a wide variety of applications. Rubber grade Carbon Blacks are used to enhance the physical properties of the systems and applications in which they are incorporated. Carbon Black consumption is predominantly driven by tyres and other rubber goods while non-rubber application command relatively small share.

Total World	2017	2018	2019	2020	2021 F	2022 F	2023 F	2024 F	2025 F
Capacity (Ktpy)	15,846	16,675	17,293	17,591	18,231	18,506	18,976	19,176	19,845
% Utilisation	81%	79%	76%	69%	74%	79%	81%	84%	84%
Production (Kt)	12,910	13,244	13,077	12,100	13,550	14,615	15,380	16,050	16,675
Market Value (Million us$)	13,776	16,688	15,915	12,704
average Value (us$/Kg)	1.04	1.23	1.19	1.02
Demand (Kt)	13,277	13,609	13,407	12,452	13,800	14,750	15,380	16,050	16,675
Tyres	9,808	10,052	9,854	9,175	10,164	10,912	11,368	11,880	12,329
Non-Tyre Rubber	2,570	2,627	2,593	2,430	2,681	2,825	2,947	3,074	3,188
speciality Blacks	899	930	960	847	955	1,013	1,065	1,096	1,158

Application Industry

TYRE INDUSTRY

Carbon Black plays a significant function in the development of the electrical and mechanical properties of high performance for a tough elastic polymeric substance such as rubber materials.

Thus, Carbon Black is widely used to manufacture a massive number of products such as reinforcing and pigment phase in automobile tyres due to its high ability to increase tire life by reducing the thermal damage. This material is also used in belts, hoses, and other non-tyre rubber goods.

While rubber is an essential ingredient to car tyres, around two hundred different materials, including special oils, carbon black, pigments, antioxidants, silica, and other additives help determine the specific characteristics of a tyre. After planning and selecting these materials, the tyre is assembled. Car tyres owe their signature black color to the additive Carbon Black. This material makes an appearance in the pigment and reinforcing phase of tyre creation, and it is valued for enhancing surface durability. By reducing thermal damage, Carbon Black extends the lifespan of tyres on the road.

The India tyre market attained 177 million units in 2020. Tyres are one of the most significant parts of an automotive. They support the weight of the vehicle, absorb shock from the road surface, and change or maintain a direction. They are primarily used in the automotive industry, one of the rapidly flourishing industries in India. According to Invest India, our nation is expected to become the worlds third-largest automotive market by 2026. The surging production of automobiles is increasing the demand for tyres and aiding the growth of the tyre industry. The escalating export activities of vehicles such as tractors, buses, heavy trucks, and cars are also propelling the market growth. Moreover, the focus on increasing production by the Indian Government and the favourable Government schemes are augmenting the market growth. Government schemes such as Atmanirbhar Bharat Abhiyan — Self Reliant India — provides an economic and compressive package of 51,000 crores to promote manufacturing of the automotive in the country, this will further support tyre industry growth, thereby augmenting Carbon Black market.

Himadris recently launched VIRTEX series of premium Carbon Black grades is meant for ultrahigh-performance tyres so that tyre companies can develop tyres with an even better grip and handling profile than they sell today. As a specialist in customised Carbon Black products, Himadri continues to develop new grades that meet the most challenging needs. The new VIRTEX series of grades is designed to meet the demand of high performance tyres, especially for luxury and multiutility vehicles. Himadris VIRTEX series offers a range of reinforcement solutions to optimise performance for specific formulations. This series delivers a wide range of characteristics that make compound development easier for ultra-high-performance tyres. This allows tyre manufacturers to achieve the optimum balance of traction and stiffness in their compounds, which enables them to achieve the right grip and handling profile for their specific application needs.

NON-TYRE RUBBER MARKET

The Non-Tyre Rubber market includes all the uses of Carbon Black in rubber compounding outside of tyres and re-treading. Major applications in this segment are automotive products and general rubber components for industrial, consumer, construction, and other types of equipment. Specific items include belts hose and fuel hose, (such as conveyor belts, transmission belts, v-belts, coolant hose, hydraulic hose, fuel hose), among others. It also includes mechanical and industrial rubber goods (seals, gaskets, rollers, sheeting and membranes and wheels, among others).

Himadrs KLAREX series consists of high-purity speciality blacks covering a wide range of particle size and structure to meet demands of mechanical rubber goods (MRG). Typical MRG applications include extruded profiles, moulded products, hoses, seals, gaskets, engine mounts, tubes, and wipers, among others. Himadris KLAREX series consists extremely clean grades, offering improved processing characteristics and dimensional stability with excellent smooth surface finish.

SPECIALITY BLACK INDUSTRY

OVERVIEW AND INDUSTRY DEVELOPMENTS

Speciality Carbon Black is a highly versatile component for non-rubber applications. Carbon Black used in high-end non-rubber applications is commonly known as ‘Speciality Blacks. Speciality Carbon Black imparts specific characteristics such as high-quality pigmentation, UV protection, dispersion, viscosity control and electrical conductivity. The selection of Carbon Black entirely depends on the requirements of the product. It is mainly used in key plastic segments including moulding, film pipe, fiber, and cable. Plastics are used in a wide range of applications in various key end-use industries including packaging, paints & coating, construction, electrical & electronics, and automotive.

Plastics application is the major growth driver accounting for almost 2/3rd volume share of the Speciality Blacks market. The increasing application scope can be attributed to its high durability, corrosion resistance, flexibility and low maintenance requirements. Increasing demand for electrical and electronic components, such as microwaves, ovens, phones, tablets, laptops, computers, television, music player, and fax machine, is expected to drive the plastics demand.

SPECIALITY BLACK DEMAND DRIVERS

Medium colour furnace blacks are primarily used in tinting applications where deep jetness is required specifically for engineering plastics ABS, PA, PC and POM. Himadris ONYX 901 and ONYX 903 medium colour furnace blacks deliver excellent balance of jetness, blue undertone, easy processing and good surface quality for most demanding colouration of plastic moulded parts and coatings.

Himadris JETEX speciality blacks consists of extremely clean grades with optimum morphology that balances blackness (tinting) with good undertone and mechanical properties critical for extruded films and sheet applications, such as packaging and industrial goods as well as injection moulded applications. These blacks have proven UV (ultra violet) performance and provide excellent dispersion to ensure good surface quality with minimum surface defects critical for agricultural films, geomembranes and non-regulated pipes.

Himadris ELECTRA series of conductive Carbon Blacks provide critical functionality to wire and cable applications. These grades impart semi-conductive performance in conductor and insulation shields of low, medium and high voltage cables enabling long term performances. ELECTRA grades are extremely clean with low ash, grit and ionics and provide excellent dispersion for surface smoothness and strippability. ELECTRA series also provides ESD performance in plastics to protect against damage due to electrostatic discharge in critical applications like fuel injectors, electronic/computer packaging, and anti-static films, among others.

Application Industry

PLASTiCS, iNKS, OR COATiNGS

Speciality Carbon Black is a highly versatile material in terms of its physical and chemical properties, which can be altered during the manufacturing process and by after-treatment. The performance of Carbon Black in plastics, inks, or coatings is primarily a function of four characteristics: particle size (or surface area), structure (or aggregate size), surface activity, and porosity.

Ink & Toner Markets for Speciality Black

item	2006	2011	2016	2021 F	2026 F
unit: 000 tonnes, except as noted
speciality black demand	792	890	1016	1200	1393
% Inks & Toners	13.8%	12.1%	11.2%	10.1%	9.2%
INK & ToNER MARKETs	109.0	108.1	114.0	121.0	128.0
Printing Inks:	100.8	98.6	102.4	104.4	106.0
newspaper Inks	53.8	50.6	48.6	43.9	40.5
Publication Inks	31.9	31.9	35.0	38.0	40.0
Packaging Inks	10.0	10.7	12.5	15.0	17.0
other Inks	5.1	5.3	6.3	7.5	8.5
Toners & Inkjets:	8.2	9.5	11.6	16.6	22.0
Toners	6.6	6.8	7.6	9.6	12.0
Inkjets	1.6	2.7	4.0	7.0	10.0

World Speciality Black Demand, Geography-Wise

item	2006	2011	2016	2021 F	2026 F
unit: 000 tonnes, except as noted
north America	235	257	290	330	367
european union	223	192	213	238	261
asia	267	362	428	529	640
China	102	165	197	245	300
Asia excluding China	164	197	232	284	341
other regions	67	79	85	104	126

Speciality black by market

item	2006	2011	2016	2021 F	2026 F
unit: 000 tonnes, except as noted
speciality black demand	792	890	1016	1200	1393
Plastics	464	544	634	767	902
Inks & Toners	109	108	114	121	128
Paints & Coatings	35	40	51	62	75
batteries	45	47	52	61	73
other Applications	140	151	166	189	215

Advance Carbon Material (ACM)

OVERVIEW AND INDUSTRY DEVELOPMENTS

Advanced Carbon Materials have excellent thermal stability and mechanical property such as tensile strength than ordinary materials. Graphene, carbon fibers, carbon foams structural graphite, and nanotubes are majorly used Advanced Carbon Materials as engineering materials. Rising focus toward lightweight composites from the automotive and aviation industry and increasing demand of carbon fiber-reinforced plastic in the construction industry is anticipated to drive the market.

This rise can be accredited to ACMs growing application base for manufacturing high quality anode material for Lithium-ion battery. Thus, demand for ACM is gaining momentum from power applications. As per one of the industry reports, the global anode material for the automotive Lithium-ion (Li-ion) battery market is anticipated to generate a revenue of US$1,348.6 million by 2030, increasing from US$707.2 million in 2019, progressing at a 5.7% CAGR.

The global Lithium-ion battery market was valued US$ 36.7 billion in 2019 and is projected to hit US$ 129.3 billion by 2027, at a CAGR of 18.0% from 2020 to 2027. Lithium-ion batteries are characterised by high-energy density, high output voltage, and long cycle life. The growth of this market is likely to be driven by the excellent features of Lithium- ion batteries, increasing adoption of consumer electronics, and growing R&D initiatives by different organisations & battery manufacturers. Moreover, an increase in demand for plug-in vehicles, rising need for automation and battery-operated materialhandling equipment in industries, propelling demand for smart devices and other industrial goods, and high requirement of Lithium-ion batteries for industrial applications are other key driving factors. Lithium-ion battery market for automotive is expected to hold the largest market. Increasing adoption and awareness of EVs, Government initiatives, and regulations supporting the adoption of EVs around the world are the factors that are driving the growth of the Lithium-ion battery market. The market for these vehicles is expected to grow in the near future, partly driven by the adoption of various environmental norms and emission regulations. This has increased the demand for Lithium-ion batteries.

Application Industry

ELECTRIC VEHICLES

The Indian automotive industry is the fifth largest in the world and is slated to be the third largest by 2030. Catering to a vast domestic market, reliance on the conventional modes of fuel intensive mobility will not be sustainable. By making the shift towards Electric Vehicles (EVs), India stands to benefit on many fronts: it has a relative abundance of renewable energy resources and availability of skilled manpower in the technology and manufacturing sectors. Globally, EV models have increased from 56 in 2013 to 408 in 2020, mainly led by SUVs (~36% of the industry). Also, amongst the top-10 OEMs, EV share is ~4-10%. About 30% of new Two-wheelers sold in the world are electric, but new cars will do this feat only by 2030. For India, it will take another decade to reach 30% electrification. Globally, by 2040, electric cars will outsell the internal combustion engine ones with a market share of about 60%, electric Two- wheelers with 77%, and the overall electric fleet with 47%, as per BloombergNEF (BNEF) report.

GOVERNMENT POLICIES

m India is emerging as one of the fastest-growing economies in the world. The vision of India Chem-2021 is to seize the opportunity to establish India as a leading chemicals and petrochemicals hub. In this regards, the Government has launched 12 PLI scheme for different sectors which will directly or indirectly benefit the chemicals sector. The Government is poised to invest Rs. 8 lakh cr in Chemical Industry by 2025. For Delhi, vehicle life stands at 10 years for diesel vehicles and 15 years for petrol vehicles. Scrapping incentive is around Rs. 7,000.

• Going ahead, all buses procured will be electric buses. The Government is currently in advanced stages to procure 1,300 low-floor electric buses.

• The Government has identified 200 land parcels in Delhi for setting up the EV charging infrastructure. Private players will mainly be responsible for battery swapping via the PPP model.

• Niti Aayog targets 100% electrification in Two-wheelers/Three-wheelers in the near future. There are already more than 2 million e-rickshaws which demonstrates the viability of EVs.

• Global battery prices have come down to US$137/kwh and should come down to below US$100 by 2023, as per Niti Aayog. m Upfront costs of EVs are falling, while battery swapping models have improved affordability.

• Local authorities have been exempted from GST for contracting electric buses.

• Production linked incentive (PLI) scheme for battery manufacturing will likely help develop the EV ecosystem in India.

Naphthalene

OVERViEW AND iNDUSTRY DEVELOPMENTS

Naphthalene is a white crystalline organic compound that can be derived either from crude oil or coal tar. Naphthalene is widely used in the concrete industry to produce high-strength concrete. The use of Naphthalene helps to reduce water consumption during concrete production and enhances the mechanical properties of concrete. The growing demand for Naphthalene, as an intermediate in the manufacture of construction chemicals, is expected to drive the demand for this market. It is primarily due to the growing demand for concrete plasticisers to boost workability and strength.

Factors such as rapid urbanisation, development of smart cities, and growing number of construction projects have increased the demand for concrete across the globe. These factors will fuel the growth of the global Naphthalene market during the forecast period.

Moreover, growth of industries such as industrial paint, printing, plastic and tannery is further boosting the demand for dyes and dye intermediates for end- use applications. Additionally, the robust demand for dyes and dye intermediates from textile industry is anticipated during forecast period, which would further steer growth in the Indian dyes and dye intermediates market.

Sulphonated Naphthalene Formaldehyde (SNF) and Polycarboxylate Ether (PCE)

OVERViEw AND iNDuSTRY DEVELOPMENT

SNF is a light yellow to yellowish brown powder, which is an anionic surfactant. It is widely used for the preparation of free-flowing and pumpable concrete mixture in the construction industry. Naphthalene, one of the by-product of Coal Tar Distillation, is used to manufacture SNF which is used as raw material for compound accelerators, anti-freezing agents, and retarders, in different construction industries. SNFs high purity feature makes cement particles with high low foaming, high range water reducing and strengthening. Further, SNF also finds its applications in agriculture, gypsum, plastics & rubber, paper, construction, textile, and oil industries.

Poly Carboxylate Ether is the next generation of raw materials for superplasticisers and offers better performance compared to SNF-based superplasticisers.

Concrete admixtures are added to construction materials to alter and improve their chemical and physical properties. Concrete admixtures provide strength and durability to buildings and significantly reduce water to cement ratio. SNF and PCE are one of the most widely used concrete admixtures in India. The cement industry witnessed a de-growth of 10-12% due to the Covid-19 pandemic. However, as the central and state governments took steps to unlock the economy and some encouraging trends were seen in the later part of the year. Increasing construction activities on account of huge public and private investments in construction sector is forecast to drive demand for concrete admixtures in India. Moreover, adoption of various policies by the Government of India for infrastructure development such as National Infrastructure Pipeline (NIP) , Pradhan Mantri Awas Yojana-Urban (PMAY-U) are further expected to boost demand for Naphthalene and PCE-based admixtures in the country. The recent boost in infrastructure including a network of expressways and economic corridors by 2025 will further stimulate demand for SNF.

While the construction segment will remain the largest segment, we are continuously working on developing products for the non-construction segment. This segment will further help us increase sales volume and diversify our product portfolio.

OPPORTUNITIES

AUTOMOBILES

The Indian automotive industry is the fourth largest in the world and the Two-wheeler industry is the largest in the world. It is also the largest tractor manufacturer and the eighth largest commercial vehicles manufacturer in the world. Together, these make India the most promising automotive market in the world. The rising per capita income, spending capacity and healthy monsoons, are the collective factors generating demand for automobiles in India. The surge in automobile demand also leads to progression of its supporting industries, thereby generating demand for tyres.

INFRASTRUCTURE

The infrastructure sector is a key driver for the Indian economy. It is highly responsible for propelling Indias overall development. It enjoys intense focus from the Government for initiating policies that ensure creation of world-class infrastructure in the country. With the growing focus on infrastructure development, the need for steel, aluminium and other metals is bound to increase.

ELECTRONIC VEHICLES

With the world gradually moving towards low- emission norms while reducing its dependence on carbon fuels, the need for Electric Vehicles is also expected to shoot up. This growing need of EV will in turn propel the need for Lithium-ion batteries as they see new heights in demand.

THREATS

COMPETITIVENESS

The Government has allowed 100% FDI in chemical sector. This has resulted in domestic players facing stiff competition from foreign multinationals, capable of exerting strong price pressures on local markets. Any significant development can impact the Companys performance negatively. Himadri views this as a healthy indicator of further thriving and leveraging on its attributes. Better pricing quality products, high volumes and strategic locations, compared to its peers, are some of the factors that places the Company in a better position to face this competition.

OPERATIONAL REVIEW

Research & Development

Our success and leadership positions depend on the sustainable growth of our business through research, development and innovation in order to foster the adoption of major transforming technologies. The Companys Research and Development department, at Mahistikry unit (Hooghly), has been recognised by the Government of India. Its state-of-the-art technical capabilities have rightly been credited for. The Company is appreciated for its perpetual excellence over time. This can be accredited to its continued investments in research and development. These results are well manifested and reflected in the Companys strong product innovation pipeline.

It is also evident in the development of high-value products developed through proprietary processes, giving the Company a competitive edge in terms of its offerings. The Company focuses its R&D efforts in all three areas - Products, Processes and Technology.

PRODUCT

The Company, over the years, through its research and development, has developed products across entire product value chain. The Companys forward integration allows it to develop and launch new innovative products at regular interval.

PROCESS

The Companys continuous focus on process improvement enhances its efficiencies. This has led to improved product yield and a better through put.

QUALITY

At Himadri, quality is not just tested. It is built into everything the Company does. Whether it is product development or manufacturing, the Company has integrated quality into all its process that impact the end product. The Company continuously tries exceeding customers expectation by providing quality products. The Company has an independent Quality Assurance (QA) team which organises internal and external audit. This team is responsible for documentation and data control. The Companys continuous emphasis on quality has made Himadri, a partner of choice. The entire process of the Company lays 100% emphasis on standard reference material testing. This allows the Company to stand true on its product promise.

The Company QA is supported by state-of-the- art research labs and has been recognised by the Government of India. Constant trainings at NABL (National Accreditation Board for Testing and Calibration Laboratories) are conducted to update the QA team with the latest techniques and technologies. Regular quality audit is also conducted at the labs to ensure the high-quality products. Various tests like MRI, CT Scan, C/H Ratio and wettability, among others, are carried out before delivery. This helps ensure consistency in the rheological and operational properties of the product.

Himadri has created a sustainable business by complying with established regulations, processes, and standards, to ensure and protect its quality.

The Company supervises its quality control more efficiently with the help of its in-house processing and manufacturing. This also leads to manufacturing environment-friendly products through environment- friendly processes. These products and processes comply with the customers and Governments norms.

FINANCIAL REVIEW

Consolidated Highlights

The consolidated gross revenue from operations stood at Rs. 167,945.80 lakhs during 2020-21 as compared to Rs. 180,580.03 lakhs in 2019-20. EBITDA stood at Rs. 13,092.32 lakhs during 2020-21 as compared to Rs. 29,446.48 lakhs in 2019-20. Profit after tax stood at Rs. 4,726.62 lakhs during 2020-21 as compared to Rs. 20,535.91 lakhs in 2019-20.

Standalone Highlights

Standalone gross revenue from operations stood at Rs. 167,945.80 lakhs in 2020-21 as compared to Rs. 180,349.85 lakhs in 2019-20. EBITDA stood at Rs. 12,757.21 lakhs in 2020-21 as compared to Rs. 29,80714 lakhs in 2019-20. Profit after tax stood at Rs. 4,66717 lakhs in 2020-21 as compared to Rs. 8,09765 lakhs in 2019-20.

ShareholdersRs. Funds

The authorised share capital of the Company stood at Rs. 7,001 lakhs as on 31 March 2021 as compared to Rs. 7,001 lakhs as on 31 March 2020 in the form of equity shares of Rs. 1 each. The paid-up share capital stood at Rs. 4,189.65 lakhs as on 31 March 2021. The CompanyRs.s reserve and surplus stood at Rs. 166,638.43 lakhs whereas the net worth was at Rs. 170,828.08 lakhs.

Dividend

With the BoardRs.s decision of being consistent in terms of payment of dividend, the Board recommended 15% (Rs. 0.15 per share) dividend for the year 2020-21 to reward its shareholders. The dividend will be paid out of accumulated profits, subject to approval of members at the ensuing Annual General Meeting.

Finance

The Company continued to enjoy working capital facilities from various banks including Axis Bank Ltd, Bank of Baroda, Central Bank of India, Citi Bank, N.A., DBS Bank India Ltd, The Federal Bank Ltd, HDFC Bank Ltd, The Hong Kong & Shanghai Banking Corporation Ltd, ICICI Bank Ltd, IDFC First Bank Ltd, IndusInd Bank Ltd, Kotak Mahindra Bank Ltd, RBL Bank Ltd, Standard Chartered Bank, State Bank of India and Yes Bank Ltd. The Company has serviced these debts proactively.

Details of Key Financial Ratios (Consolidated)

Key Financial Ratios	FY 2019-20	FY 2020-21	Variance
debtors Turnover	6.03X	3.64X	-40%
Inventory Turnover	3.02X	3.64X	20%
Interest Coverage ratio	5.69X	4.26X	-25%
Current ratio	1.13X	1.25X	11%
debt Equity ratio	0.26X	0.32X	22%
operating Profit Margin (%)	16%	8%	-52%
Net Profit margin (%)	11%	3%	-75%

HUMAN RESOURCE

The Companys people strategies are geared to create learning opportunities. It focuses on building careers and fosters an empowering and inclusive culture. The idea is to provide an environment where employees find meaning in what they do while creating value for the Company.

CULTURE TRANSFORMATION

The Company aims to build an inclusive and empowering work environment, focussed on enhancing employee experiences. The Companys philosophy for People, Process, Policies and Practices contributes towards building an agile and performance-oriented organisation.

SHAPING CAREERS

The Companys focus is to hire the right individuals with appropriate competencies and assimilate them into the culture and work environment and enable them to perform. Based on the periodical assessment, facilitate learning through various modes and develop competencies for leadership roles and create an internal pipeline of talent that helps to build a future-ready organisation. The Company has an excellent track record of harmonious industrial relations. This is built on the foundations of mutual trust and co-operation which has helped sustain organisations productivity levels.

DIVERSITY & INCLUSION

Organisation put emphasis on practicing diversification in inducting different types of people in its periphery with an aim to promote diversity & inclusion at the workplace. It makes all employees to feel accepted, valued and happy and a happy engaged employee is an asset to the Company and as a result the Company enjoys turnover rates. The organisation acknowledges holidays of all cultures and leave calendars are designed by respecting the same.

BUILDING CAPABILITY

Anticipating future skill requirements and developing them is the key to the Companys longterm sustainability. Himadri continues to invest in job enrichment, skill enhancement, research and development, marketing and a collaborative programme for employees. This enables its people to better understand the needs of the customers. Cascading of organisational goals using the management by objectives helps to bring in role clarity and alignment at all levels. This, in turn, creates an empowering work environment. The Company provides opportunities for its employees to explore career mobility options within the organisation or the Himadri Group. There is also an exposure to latest technology and forums for networking, to help strengthen the employees subject matter expertise.

REWARDING BY RECOGNiSiNG

The history of rewarding people with proper recognition is something that comes naturally to Himadri from ages, the organisation believes the contribution made by its members towards its journey must be recognised and rewarded as part of the gratifications process. The employees were rewarded by the organisation on its foundation day ir presence of their family members through the virtual platform. The Company also acknowledged the support of the employees during the Covid-19 period and rewarded them as “Special Reward for Special Efforts” award. We acknowledge the creativity of our employees children and designed our Annual Calendar by their artwork only.

DIGITISATION OF THE PROCESSES

The Companys focus is on transforming all the Employee Life Cycle processes through digitised platform. Thereby enabling its employee with ease of access of policies and processes while as an employer promoting Talent Acquisition E-Onboarding, Performance Management , ELearning practices for better managed process across all locations and eliminating process delay to enhance efficiency and aiming paperless workplace in a long run.

EMPLOYEE CARE

Himadris vision to serve the mankind has been practiced in real time as the organisation has extended the medical coverage, introduced term insurance and accidental policy. Additionally the Company also launched the Pandemic Policy to support the deceased employees families to live their life with full dignity and pride with an aim to create an environment of security in these uncertain time.

MOTIVATING EMPLOYEES POST COVID

The biggest challenge was to motivate employees and bring them to normalcy as it is important for their life. The Company organised a Sports Championship to create some fun, energy and happiness across the organisation. Several sessions were organised by the expert through virtual platforms and Managing Emotional Quotient in post- Covid-19 era was also part of the programme.

ENVIRONMENT, HEALTH AND SAFETY MEASURES

Himadri is driven by philosophy that is focused on no harm to people, asset and natural resources. Safety is one of the core values at Himadri.

There is an unwavering commitment towards the continuous improvement of the organisations safety performance. Benchmarking with the companies that are best in the business, the Company is committed to continuously employing world-class Safety, Health and Environment practices.

Himadri considers health and safety of its employees as an essential and integral part of all activities. Accidents and risks to health are prevented through continual improvement in the working environment and safety ensures. All employees are covered by health insurance policies.

The Company is committed towards protecting the environment, ensuring a safe workplace and conserving natural resources. Himadri has established a safety, health and environment committee to ensure security and safety within and around the vicinity of its facilities. To strengthen our Safety First Attitude, upgradation of Safety systems including implementation of Fire Detection System was carried out.

This Committee of the Board provides valuable direction and guidance to the management to ensure that safety and sustainability implications are duly addressed in all new strategic initiatives, budgets, audit actions and improvement plans. They also monitor and review reports monthly and quarterly on safety, environment and health performance including policy and legal compliances.

Himadri is subjected to various environmental laws and regulations. These laws are applicable to the production, use and sale of chemicals, emissions into the air, discharges into waterways and other releases of materials into the environment. Along with these, it is also applicable to the generation, handling, storage, transportation, treatment and disposal of waste material.

We are committed to safe and lawful operation of our facilities with respect to the manufacturing and distribution of products. Being a responsible corporate we have invested and undertaken ecofriendly measures to make our facilities Zero discharge plant. It ensures control of all forms of discharge - solid, liquid or gas. The Company also consciously increased it green cover by planting approx. 5,000 saplings.

Sustained efforts in this direction have resulted in Company being bestowed with Awards of Excellence in both safety and environment by Greentech foundation.

To sensitise employees on key health risks, health talks and seminars by leading subject matter experts were organised. Reaffirming that prevention is better than cure, medical check-ups were organised for the benefit the entire workforce. Yoga and physiotherapy sessions were held to promote the overall well-being of the individual.

On safety of Women Employees, we have launched an app based Safety device for all female colleagues and handed over to them during last Womens day celebration. The mechanism of the device is to generate alert to the persons emergency contact and nearby police station.

RISK MANAGEMENT

Himadri realises that risk is inherent to all its business activities. The Company has a well-established risk management framework that helps it remain resilient. Risk analysis along with their mitigation is critical in the ever-changing environment that the Company in which it operates.

Risks and Response

RAW MATERIAL

Risk

Volatility in the global prices of raw materials is also a major challenge faced by the chemical industry. Sharp corrections in the crude oil prices and prices of various raw materials procured by the Company can influence bottomline.

Response

Being the major player in the industry, the Company always stocks at least a 60 days inventory to not get affected by the unavailability of the raw material. Hence ensuring smoother flow of operations.

ENVIRONMENTAL SUSTAINABILITY

Risk

The industry that the Company operates in, is accountable for its impact on the environment.

The chemical industry is not only held responsible for meeting the environmental norms, but it is also accountable for delivering societal value.

Response

The Company complies with all the required environmental acts and regulations. It has also made significant investments towards eco-friendly measures which are helping the Company make its facilities Zero Discharge in nature.

COMPETITION RISK

Risk

The chemical industry in intensely competitive, comprising large number of manufactures. The risk emerges when the Company does not initiate timely action against the underlying opportunity.

Response

The Company remains aware of emerging opportunities in the chemical space and proactively responds to the same by continuously adding new products to its portfolio. The Companys largest integrated production facility and its proximity to clients manufacturing facility helps it become the strategic vendor to client while also remaining competitive in the market.

DEPENDENCY RISK

Risk

Being dependent on specific industries like Aluminium and Graphite, any downfall in these industries would in turn lead to downfall in the Companys margins.

Response

Himadri caters to a wide range of industries and application base. As these application industries form an essential part of any economy, the demand for these products remains largely inelastic.

MARKET PRESENCE

Risk

Himadri operates in a highly competitive industry with a number of other manufacturers that produce competing products, both in India and internationally. With strategic facility location, the Companys presence in the market also matters.

Response

The Company has set up 8 facilities, marking its presence across 5 Indian states from East to West. The Company operates fully dedicated fleet of over 170 tankers to ensure timely delivery and procurement. This presence has reaped goodwill for the Company in the respected industry. Several Aluminium and Graphite companies in India have been customers of Himadri for more than past 20 years.

INDUSTRIAL RELATIONS

Industrial relations form an integral part of any manufacturing firm. The Company maintains open communication channels with workforce and keeps them engaged with its objectives towards attainment of healthy employer-employee relationship. This helps in swiftly continuing our operations without conflicts between the labours and the Companys management. The Company follows different programs for the development of skills among employees at different levels. This provides a friendly environment to work in. Industrial relations at the offices continued to be cordial through the adoption of productive and performance-based policies.

The policies are further focused to develop and benefit the talent and simultaneously protecting organisational interest.

SOCIAL WELFARE ACTIVITIES

Himadri is committed to contribute towards human development. It is dedicated to serve the surrounding communities of the areas it closely works with through initiatives in education, healthcare, and women empowerment. During the pandemic the Company exercised initiative to support humanity and during the year 2020-21 undertook the following CSR activities

Distributed 30 kgs of food grains per family of around 90,000 families in near by villages m Distributed cooked food to 1,000 persons per day for 4 months

• Felicitated and appreciated of meritorious village school students through awards and annual prizes

• Organised free eye check-up camps and distribution of eyewear m Conducted free village medical centres throughout the year, at Mahistikry and Belechonga villages, Hooghly m Arranged and distributed free food and clothes/ blankets at various locations during the year and during festive seasons to needy villagers m Started the Widow Pension scheme in the Plant locality

• Constructed Pukka Houses in place of Kuccha houses

• Developed a green belt around the Companys plant to protect the environment

In addition to above, the Company has chosen couple of CSR projects on rural development for Economically Weaker Sections (EWS) on rural development. These include constructing Pukka houses in place of Kuccha houses for Economically Weaker Sections (EWS) of the society in village area surrounding or adjoining to Companys plant at Mahistikry, West Bengal as well as surrounding villages, setting up of rural electrification facility, setting up of drainage system, setting up of water supply tanks including pipeline connectivity to the villages involving a large amount of outlay and same are under process.

The Company, through its CSR activities, has always focused on efforts that can substantially impact the well-being of the disadvantaged segments of the population. The endeavour is to have a comprehensive approach that is meaningful and with a long-term focus to ensure scalability. The Company has been continuously focused on providing social benefits to the society in its true sense.

STATUTORY COMPLIANCE

The Company Secretary as the compliance officer, ensures that the Company complies with SEBI regulations and provisions of the Listing Regulations. The Chief Financial Officer, the Chief Executive Officer and the Managing Director act as Compliance Officers for the prevention of insider trading. With a view to cover the risk of compliance with various rules and regulations of the Companies Act, SEBI directives and the Listing Regulations, the Company has appointed Internal Auditors to ensure reporting of any potential non-compliance. Compliance certificates are obtained from various managerial personnel, ensuring compliance to various statues.

Internal Control System

At Himadri, the Board of Directors are responsible for ensuring and laying down the internal financial controls. It is also responsible for evaluating whether such controls are adequate and function effectively or not. Himadri has policies, procedures, control frameworks and management systems in place that map into the definition of Internal Financial Controls as detailed in the Companies Act, 2013. These have been established at the entity and process levels and are designed to ensure compliance to internal control requirements, regulatory compliance and appropriate recording of financial and operational information.

The senior management reviews and certifies the effectiveness of the internal control mechanism over financial reporting, adherence to the code of conduct and Companys policies for which they are responsible and also the compliance to established procedures relation to financial or commercial transactions, where they have a personal interest or potential conflict of interest, if any. Himadri uses services of independent internal auditors to strengthen the internal controls process. There are well established and comprehensive internal control systems processes, rules, policies and procedures for effective monitoring and control of the entire Company operations and its subsidiaries.

The audit plan is approved by the Audit Committee, which reviews compliance to the plan. During the year, the Audit Committee met regularly to review reports submitted by the Auditors. All significant audit observations and follow-up actions thereon were reported to the Audit Committee.

The Audit Committee also met the Companys Statutory Auditors to ascertain their views on financial statements, including the financial reporting system, compliance to accounting policies and procedures, the adequacy and effectiveness of the internal controls and systems followed by the Company. The Management acted upon the observations and suggestions of the Audit Committee.