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Global Chemical Industry

The repercussions of the Ukraine-Russia conflict were high on the global chemical industry in 2022 with high fluctuations in energy prices, especially in western countries. Chemical manufacturers and producers responded to high inflation, increasing interest rates, and higher energy prices by reducing inventories and operating capacity. The year 2023 is expected to witness a slowdown in global chemical production. The global chemical market is expected to reach USD 5,079.3 billion in 2023 from USD 4,700.1 billion recorded in 2022, registering a CAGR of 8.1%. Disruptions of the past 18 months have also highlighted the importance of localising supply chains and finding the right balance between efficiency and resilience.

The American Chemistry Council has projected global production of chemicals to increase by 0.6% in 2023, with gains in Asia/Pacific, Africa & Middle East, and former Soviet Union nations off-setting declines in Europe, North America, and Latin America. The Former Soviet Union, Africa, and the Middle-East are expected to witness growth of 1.1%, 2.1%, and 3.2%, respectively, in 2023. The total chemical production is expected to decline in 2023 by 1.8%, 1.7%, and 4.2% in North America, Latin America, and Europe, respectively. However, in 2024, the global chemical production is expected to witness significant growth of 3.5%, with North America, Latin America, and Europe expected to grow 1.3%, 2.8%, and 2.9%, respectively; and the Former Soviet Union, Africa, and the Middle-East expected to grow 5.0%, 2.3%, and 4.7%, respectively.


Promising Indian Chemical Industry

Indias chemical industry has been a global outperformer in terms of demand growth across its various sub-segments. The Indian chemical sector is further expected to be the worlds next manufacturing hub for chemicals. Indias chemical industry has been highly diverse covering more than 80,000 commercial products. Chemicals are broadly classified as bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers, and fertilisers. The total volume of maior chemicals produced in India reached 6.5 million metric tonnes (MT) for the six months ended FY 22-23, as compared to 6.3 million MT produced during the same time period in the previous year. The total chemical production grew to 26,570 MT for the six-month period ending FY 22-23. Inorganic and organic chemical production increased to 529 MT and 904 MT, respectively in the same period. The growth was facilitated by rising domestic consumption, changing consumer preferences, and shifting supply chains. India has the potential to become the manufacturing and consumption engine for the global chemical industry, fuelled by rapid economic growth, a growing middle class, low capital costs, and lower operating costs. The industry, however, also faces many challenges, including restricted domestic feedstock availability, delayed regulatory approvals, and stiff Chinese competition.

Nevertheless, the interest of the world to de-leverage from China continues and Indian chemical industry is projected to grow by 11% to 12% between 2021 to 2027 and by 7% to 10% between 2028 to 2040, tripling its share in the global market by 2040, according to a report by McKinsey & Company (February 2023).

The total chemical and chemical product exports and imports (excluding pharmaceutical and fertiliser commodities) grew at a Compound Annual Growth Rate (CAGR) of 13.86% and 14.38% from FY 17-18 to FY 21-22, respectively. The chemical industrys exports are projected to grow at a CAGR of 9.5-10% to USD 140-USD 145 billion by 2040 from the USD 24 billion recorded in 2021. While chemical imports are projected to grow at a CAGR of 9 to 9.5% to USD 180 to USD 185 billion from USD 33 billion in 2021, imports and exports of inorganic compounds are anticipated to grow at a CAGR of 9.2% and 11.0%, respectively, from 2021 to 2040.

Indian Chemical Production Trends (MT)

Chemicals 2017-18 2018-19 2019-20 2020-21 2021-22 CAGR (%) 2022-23 (Up to Sep 2023)
Inorganic Chemicals 1,058 1,064 1,063 978 1,052 -0.16 529
Organic Chemicals 1,799 1,884 1,847 1,906 1,953 2.08 904
Total Major Chemicals 11,069 11,589 11,943 11,243 12,743 3.58 6,487
Total Major Petrochemicals 36,813 37,519 43,524 42,159 44,589 4.91 20,083
Total Chemicals 47,882 49,108 55,467 53,402 57,332 4.61 26,570

Source: Ministry of Chemicals and Fertilisers, McKinsey report

Indian Specialty Chemical Industry

The Indian specialty chemicals industry, which accounts for a substantial share in Indias chemical industry, has grown exponentially in recent years. CRISIL anticipates the specialty chemicals sector to witness a revenue growth of 6 to 7% in FY 23-24, as compared to the 11% growth witnessed in FY 22-23. The growth would be mainly driven by higher domestic demand, which comprises about 60% of the industrys total revenue. It is likely to face macro headwinds from the US and the UK. In FY 23-24, domestic specialty chemical sales are anticipated to increase by 8% to 9% year-over-year and exports are projected to account for 40% of the industrys total revenue.

Specialty chemicals accounted for more than 50% of chemical exports in 2021 . Specialty chemicals are the only segment in Indias chemical industry that has been a net exporter in the countrys foreign trade. According to the McKinsey report, imports and exports of specialty chemicals are expected to increase at a CAGR of 7.5% and 8.7%, respectively, to USD 52 billion and USD 73 billion by 2040, up from USD 13 billion and USD 15 billion, respectively, in 2021.


Lithium Battery Market in India

In the past, the growing demand for consumer electronics among the countrys population has been the main factor driving the market for lithium-ion batteries in India. However, with the growing global need to achieve Carbon Neutrality, the demand for lithium-Ion Batteries is being driven by increasing usage of Electronic Vehicles (EV) as well as Battery Storage systems for Renewable energy. India is expected to have a demand of 160 GWh of Lithium Ion batteries by 2030. There are more than 10 companies in India which are in establishing or process of establishing Giga Factories having targeted annual cell production of 5 GWh - 40 GWh by 2030. Together they are expected to have an annual cell production of >150 GWh by 2030 of which 50 GWh is currently supported by Governments Rs. 18,000 Crore Advance Cell Chemistry (ACC) PLI Scheme, which requires start of production by 2024 and reaching peak potential by 2028. The PLI scheme also requires the companies to reach min 60% India value addition, which creates a significant demand for Lithium-Ion ACC supply chain. By 2030, while India is expected to reach production >150 GWh cells, the world demand for Lithium-Ion Cells is expected to be >3,000 GWh, approximately 20 times Indias demand, thus also creating an export market for Indian Lithium-Ion Battery Cell materials manufacturer.

The government has been implementing cheaper road fees, scrapping old vehicles, and providing incentives in order to reach its goal of 30% EV penetration in the Indian automobile market by 2030. The rising cost of oil imports, rising pollution, and Indias worldwide duties to combat climate change are the driving factors behind the countrys recent measures to accelerate the transition to e-mobility. The government is promoting the installation of EV charging stations through the FAME India Programme Phase II and state-level initiatives. The government has reduced the customs duty on motor parts from 10% to 7.5% which has been contributing to the overall cost reduction of EVs. Moreover, the government intends to create electric car mobility zones, which will assist in reducing overcrowding caused by private automobiles. The governments battery swapping policy would gain popularity in commercial applications like 2W and 3W autos due to the fact that replacing the depleted battery is more feasible than on-the-spot charging for EVs. This would allow for faster penetration of lithium batteries in these market segments.

Key Segments driving the growth in the Lithium-Ion Battery Market

Smartphone industry is expected to reach USD 281 billion by 2028, driven by widespread availability of internet. About 11,80,903 EVs were sold in FY 22-23. Faster adoption of EVs would lead to increased adoption of lithium-Ion batteries Expanding population and rising discretionary income would lead to higher sales of consumer electronics, eventually boosting the lithium battery market.

Source: EV reporter, Research & Markets Report, Mordor Intelligence, CEEW Press release, Live Mint News Release

Company Overview

Neogen Chemicals Limited, (hereafter referred to as "Neogen" or "the Company") was established in 1989 and is Indias leading manufacturers of specialty chemicals, specifically Bromine and Lithium-based chemicals. The Company focusses on producing a wide range of specialty chemicals, including organic and inorganic chemicals. These chemicals are utilised in various industries, such as, pharmaceuticals, agrochemicals, engineering, electronics, polymers, water treatment, construction, aroma chemicals, flavours and fragrances, specialty polymers, vapour absorption chillers and upcoming usage in Battery Materials.

The Company also offers custom synthesis and contract manufacturing services, which includes developing and customising products to meet specific customer requirements by utilising its own in-house process expertise and technical specifications given by the customers. Neogen has grown its product line over the years. Seizing the opportunity, the Company has recently forayed into manufacturing of lithium-ion battery materials for energy storage and electric vehicle applications.


In March 2023, Neogen entered into an agreement for acquiring BuLi Chemicals India Private Limited ("BuLi Chem") from Livent Corporation, USA, having its manufacturing unit based in Hyderabad, and it now operates as a wholly-owned subsidiary of Neogen Chemicals Limited. BuLi Chem owns the technology to manufacture N Butyl Lithium and other organolithium products using Lithium metal, which are key reagents for the Lithiation reaction used in the manufacturing of several complex pharmaceutical and agrochemical intermediates. It will give Neogen a significant competitive advantage by providing an additional technology platform that can be leveraged across the product segments to generate more Organic intermediates sale as well as Custom Synthesis and Manufacturing business. Further combining this with Neogens experience to recycle lithium for last >20 years, the recycle of waste produced during production of N Butyl Lithium will also make Neogens Inorganic lithium salts business more attractive.

In April 2023, Neogen also signed an agreement with MU Ionic Solutions Corp (MUIS), a joint venture of Mitsubishi Chemical Corporation (MCC) and UBE Corporation, to acquire a technology licence for the production of lithium electrolytes in India. With this, Neogen will be the first Company in the world to have MUISs proven global technology to manufacture electrolytes in India. The MUIS technology would help the Companys production operations meet stringent global standards for quality, dependability, and safety. It will also help the Company to significantly reduce the approval times with Lithium-Ion Battery makers.

Neogens Product Portfolio

Product Portfolio
Organic Chemicals Inorganic Chemicals
Bromine Compounds Specialty Inorganic Lithium-based chemical products
Advanced Intermediates Electrolytes for Battery Chemicals
Custom Synthesis & Manufacturing (CSM)

Organic Chemicals include compounds based on bromine, chlorine, fluorine, and iodine, as well as their combinations. Neogen also manufactures specialty chemicals, such as, organometallic grignard reagents and with recent acquisition of BuLi Chem - organolithium derivatives as well. The Company is also specialised in the production of advanced intermediaries which are multi-step chemistry compounds that produce forward-integrated value-added products. Such products are used as intermediates in the production of Active Pharmaceutical Ingredients (API), Active Agrochemical Ingredients, and other Specialty Chemicals such as Aroma Chemicals, Polymer Additives, etc.

The Company also offers custom synthesis and contract manufacturing services, which includes developing and customising products to meet specific customer requirements by utilising its own in-house process expertise and technical specifications given by the customers.

During FY 22-23, the demand trajectory for the organic chemicals remained favourable, and the Company witnessed increasing revenue across both bromine derivatives as well as custom synthesis and manufacturing business. The Companys total organic chemicals revenues rose 28% year-on-year (YoY) to Rs. 463 crore in FY 22-23 from Rs. 363 crore in FY 21-22.

The inorganic chemicals portfolio of the Company includes specialty, inorganic lithium based chemical products that find applications across multiple industries, such as, eco-friendly VAM (Vapour Absorption Machine) for cooling air/water/process equipment, pharmaceuticals, specialty polymers, battery chemicals and construction chemicals. Enhanced capacity utilisation and higher realisations have supported robust inorganic chemicals segment revenue growth during the year. Inorganic chemicals revenue increased by 80% YoY to Rs. 223 crore, as compared to Rs. 124 crore recorded in FY 21-22.

During FY 22-23, the share of inorganic chemicals in its total revenue grew to 32% as compared to 25% in the previous year, while the share of organic chemicals sales stood at 68% as compared to its share of 75% recorded in FY 21-22. During the year under review, the share of domestic sales and export sales (including deemed export) stood at 52% and 48% respectively as compared to 56% and 44%, respectively, recorded in the previous year.

Revenue Break-up in FY 22-23

Total Revenue - Rs. 686.2 Crore

Looking ahead

Going forward, the Company intends to use its three decades of experience in lithium chemistry to manufacture Specialty Lithium Salts and additives for Electrolyte used in lithium-ion battery advance chemistry cells, as well as to produce lithium electrolytes salts required for the final formulation of the electrolytes. Towards achieving this objective, Neogen already took some significant initiatives as given hereunder:

i) Setting up Neogen Ionics Limited

The battery chemicals business of Neogen will be conducted under a distinct entity called Neogen Ionics Limited, which will be a wholly-owned subsidiary of Neogen Chemicals Limited. The battery chemicals business will have high volumes compared to Neogens legacy business. It will also have to be rapidly scaled up and as such, its CAPEX/OPEX requirements will be very different from those required in its existing business. The workforce across various functions like R&D, manufacturing, marketing and distribution, etc., will need different domain expertise. The new Company will also have the advantage of lower corporate tax rate of 15%. A wholly-owned new company would serve all these purposes and aid in synchronised growth of Neogen.

ii) Acquiring BuLi Chem

In March 2023, Neogen entered into an agreement for acquiring BuLi Chemicals India Private Limited ("BuLi Chem") from Livent Corporation, USA, having its manufacturing unit based in Hyderabad, and it now operates as a wholly-owned subsidiary of Neogen Chemicals Limited. BuLi Chem owns the technology to manufacture N Butyl Lithium and other organolithium products using Lithium metal, which are key reagents for the Lithiation reaction used in the manufacturing of several complex pharmaceutical and agrochemical intermediates. Operating now as a wholly-owned subsidiary of Neogen Chemicals Limited, BuLi Chem will give Neogen a significant competitive advantage by providing an additional technology platform that can be leveraged across the product segments to generate more Custom Synthesis and Manufacturing business. The technological expertise gained from BuLi Chem can also be utilised to introduce new and more complex products in the future, significantly improving the Companys hold over the organic chemicals market.

iii) Technology Development

Neogen used its >30 years of experience in producing Lithium Chemicals to develop technology for manufacturing several lithium battery materials such as lithium electrolyte salt, additives, and electrolyte. Further, carried out investment in R&D, Kilo lab/pilot production facilities and now investing in a demo commercial facility for these materials thus becoming one of the earliest and of very few companies in India having such a facility.

The newly acquired manufacturing plant ofBuLI Chem, situated in Hyderabad, would enable Neogen to leverage its capabilities in the custom synthesis and manufacturing (CSM) business and strengthen its pharma and agro-chemical portfolio.

iv) MoU with MUIS

In April 2023, Neogen also signed an agreement with MU Ionic Solutions Corp (MUIS), a joint venture of Mitsubishi Chemical Corporation (MCC) and UBE Corporation, to acquire a technology licence for the production of lithium electrolytes in India. Neogen will be the first Company in the world to have a proven global technology to manufacture electrolytes in India. The MUIS technology would help the Companys production operations meet stringent global standards for quality, dependability, and safety. It will also help the Company to significantly reduce the approval times with Lithium-Ion Battery makers.

Manufacturing Infrastructure

Neogen operates out of four state-of-the-art manufacturing facilities, located in Mahape, Navi Mumbai, Karakhadi near Vadodara, Dahej SEZ in Gujarat and Sangareddy, Hyderabad (Acquired in May 2023). These facilities cover more than 58 acres of land in India. With the completion of Phase I and Phase II expansions and other brownfield expansions, the Companys total organic chemicals manufacturing reactor capacity increased to 463m3 in FY 22-23, from 407m3 in the previous year. The aggregate manufacturing capacity of Inorganic Chemicals increased to 39m3 in FY 22-23. The world-class facilities will significantly boost Neogens overall performance by enabling it to add value through multi-step processes and complex chemistry. The newly acquired manufacturing plant of BuLI Chem, situated in Hyderabad, would enable Neogen to leverage its capabilities in the custom synthesis and manufacturing (CSM) business and strengthen its pharma and agro-chemical portfolio.

Strong Manufacturing Infrastructure

Factory Land Area Land Utilisation Capacity Certifications
Organic Chemicals (Reactor Capacity) Inorganic Chemicals (Tonnage)
Mahape (Since 1991) 1 Acre 100% 69 m3 9 m3 ISO 9001:2015 from Bureau Veritas Certification Holding SAS
Vadodara (Since 2017) 40 Acres 20% 111 m3 - ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018 certifications from Bureau Veritas Certification Holding SAS
Dahej (Since 2020) 12 Acres 40% 258 m3 30 m3 ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018 certifications from Bureau Veritas Certification Holding SAS. Also, GMP (Good Manufacturing Practices) certified by SGS
Hyderabad (Since May 2023) 5 Acres 50% 25 m3 - ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018 certifications from Bureau Veritas Certification Holding SAS.
Total 58 Acres 463 m3 39 m3


Innovative and Diverse Product Portfolio Continuous Investment in R & D
Strong Manufacturing Capabilities Key Business Operational Sustainability
Experienced Promoters with Domain Knowledge Extensive Global Footprints & Loyal Customer Base
Strong Supply Chain and Logistics Specialised Business Model with High Entry Barriers

Key Business Strategies

1. Capacity Expansion

FY 22-23 was a landmark year for the Company insofar as enhancing its production capacity was concerned. It mapped out ambitious growth plans for both, its existing business as well as its future business of producing battery chemicals and took number of initiatives. Neogens core business - organic and inorganic chemicals - grew in FY 22-23, due to increased demand matched by enhanced capacity. The Company is well positioned now to take on the next phase of development in the battery chemicals market, which is anticipated to experience enormous growth over the next decade. The Company intends to make significant capital investments in the field of electrolytes and lithium compounds over the next three years, while also focussing on innovation in these products.

a. For Organic Chemicals:

The Company had planned to commission a total of 60 m3 of organic specialty chemicals, of which 29 m3 have been commissioned in FY 22-23. The remaining 31 m3 is anticipated to be commissioned by March 2024.

b. For Inorganic Chemicals: The Company increased its inorganic capacity to 39 m3 during the year under review.

c. For Battery Chemicals: Earlier, Neogen had planned to add 10,000 MT electrolyte capacity and 2,000 MT specialty lithium salts capacity, to be commissioned over FY 24-25 and FY 25-26. Post the agreement with MU Ionic Solutions Corp, Japan, the Company is now reviewing its capex, since it now has a licence to manufacture electrolytes which has further increased customer confidence. This licence comprises the transfer of technology for a manufacturing facility and process with a maximum capacity of 30,000 MT intended to meet the demand for electrolytes in India. To support such expansion plans, Neogen approved a Rs. 450 crore capital expenditure for setting up in phases 10,000 MT electrolyte and 2,000 MT Lithium electrolyte salts manufacturing capacity, by September 2025, however, the same is currently being reviewed pending completion of design by MUIS team and long-term MoUs/ agreement with customers for the same.

2. Diversified Product Portfolio

Neogen has grown its product offerings over time by using its robust production and developmental capabilities to create an extensive product portfolio with a wide range of applications. As a consequence of their increased value and strategic importance to consumers, these products serve multiple end-user industries, such as, agrochemicals and pharmaceuticals. The Company has technology to produce more than 244 products which are being sold in India and 29 countries world over, including the United States, Europe, Japan, and the Middle East.

Neogen was able to acquire more customers across the globe by meeting their diverse product requirements thanks to this extensive product portfolio. Neogen has also developed a 58-member dedicated R&D team, including 7 senior personnel who have a doctorate in chemistry (Ph.D.) from reputed institutions and more than 15 years of experience. With the aid of its strong R&D team, the Company has been delivering innovative products to its clients. Multiple CSM (Custom Synthesis and Manufacturing) clients are in various stages of development - from research and development to pilot production to full commercialisation. The recent acquisition has also aided in the expansion of its existing product portfolio.

3. Expanding its presence in lithium-ion batteries market

Neogen had been planning to expand its presence in the lithium-ion battery market for the past few years. The Companys proactive actions have resulted in the signing of an important deal with MUIS, which is anticipated to significantly aid in its strong footprint in the lithium-ion battery segment. The Company continues to monitor the growing potential of compounds and lithium-ion battery materials for the EV market. The Company also keeps examining in depth the market for battery materials and evaluating lucrative opportunities coming up in the sector.

4. Growing sustainably

Neogen continues its legacy of operating in an eco-friendly and sustainable manner. It is committed to minimising its carbon footprint and acting as a responsible corporate citizen. The Company is committed to practising responsible chemistry while safeguarding the environment, its employees, and its customers, as well as caring for the welfare of the community. Some initiatives it took in this regard during the period under review are:

• Switched from Light Diesel Oil (LDO) to PNG for generating steam at its Mahape Plant,

• Uses PNG/CNG (which is a clean fuel) instead of other fuels to generate steam at its Dahej plant,

• Installed a Zero Liquid Discharge system at its greenfield project at the Dahej SEZ plant,

• Its Dahej SEZ Plant received GMP certification from SGS for manufacturing of advanced intermediates and specialty chemicals for pharmaceutical applications,

• Complies with all government rules and regulations with respect to the discharge of the effluent,

• Setting up a Solar Power plant at its Karakhadi, Vadodara unit, which can meet 30-50% of the total requirement of the plant,

• The recently acquired BuLi plant, which is also a zero liquid waste plant, and further reduces its water consumption through rainwater harvesting,

• Further, Neogens key products such as Lithium Bromide which is used in environment-friendly Vapour Absorption Chillers which is an alternate to greenhouse gas contributing CFC/HCFC based compressor-based cooling system,

• The Company is exploring opportunities in Lithium-Ion Battery space and has taken development initiatives for electrolyte formulations, Electrolyte Lithium Salts and additives, Specialised Cathode Materials and CSM and advanced intermediates opportunities. Lithium-ion batteries contain relatively low levels of toxic heavy metals found in other types of batteries, this will help in less emission of gases with inherent safe chemistry. The Company recycles / reuses / re-processes lithium products to make same level of fresh products quality. It will help in conservation of natural resources, promote green energy and reduce the use of crude.

5. Ensuring Strong Operating Efficiency

All of Neogens production facilities routinely engage in highly complex processes while maintaining high utilisation rates. Neogen has remained committed to organisational development and reorganisation by adding experienced personnel to key positions, enhancing the skill sets of the existing team through training, and strengthening its R&D capabilities. The planned capacity expansion at its Dahej SEZ plant was a monument to the power of the Companys business engagement. The Company has further implemented SAP S/4HANA ERP to improve operational efficacy and visibility. During the year under review, the Company was subject to significant volatility in the prices of lithium-related inputs. However, the Company was able to pass on the price increase to its consumers.

Financial Performance

Standalone Financial Performance

In FY 22-23, the Companys revenues reached an all-time high. This was due to the incremental contribution from expanded capacities, a sustained demand trajectory, and a favourable product mix. The revenue from operations in FY 22-23 stood at Rs. 686.18 crore, thereby registering 41% growth over the previous year. The Company achieved strong revenues despite escalation in raw material prices, higher utility costs, and supply chain disruptions. The Company was able to pass on majority of the raw material price increase to the customer, thus protecting its absolute EBITDA margin.

The earnings before interest, taxes, depreciation, and amortisation (EBITDA) increased by 29% to Rs. 111.62 crore from Rs. 86.59 crore in FY 21-22. Despite high fluctuations in input prices, increased utility costs, and adverse movements in foreign exchange rates, the Companys absolute EBITDA improved significantly due to a favourable product mix change. EBITDA margin was impacted by significantly higher lithium prices, which were passed on to the customer Protecting the absolute EBIDTA margin, however with almost 6 times increase in lithium prices over its long-term stable price, the % EBIDTA in the lithium business was lower.

Profits increased due to higher utilisation of plant capacity, cost management strategies, and product diversity. Profit after tax increased by 12% from Rs. 44.72 crore in FY 21-22 to Rs. 50.05 crore in FY 22-23. Neogens PAT included the impact of elevated finance costs as a result of ongoing expansion initiatives and high interest rates in comparison to the previous year. PAT performance was also impacted by a higher depreciation charge related to reactors being added during the year that have not yet reached maximum capacity.

Neogens Net Worth increased to Rs. 482.61 crore as of March 31,2023, from Rs. 439.32 crore as of March 31,2022. During the period under review, Net Fixed Assets increased from Rs. 281.78 crore to Rs. 339.32 crore, while the Cash and Cash Equivalents stood at Rs. 18.22 crore as compared to Rs. 32.80 crore in the previous year.

Consolidated Financial Performance

Neogens consolidated revenue including other income, increased by 41% to Rs. 686.18 crore from Rs. 487.25 crore in FY 21-22. The strong top-line performance was driven by capacity expansion initiatives and sales growth for inorganic chemical products.

EBITDA increased by 29% to Rs. 111.72 crore in FY 22-23 from Rs. 86.77 crore in FY 21-22 as a result of increased capacity utilisation and an improved product mix. Profit after tax for FY 22-23 was Rs. 49.97 crore, 12% increase over the Rs. 44.63 crore reported in FY 21-22. PAT performance was consistent with the Companys operational performance, and was bolstered by a lower effective tax rate and increased depreciation proportional to the newly introduced capacities by Neogen.

EPS for FY 22-23 was Rs. 20.03, up from Rs. 18.70 per share for FY 21-22. The Board of Directors approved a final dividend of Rs. 3.00 per equity share (30% of the par value of Equity Shares) for FY 22-23, based on the strong performance reported during the year.

At a glance (On Standalone Basis)

Key Ratios Numerator/Denominator FY 22-23

FY 21-22 % Change

Operating Profit (Rs. in Crore) EBITDA - Depreciation Rs. 95.44 crore Rs. 74.89 crore 27.44
Operating Profit Margins (in %) Operating profit / Revenue from operation 13.91% 15.37% -9.50
PAT (Rs. in Crore) PBT-Tax (% on PBT) Rs. 50.05 crore Rs. 44.72 crore 11.92
PAT Margins (in %) PAT / Revenue from Operations 7.29% 9.18% -20.53
Current Ratio Current Asset / Current Liability 1.60 2.26 -29.20
Inventory Turnover Revenue from operation/ Average Inventory 2.81 3.19 -11.67
Debt to Equity Level (Long-term Debt + Short-term Borrowings) / (Equity Share Capital +Other Equity) 0.75 0.51 46.71
Interest Coverage Ratio EBIT / Finance Cost 3.46 4.00 -13.48
Debtors Turnover Ratio Revenue from Operations / Average Debtors 4.78 5.18 -7.69
Return on Net Worth PAT / (Equity Share Capital + Other Equity) 10.37% 10.18% 1.88

Reasons for Change

Operating Profit: Operating Profit was improved due to a favourable product mix change and passing on of higher RM prices to the customers.

PAT Margin: PAT margin was impacted by elevated finance costs as a result of ongoing expansion initiatives, high interest rates in comparison to the previous year and higher depreciation charge related to reactors being added during the year.

Current Ratio: Current ratio has declined majorly due to increase in short-term borrowing to support the growth of business.

Debt Equity Level: This ratio has increased due to increase in borrowings which was taken during the year to support the growth of business and ongoing expansion projects.


The Company has been a strong and reputed player in the chemical industry space, offering an extensive range of products. Neogens growth prospects on both domestic and international markets have been bolstered by its established manufacturing infrastructure in multiple locations and expertise in complex processes. Incentives announced by the Indian government, such as, Make in India, PLI Scheme, etc., for the Pharmaceutical and its intermediates and ACC for Lithium-Ion batteries for EV & renewable energy storage industry also played a significant role in the Companys growth prospects. The Company is aware of the expanding potential in the lithium-ion battery materials for EVs and chemicals. The planned capacity expansion in the battery chemicals space would aid in significant growth in the Companys revenues in the near future. Neogen would continue using its knowledge and expertise to produce sustainable and profitable growth across all its business segments.

Neogen has prioritised growth from advanced specialty intermediaries while simultaneously emphasising operational efficiency and functional excellence. The goal is to be prepared for the future and to benefit from a first-mover advantage in some of these high-potential opportunities while maintaining financial stability.

The Company has significantly increased its research and development capabilities across multiple high potential chemistries to provide substantial value to its clients. In addition, the internal R&D team facilitated the introduction of more efficient processes and pathways to add more chemical intermediates to the Companys product line, as well as the substitution of existing products with new ones to satisfy the rising demand. The Companys strong global distribution network significantly contributed to its export revenue during the year.

The roadmap ahead appears promising, and the Company is prepared to embark on the next phase of development, which will demonstrate its robust manufacturing capabilities at scale as well as its expertise in a variety of complex chemistries. The industry has been supportive and the demand outlook remains positive for the Company. Neogens goal is to continue on its profitable-growth path and provide constant long-term value to its stakeholders. With its enormous market expertise, extensive experience, and cost-competitive manufacturing platform, Neogen remains well-positioned to capitalise on emerging opportunities. Neogen intends to further accelerate its strong performance by constantly expanding its horizon in the designated regions and markets and providing value to all of its stakeholders.

Human Resource Development

The Companys human resource policies are guided by the fundamental principles of transparency, consistency, and equity. Further improvements are being made to talent management, capability development, and performance enhancement. The Companys robust HR policies have a significant impact on talent acquisition, employee retention, and employee engagement. The Companys human resources continue to align their strategic actions and procedures with the long-term goal of creating and enhancing value for Neogen and its stakeholders. Neogens personnel and people processes give it the advantage of being able to manage challenges with equanimity, to embrace change proactively, and to maintain a mindset that generates vigour and enthusiasm for moving forward. Neogen aims to establish a healthy, hospitable, and competitive work environment so that its employees can achieve success and establish new benchmarks for quality, productivity, efficiency, and customer satisfaction.

During the year, the Company organised NCL Cricket Tournament 2023 at its Karakhadi and Dahej plants, a picnic for Thane and Mahape plant employees and a culture building initiative for its finance team.

Environment, Health and Safety (EHS)

The Companys business operations are dedicated to responsible chemistry and environmental protection. Neogens strategic objective is to promote the well-being of communities and society. In addition to pursuing exceptional corporate growth, Neogen is committed to fostering community development and preserving the environment.

Neogen is also devoted to maintaining a wholesome and secure workplace. It believes that it is possible to prevent all injuries, occupational ailments, accidents, and environmental incidents. This implies that all employees prioritise their own safety in addition to the safety of others, including contractors, consumers, and the communities in which the Company operates. Neogen strives to constantly improve workplace safety and process safety management through employee engagement and training programmes, as well as a change in employee behaviour. Neogen monitors internal and external safety and takes corrective action to improve safety standards as necessary. Even non-injury incidents and unanticipated events are recorded in Neogens safety management system (SMS) as part of the Companys rigorous incident reporting system. The root cause of each incident is identified, and precautions are taken to prevent future occurrences. Neogen routinely inspects and maintains its fire hydrant systems and waste treatment facilities.

The Company disposes of its solid waste in landfills and ecologically-permitted incinerators. The effluent treatment facility at the Karakhadi, Vadodara facility includes primary (chemical), secondary (biological), and tertiary (disinfection) treatment facilities. The Mahape Plant discharges liquid effluent at a shared wastewater treatment facility. The Companys new Dahej Special Economic Zone (SEZ) facility is designed to provide world-class health and safety performance and to implement a Zero Liquid Discharge (ZLD) system, thereby drastically reducing water consumption.

Research and Development

Neogen is committed to preserving product quality and consistency. All products are subjected to rigorous quality tests to ensure that they meet customer requirements. The manufacturing facilities of Neogen conform to all applicable regulations and accreditations. Quality control systems monitor every step of the production process. The laboratories for quality control are equipped with the necessary analytical instruments to guarantee faultless service. The manufacturing facilities have been inspected and approved by multiple domestic and international customers.

The Company has established two state-of-the-art R&D units, one each in Mahape and Vadodara, with an endeavour to develop new processes and improve the existing ones. Neogen also has a 58-member dedicated R&D team, including 7 senior personnel with doctorates in chemistry (Ph.D.) from reputed institutions and with 15+ years of experience. The Company believes that R&D is critical for sustained growth and will provide resources to further strengthen its R&D infrastructure to take advantage of the upcoming opportunities.

Quality Control and Assurance

Neogen has a 57-member Quality Control and Quality Assurance team at its facilities. The team is responsible for documentation and data administration, product inspections, and internal and external audits.

Neogens quality control laboratories are fitted with gas chromatography (GC), high-performance liquid chromatography (HPLC), ultraviolet spectrophotometers, Karl Fischer moisture analysers, polarimeters, inductively coupled plasma (ICP) and other essential analytical instruments to support its quality control measures across all operations.

Its Vadodara facility in Karakhadi has been ISO 9001:2015, ISO 14001:2015, and ISO 45001:2018 certified by Bureau Veritas Certification Holding SAS. Similarly, its Mahape, Navi Mumbai facility is ISO 9001:2015 certified for Quality Management System. Its Dahej SEZ and Hyderabad Facility is ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018 certifications from Bureau Veritas Certification Holding SAS and also, GMP (Good Manufacturing Practices) certified by SGS.

Additionally, the Companys documentation system adheres to ICH-Q7A criteria for intermediates. Moreover, Neogen has implemented a quality management system pertinent to Key Starting Materials (KSM) and Intermediates at each of its manufacturing facilities. The quality assurance team oversees the entirety of the production process, from the initial inspection of incoming raw materials to the output. Before packaging, the finished product is subjected to a stringent quality check. Documentation and data administration, product inspections, and internal and external audits are also the responsibility of the team. Only after a sample of the batch has been tested against customer or internal specifications, as applicable, is the finished product approved for shipment. The finished product is only approved for shipment after a sample of the batch has been verified against customer or internal specifications, as appropriate.

Internal Control Structure

Neogens management team adheres to the highest financial and accounting practices. It has an independent internal audit function and both well-established corporate and plant-level risk management procedure. An Independent Internal Auditor conducts quarterly evaluations in accordance with a comprehensive risk-based audit plan, which is approved by the Audit Committee and validated by the Statutory Auditors report. Neogen has implemented internal controls over the financial statements that are commensurate with the Companys scale and operations. The system increases the Companys operational and financial efficiency, safeguards its assets, and prevents any potential misconduct. In addition, the system assures the accuracy and completeness of its accounting records, the timely preparation of reliable financial disclosures, and the application of predetermined policies.

The auditors conducting this evaluation for FY 22-23 identified no material weaknesses or significant deficiencies in the operation of internal financial controls.

Risk Management Framework

Risk Management is an integral part of the strategy and planning process at Neogen. The Company faces multiple types of risks as a major player in the global chemical industry. To mitigate these risks, a comprehensive structure-based risk management strategy is implemented by the Company.

Action plans are designed to mitigate risks that could have a significant impact on Neogens long-term viability based on proactive risk identification. Target dates are assigned to the proprietors of mitigation plans, and the progress of mitigation actions is monitored and evaluated. Risk management and risk mitigation processes aim to limit the impact of risk and efficiently mitigate identified risks.

Business Risk Business risks refer to the possibility of the Company operating at a loss as a result of uncertainties such as alterations in consumer trends and preferences, strikes, rising competition, alterations in government policy, obsolescence, etc. Mitigation - The Company proactively verifies and analyses business risk to determine the probability of an event and its potential impact on the enterprises business operations, personnel, and financial management. The Company identifies specific risks and appropriate countermeasures or alternate procedures to avert probable adverse consequences. In addition, the Company analyses all anticipated and unanticipated costs for an undertaking to avoid going over budget.
Environment, Health and Safety Risk Environmental, health, and safety (EHS) risk is associated with potential environmental, health, and safety issues related to the Companys operations. Mitigation - Neogen implements stringent quality and EHS criteria that are continuously evaluated to ensure conformity with locally and internationally accepted standards. The Companys production facilities have international quality, environmental, and occupational health and safety certifications. Further, Neogen has been increasing its EcoVadis Global Sustainability score every year and now is among the top 26%-50% category of all the companies rated by EcoVadis.
Financial Risk Financial risk is the probability of suffering losses on an investment or commercial operation. The most prominent financial risks include credit risk, liquidity risk, and operational risk. Mitigation - The process of establishing a customers creditworthiness, as well as a fair estimate of the risk involved, is critical for financial risk management. Neogen has established structures, regulations, procedures, and systems for efficient financial risk management.
IT Risk IT risk refers to the potential for monetary loss, business interruption, or reputational harm resulting from the failure of an organisations information technology systems. Human error, internal fraud through software manipulation, external fraud by attackers, application and machine obsolescence, dependability issues (including software malfunctions), and poor management can all contribute to information and cyber security risks. Mitigation - The Company evaluates its cyber and information security policies on a regular basis. In addition, it implements and ensures compliance with the appropriate information security risk framework. The Company is predominantly responsible for the identification, measurement, control, and monitoring of technology in order to prevent risks to the businesss systems and ensure their safety and soundness.
Legal Risk Regulatory risk can arise for Neogen as a result of inadequate compliance with rules or breaches of contractual obligations and intellectual property rights, resulting in litigation and reputational harm. Mitigation - The Company maintains a close relationship with a number of Indian regulatory agencies and international clients in order to remain informed of evolving regulatory requirements. Neogen relies on strong internal and external teams to ensure that its Intellectual Property Rights are well-protected and contractual obligations are met by both parties.
R&D and Innovation Risks Insufficient investments in Neogens procedures, technology, and R&D might harm the Companys bottom line. Mitigation - Neogens fundamental strength is its technological innovation. It operates two cutting-edge research and development facilities in Mahape, Navi Mumbai, Maharashtra, and Karakhadi, Vadodara. It takes pride in its 58-member R&D team, which comprises approximately 10.0% of the total workforce and comprises competent and energetic individuals. The Companys product catalogue has grown from 20 to 244 items since its inception due to its R&D prowess. Neogen is dedicated to strengthening and expanding its research and development capabilities.
Forex Risks Exports account for approximately 48% of Neogens revenue. The unpredictability of exchange rate entails the risk of financial loss. Mitigation - Neogen has a well-defined foreign exchange strategy in place. The objective of this strategy is to mitigate foreign exchange risk by employing appropriate hedging measures. Neogen employs a netting strategy to manage its foreign exchange exposure.
Risk associated to Sourcing of Lithium Over the next decade, the demand for lithium-ion batteries is expected to increase dramatically due to the increasing adoption of electric vehicles. This will introduce new supply chain risks, particularly regarding battery materials in their unprocessed & refined forms and higher fluctuations in lithium prices. Such fluctuation in prices could increase the Companys costs and will impact its profitability. Mitigation - The Companys more than 3 decades of relationship with two of the worlds largest Lithium mining companies ensure stable supply. To further de-risk, Neogen has added 2-3 additional global suppliers of Lithium to ensure continuity of supply. In order to safeguard its profit margins, the Company makes it best effort to pass on the fluctuating costs of lithium to its customers and getting into Lithium market price linked FG price arrangement with customer for a long period of time.
Raw Material Risk Neogen occasionally confronts the risk of insufficient raw material supplies and price fluctuations due to the significant price volatility of the chemical intermediates business. As they constitute a substantial portion of the chemical process, the price volatility of raw materials can have a direct impact on the prices of the final products. Mitigation - The procurement team at Neogen ensures that a large proportion of the Companys essential basic materials are available from multiple sources from multiple geographies. In addition, the Company maintains strong, long-term relationships with its suppliers, allowing it to obtain economical raw materials and maintain adequate inventory levels to mitigate these risks.

Caution Statement

Certain statements in the management discussion and analysis may be forward-looking in nature within the meaning of applicable securities law and regulations. Actual results may materially differ from those projected or implied. These statements refer to Neogens growth strategy, financial results, product potential and development programme based on certain assumptions and expectation of future events. Neogen assumes no responsibility to publicly amend, modify or revise any such forward-looking statements based on subsequent developments, information of events.