Hemani Industries is an Indian chemical company focused on the manufacturing and marketing of a range of agrochemicals and specialty chemicals. The end uses of its products include crop protection (insecticides, herbicides and fungicides) as well as products used for wood protection, veterinary, household and public health applications. It is highly backward integrated with most of its raw materials being produced in-house. (Source: Frost & Sullivan Report, March 2022). In addition to manufacture and sale of its products (as Intermediates, Technical and Formulations), the company also engages in contract research and manufacturing services (“CRAMS”) and contract manufacturing for multi-national and domestic companies in the agrochemical and specialty chemicals areas.
The company has a presence across the entire value chain, Technicals, Formulations and Intermediates. According to Frost & Sullivan, Hemani Industries is a leading player in the Indian pyrethroid market in Fiscal 2021. In Intermediates, in CY 2020, it was the largest global producer by volume of Meta Phenoxy Benzaldehyde (“MPBD”) and the second largest producer by volume of Cypermethrin Acid Chloride (“CMAC”). In Technicals, in CY2020, it is the largest global producer by volume of Cypermethrin Technical, the second largest global producer by volume of Alpha Cypermethrin, the third largest global producer by volume of Permethrin Technical and the third largest manufacturer by volume of Dicamba in India.

The IPO consists of a fresh issue of shares aggregating up to Rs5,000mn and an offer for sale aggregating up to Rs15,000 mn by the selling shareholders from the promoter and promoter group. The total IPO size is Rs 20,000 mn.
The proceeds from the sale will be utilized for capacity expansion of Saykha industrial estate, repayment/prepayment of borrowings of the company and its subsidiaries, funding long-term working capital requirements and general corporate purposes.

The company has seen strong growth in the fiscal gone by, with revenues increasing from Rs8,823.03 mn in FY19 to Rs11,352.85 mn in FY21. The company’s EBITDA increased from Rs1,404.58 mn in FY19 to Rs2,443.50 mn in FY21. The company’s profit increased from Rs741.11 mn in FY19 to Rs 1,704.40 mn in FY21.

Hemani Industries, a leading manufacturer and exporter of Agrochemical products is getting ready to furnish its IPO. In that background, let us take a look at its listed peers and their market capitalizations

The company manufactures, produces and supplies various agrochemicals and specialty chemicals to international and domestic markets. It has a presence across the entire value chain, Technicals, Formulations and Intermediates according to Frost & Sullivan. In Fiscal 2021, Hemani Industries was a leading player in the Indian pyrethroid market. In Intermediates, in CY 2020, it was the largest global producer by volume of MPBD and the second largest producer by volume of CMAC. In Technicals, in CY2020, the company was the largest global producer by volume of Cypermethrin Technical, the second largest global producer by volume of Alpha Cypermethrin, the third largest global producer by volume of Permethrin Technical and the third largest manufacturer by volume of Dicamba in India. In addition, it is one of the top four companies in the global Deltamethrin market in 2020, in terms of production volume, and are one of the leading manufacturers and exporters of Bifenthrin in India, catering to the global demand. (Source: F&S Report, March 2022).
Hemani Industries has achieved these market positions using its core competencies in chemistry and technology, which has helped them optimize production, enhance yields, and increase cost competitiveness. According to Frost & Sullivan, the integration across the agrochemicals value chain, positions them as a key strategic player and supplier in Indian agrochemicals space. By leveraging its experience in Intermediates and Technicals for insecticides, it developed and expanded its product range to include Intermediates and Technicals for herbicides and fungicides, and successfully developed a Formulations business. It is focused on product diversification and adding more fast-growing product categories to its portfolio. Further, its leadership position in its key products offers them advantages such as cost efficiency due to economies of scale, competitive product pricing, ability to scale the business, ensure customer loyalty and expand its product pipeline into new end-uses.

Hemani Industries is an export-focused business catering to over 60 countries covering major geographies in Asia, Europe, North America, South America and Australia. Its largest export countries by revenues include China, the United Kingdom, and the United States. It is a Three Star Export House under the Indian Ministry of Commerce scheme, and it has an international sales and marketing team that is dedicated to generating business orders and understanding the requirements of its customers. Hemani Industries currently has a three wholly owned subsidiaries located in Australia, South Korea and India. Its two overseas subsidiaries operate as its marketing and distribution arms for those regions and help them identify new customers as well as to understand its evolving needs. In addition to serving the customers in its respective regions, these subsidiaries also carry inventory of its products in order to meet with immediate requirements of the customers and thus substantially reduce the lead time. As of December 31, 2021, it had two international offices located in Australia and South Korea and three overseas stock points located in Australia, South Korea, and the Netherlands to cater to global customers. Its sales across India are augmented by its distribution network of dealers, and distributors.
To ensure continuing international growth and expansion into new markets and customers, the company obtained and maintains numerous international product registrations across geographies through its wholly owned subsidiaries. It has successfully entered highly regulated markets and adhered to international regulatory standards to sell products. The time required to obtain an international product registration varies from country to country but on average it spends between 12 and 60 months to process the application, file for registration and clear regulatory approval. According to F&S, obtaining registration involves long approvals and is a time taking process - consumes over 3-4 years due to the voluminous documentation and disclosures requirements. Holding these international product registrations bolsters its position as a key agrochemical’s exporter and against other chemical exporting competitors. According to Frost & Sullivan, holding product registrations is also a key success factor which complements the company’s revenue growth.
Its competitive advantage is further augmented by the high barriers to entry in the agrochemical industry. Such entry barriers include the high cost, complex regulatory approvals, intricacy of product development and manufacturing, lead time, expenditure required for R&D, building customer confidence and relationships, which can only be achieved over a period of time.
The company also has a dedicated regulatory team which helps us in ensuring compliance with the guidelines set out with United States’ EPA OPPTS (“OPPTS”) for all its Technical and Formulation products. Further, due to the stringent regulatory and industry standards of the end use products manufactured by its customers, any change in the vendor of the component Intermediates and Technicals may require significant time and expense for customers, which acts an entry barrier and as a disincentive for any such change. Accordingly, customer acquisition is difficult, and the number of competitors involved in the manufacturing of similar products is limited.

Hemani Industries has customers in over 1,700 multinational, regional and local companies over the past ten years. Select examples of its major customers include Alchemie Overseas Ltd., Arysta LifeScience Benelux SRPL, Bayer Vapi Private Limited, Dhanuka Agritech Limited, Jiangsu Yangnong Chemical Co., Ltd., Shandong Rainbow Agrosciences Co., Ltd, Sharda Cropchem Limited, Tagros Chemicals India Pvt. Ltd. and UPL Limited. It is also engaged in CRAMS and contract manufacturing for large international and domestic chemical companies in agrochemicals and specialty chemical areas
The company added 927 customers between April 1, 2018 and December 31, 2021. In addition to producing quality products and fulfilling orders and projects on-time, the company believes that its customer loyalty has been earned by:
Approachable management addressing its concerns and relationships developed by its marketing team.
Nurturing customer centric culture that focuses on quality assurance and performance standards.
Building strong technical and R&D team; and
Offering modern facilities with an emphasis on sound environmental and safety practices. Its market positions coupled with its long-term relationships and ongoing active engagements with customers allow them to plan its capital expenditure well in advance as well as benefit from increasing economies of scale, strong purchasing power for raw materials and a lower cost base.
According to Frost & Sullivan, the level of technical skill and expertise that is essential for developing in-house innovative processes, undertaking complex chemistries and handling some of the raw materials and Intermediates, requires a significant amount of training that can only be achieved over a period of time thereby creating a further entry barrier for new entrants.

Hemani Industries' R&D laboratory is located at its Ankleshwar Facility with modern research and development infrastructure. The R&D efforts are mainly focused on developing new products and processes, improving existing production processes, adopting advance production technology, and improving the quality of existing products coupled with cost efficiency.
Its laboratories are equipped with sophisticated instruments which include gas chromatography–mass spectrometry and high-performance liquid chromatography machines, particle size analyzers, PH meters, Karl Fischer titrators, conductivity meters, melting point apparatus and water purification systems. Its analytical capabilities include critical quality control measures, stability studies, method validation and method development. The R&D activities have enhanced its ability to handle more complex reactions and processes. It has also emphasized the development of different Formulations prepared from both its own products and outsourced Technicals. In addition, it also works on the development of various combination products suitable for different end uses in different countries.
In addition to R&D and manufacturing of own products, it also undertakes CRAMS and contract manufacturing for international and domestic chemical companies in agrochemicals and specialty chemical areas under a contractual supply agreement-based model. Hemani Industries recently executed two major contract manufacturing assignments from leading global agrochemical companies. These contracts are both short-term and long-term in nature either with exclusive or non-exclusive arrangements.

Investing in and expanding its manufacturing capabilities will help drive new lines of revenue
Forward integration will help expand the business, with focus on higher value propositions

The lack of long-term contracts with clients hampers the company’s ability to build long lasting relationships
The business is heavily dependent on raw materials which rely on the commodity cycle. Any fluctuation in prices could prove to be disruptive for the business.

According to Frost & Sullivan, stringent regulations and complex chemistries create high entry barriers in the specialty chemicals industry. These entry barriers act as catalysts for growth in the medium to long term. The global agrochemicals market was valued by Frost & Sullivan at US$66.6 billion in CY2020 and is forecast to reach USD 91.7 billion by CY2025 growing at a CAGR of 6.5%. In addition, according to the F&S Report, in the crop protection segment, the demand for agrochemical Intermediates is likely to grow at a CAGR of approximately 5.2% between CY2020 and CY2025 and reach a market size of US$78 billion by CY2025. (Source: F&S Report, March 2022). Its market position, coupled with its cost efficiency initiatives, make them well positioned to capitalize on such market opportunities. Over the years, the company has consistently grown its manufacturing and production capabilities. Further, it also scouts for strategic acquisitions to acquire manufacturing facilities and entities which can give them a competitive advantage through forward or backward integration by adding production capacities, new products to the portfolio and securing sources of raw material supply. It focusses on amping up technological competencies that it is absent from by acquiring businesses in the space.

Hemani Industries plans to diversify its portfolio products which could cater to customers across various segments, sectors outside of agrochemicals (like wood protection, veterinary, household and public health applications) and geographies. The plans to continue to strengthen its existing product portfolio and to further diversify into products with prospects for increased growth and profitability. For example, it intends to increase its focus on insecticides, herbicides and fungicides, etc which provides them with promising value propositions with an increased range of product offerings. In addition, it aims to capitalize on molecules going off patent in the next five years and look for opportunities to add these molecules as products. According to Frost & Sullivan, the demand for some of these off-patent technical-grade molecules in the global market is expected to increase drastically. Frost & Sullivan expects that the market size of these products will crossover $ 4.1 billion by 2026.

Hemani Industries believes that its continuing R&D endeavours and reputation for quality and timely delivery will help them increase its wallet share and product portfolio with existing customers. For example, it developed one of its herbicide products in a different physical form from competing products which led to reduced dusting while formulating this product, and greater customer acceptance. It has built long-standing relationships with many customers through various strategic endeavours, Which it intends to leverage by capitalizing on the cross-selling opportunities that its diversified product portfolio offers.
The company has been selling Formulations under its own brands since 2018 and under white labels since 2019. It intends to grow its own branded products portfolio by launching its existing Formulation products in new geographies, as well as launching new Formulation products into both existing and new geographies. To build its brand and expand the customer base for its new products, it intends to undertake initiatives such as conducting field demonstrations and product promotion through advertisements and other publications, and participation in various national and international exhibitions. It believes that developing its branded consumer formulation products will further build its international market position and offer an opportunity for growth

In Fiscal 2021, Hemani Industries marketed its product portfolio in over 60 countries. It has an international sales and marketing team that is dedicated to generating business orders and understanding the requirements of customers. It intends to expand its sales network internationally and in India by additional sales teams and sales offices in selected jurisdictions. In that regard, it also will setup new international subsidiaries as required to support its export business. We will also look for acquisition opportunities that will allow them to penetrate regulated markets by acquiring regulatory assets and improve its international distribution capabilities. In particular, it will focus on identifying acquisition targets that expands the geographic spread of its export business.
Hemani Industries’ future growth depends on expanding its supply chain capabilities, particularly to its export markets, through improved and robust sales and distribution network. It will continuously seek to increase the penetration of its products by appointing new distributors and dealers targeted at different customer groups and geographies. Further, its focus will be to increase the number of stock points and strengthen its sales team in India and globally to ensure that it is able to deliver its products to customers in a timely and desired manner.

Disclaimer -