Chemplast Sanmar Ltd (CSL) is the largest manufacturer of paste PVC resin in India, with an installed production capacity of 66ktpa. Further, the company’s wholly-owned subsidiary, Chemplast Cuddalore Vinyls (CCVL), is the second-largest manufacturer of suspension PVC resin in India (capacity: 300ktpa) and the largest manufacturer in South India. Notably, PVC is the company’s main business, contributing 78% of consolidated contribution in FY21. The company’s remaining business portfolio (except custom manufacturing) – comprising caustic soda, chloromethanes, hydrogen peroxide and R-22 refrigerant – primarily serves to extract value from the by-products generated from the backward integration of the PVC business.
Favorable industry dynamics: Demand for PVC in India should benefit from low per capita consumption and growth in end-user industries such as leather & automotives (for paste) and irrigation & construction (for suspension). There are limited producers of PVC in India and rationalisation of global capacities (partly due to environmental reasons) is likely to drive growth. Customer stickiness is an added positive. CSM business should benefit from India’s low-cost advantage and ‘China+1’ theme.
Leadership position in an industry with high entry barriers: CSL holds a 46% share in India’s paste PVC market (82% share of domestic supplies) and 8% share in suspension PVC (20% of domestic supplies). India is supply-starved in both products, leaving ample room for import substitution, but access to technology (in paste) and capex intensity (in suspension) bar new entrants. In the CSM business, customer approval is the key barrier, and CSL has one established relationship (with Syngenta), with more on the way.
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