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Deepak Nitrite - Leading Indian producer of Sodium Nitrate

Deepak Nitrite all set to capture opportunities across the chemicals and speciality chemicals landscape 

Twitter Handle: @shuchi_nahar
About the Company
From a bulk commodity products manufacturer, Deepak Nitrite Ltd. (DNL) has evolved into a specialty chemical company operating in three key division i.e Basic Chemicals, Fine and Specialty Chemicals and Performance Products with facilities located at Dahej, Nandesari, Roha, Taloja and Hyderabad. DNL has a number of credits to its name for manufacturing of chemicals holds a leading position in products such as Sodium Nitrite, Nitro toluene - the only company in India to have fully integrated OBA setup.

The company dictates 80% domestic market share in sodium nitrite and 50% market share in nitro toluene. Also, nitro toluene acts as a key raw material for the Performance Chemicals segment. The end-user applications of DNL’s products vary from agrochemicals, dyes, and pigments to pharmaceuticals, rubber chemicals, refinery, textile, and colorants. 

In FY 2019-20, the Company invested 270 Crores towards initiatives on capacity expansion and debottlenecking of existing plants. This expenditure also covers the new 125-acre land purchased at Dahej during the year. This land is strategically located surrounded by key suppliers and customers paving the path for ample opportunity for growth.
Chemical Markets – Globally
Basic chemicals are expected to see the largest growth of any chemical segment, at a 2.1 percent forecast for 2024. The global specialty chemicals market size was valued at USD 630.0 billion in 2019 and is expected to grow at a compound annual growth rate (CAGR) of 3.7% from 2020 to 2027. Global Phenol Market to Grow at 3.40% During 2020- 2025, Stimulated by Advancements in Production Technology.
Asian & Indian Market
The world’s leading chemical company was Japan’s Shin-Etsu Chemical. Asia has the world's largest share of the global chemicals market, at 56.6% in 2019. It has consistently accounted for more than 50 percent of the global chemicals market since 2012. India is the 3rd largest manufacturer of chemicals in Asia and the 6th largest manufacturer in the world.
Indian Chemical Market
India has the potential to become the 4 Largest chemical producer in the world growing at 9% p.a. for the next 5 years.
The Indian chemical industry is expected to double to US$ 300 billion by 2025, recording an annual growth rate of 15%-20%.The total FDI in Chemicals (excluding fertilizers) from April 2000 to December 2019 stood at US$ 17.4 billion. The Indian Chemical Council’s aim to achieve a turnover of US$ 300 billion by 2025 backed by Government’s support in proposed infrastructure and policy changes. The investment required for this is estimated to be around US$ 75-100 billion and the primary objective is to reduce India’s dependence on imports.

Improved Financial Ratio
The company demonstrated strong all-around performance led by healthy growth across its Strategic Business Units (SBUs). On a Standalone basis, revenues climbed to 2,230 Crores, 25% higher than the previous year.
EBITDA registered at 804 Crores, up by 161% from the previous year resulting to EBITDA margins of 36%, higher by 18.77%. Profit Before Tax (PBT) was recorded at 706 Crores, up by 232% from last year. Profit After-Tax (PAT) stood at 544 Crores, representing an improvement of 294% compared to FY 2018-19.

Segmental Growth over the Years
Basic Chemicals
Basic Chemicals reported sales of 940 Crores in FY 2019- 20, growing by 5%. Closure of production facilities due to the national lockdown impacted the revenue momentum towards the end of Q4 FY 2019-20. This has, however, recovered post-re-starting of the facilities.
Overall, the Company will continue to swiftly capitalize the opportunities by diverting capacity towards products that enjoy better demand scenario, and will leverage its cost leadership position to drive market share gains.
 
Fine & Speciality Chemicals
Fine & Speciality Chemicals segment’s revenue grew by 9% to 585 Crores in FY 2019-20. EBIT for this segment grew by 33%. The Company witnessed increased demand for key products in the export markets which also led to solid realization gains.

The performance was also bolstered by benefits accruing from backward integration initiatives and capacity expansion for established products. With a strong product portfolio, the Company is on track to deliver a stellar performance in the FSC segment in the coming years.
 
Performance Products
Performance Products the segment reported a stellar performance during the year under review growing robustly by 91% translating to Revenues of 768 Crores. Company’s efforts of re-orienting its industry mix and geography mix to ensure better product acceptance played a major role in driving the performance.

Further, the Company’s position as a fully integrated supplier of OBA has strengthened its competitive edge. During the year, Company witnessed healthy realization gains in DASDA owing to China's temporary disruptions, which bolstered its overall performance in the PP segment. Performance Products has contributed 34% to the Company’s Total Revenues.

Capacity Build-up
With future CAPEX to be incurred largely through internal accruals, the Free Cash Flow to the Firm (FCFF) should turn positive. On the back of sustained CAPEX, debt in absolute terms will largely remain flat.

In FY 2019-20, the Company invested 270 Crores towards initiatives on capacity expansion and debottlenecking of existing plants. This expenditure also covers the new 125-acre land purchased at Dahej during the year. Deepak Phenolics, which is now in the process of safe scaleup to capacity. DPL had it first full year of operations in FY 19-20, wherein its Phenol production volumes were just short of 200,000 tons or above 90% capacity utilization.

Source: Grandview Research
Expert Market Research
Company Annual Reports 
Mckinsey Report
Data Bridge Market Research
Disclaimer: The information provided on Shuchi Nahar’s Weekend Blog is for educational purposes only. The articles  may contain external links , references and compilation of various publicly available articles. Hence all the authors are given due credit for the same. All copyrights and trademarks of images belong to their respective owners and are used for Fair Educational Purpose only. 
Twitter Handle: @shuchi_nahar

Comments

  1. During the second quarter of 2021, Nitro Toluene supplies in the Asia Pacific region were largely under the pressure of raw material shortage. The Chinese government-imposed consumption taxes on imported heavy aromatics commodities in June, further adding to the inflationary raw material rates. The production levels remained high, and plants were operating at around 90% of the capacity in June due to high demand. The Indian inventory levels were less with suppliers largely impacted because of renewed restrictions on the Asian ports and soaring freight. Shortage of Nitric Acid further escalated the pricing trend in Asia. FOB Shanghai Nitro Toluene discussion were assessed at USD 1450 per tonne in June. Demand surged in the second half of the quarter due to seasonal offtakes from the agrochemicals https://www.chemanalyst.com/Pricing-data/nitro-toluene-1153sector.

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