Thematic

Thematic
Institutional Research
India I Chemicals
29 November, 2022
Chemicals
China+1 is here to Stay – Decadal Opportunity for India
Rohit Nagraj Jay Bharat Trivedi

Research Analyst, Chemicals Research Associate, Chemicals
+91-022-4215 9645 +91-022-4215 9201
rohit.nagraj@centrum.co.in jay.trivedi@centrum.co.in
Please see Disclaimer for analyst certifications and all other important disclosures.
Chemicals 29 November, 2022
Index
India Chemicals benefitted since 2015, to continue further.................................................. 8
Indian chemical industry growth reflected through surge in financial performance during
FY13-22 .................................................................................................................................. 9
Policy changes in China impacting chemical sector dynamics ............................................. 10
Levers for continued growth of Indian Chemical industry ................................................... 11
Fluorine – Aspirational Chemistry ........................................................................................ 16
Global Fluorochemicals Market – To Grow at a Faster Clip during 2019-24 ....................... 18
Fluorospecialty Chemicals .................................................................................................... 27
Global Refrigerants Market .................................................................................................. 31
Chemicals for EV, New Energy – Opens up a New Frontier ................................................. 36
India Chemicals – Inevitable Growth Opportunity............................................................... 40
India Chemicals/ Agrochem on capex mode –Momentum accelerated .............................. 45
China’s entry into WTO marked the beginning of Europe+1 ............................................... 46
EU Energy/ Gas crisis – A short-term hiccup ........................................................................ 48
LNG to displace Russian gas, REPowerEU plan to eliminate Russian dependence .............. 49
Global Chemicals Market ..................................................................................................... 54
Germany – The largest Chemicals hub in EU ....................................................................... 57
Company Section
Aarti Industries ..................................................................................................................... 61
Anupam Rasayan India ......................................................................................................... 86
Atul Ltd. .............................................................................................................................. 105
Deepak Nitrite .................................................................................................................... 126
Galaxy Surfactants ............................................................................................................. 151
Gujarat Fluorochemicals .................................................................................................... 172
Navin Fluorine International .............................................................................................. 198
SRF...................................................................................................................................... 217
Vinati Organics ................................................................................................................... 243
Centrum Institutional Research 2

Exhibit 1: Key financials of companies

EBITDA (Rs mn) Net profit (Rs mn) RoCE (%) RoE (%)
Company
FY22 FY23E FY24E FY25E FY22 FY23E FY24E FY25E FY22 FY23E FY24E FY25E FY22 FY23E FY24E FY25E
Aarti Industries 17,201 11,079 13,951 17,373 11,858 5,379 7,421 9,891 20% 9% 11% 12% 30% 11% 14% 16%
Anupam Rasayan India 2,970 3,808 4,928 6,320 1,522 1,919 2,663 3,613 8% 7% 9% 11% 9% 9% 11% 13%
Atul Ltd. 9,114 9,864 13,186 16,212 6,043 6,392 8,368 10,282 14% 13% 15% 16% 15% 14% 16% 17%
Deepak Nitrite 16,036 13,626 19,714 22,759 10,666 8,932 13,589 15,890 34% 23% 28% 25% 38% 24% 28% 26%
Galaxy Surfactants 4,007 5,160 4,750 5,155 2,628 3,302 3,099 3,397 16% 17% 14% 14% 18% 19% 16% 15%
Gujarat Fluorochemicals 11,976 20,002 22,941 27,621 7,872 12,702 14,450 17,595 16% 21% 20% 21% 20% 26% 24% 24%
Navin Fluorine International 3,548 5,237 7,690 9,457 2,631 3,545 5,070 6,478 15% 16% 18% 20% 15% 18% 21% 23%
SRF 31,032 35,945 43,020 51,263 18,889 21,541 25,805 31,224 18% 17% 18% 19% 24% 23% 22% 22%
Vinati Organics 4,341 5,802 7,045 8,595 3,466 4,459 5,556 7,039 20% 22% 23% 24% 21% 22% 23% 25%
Source: Company, Centrum Broking (Note: Aarti Industries figures have been considered inclusive of one time contract cancellation fees)
Exhibit 2: Valuation details of companies

Upside/
Company Reco. CMP TP Comments
Downside (%)
We estimate revenue/EBITDA/PAT CAGR of 15.1%/21.4%/22.4% over FY22-25E adjusted for termination income. We have valued Aarti Industries (now only the specialty
Aarti Industries ADD 664 716 7.8
chemicals) at 30x avg. FY24-25E EPS of Rs23.9. We initiate coverage with an ADD rating and TP of Rs716 (8% upside).
Anupam Rasayan We expect revenue/EBITDA/PAT CAGR of 28.1%/28.6%/33.4% over FY22-25E. We have valued Anupam’s business at lower than other specchem company multiples due to
REDUCE 727 725 -0.3
India its lower asset turns and lower return ratios. Based on our SOTP methodology, we initiate coverage with a REDUCE rating and TP of Rs725 (0% upside).
We estimate FY22-25E Revenue/EBITDA/PAT CAGR of 17%/21%/19%. We have valued the company at 30x avg. FY24E-25E EPS of Rs316. We initiate coverage with BUY
Atul Ltd. BUY 8,202 9,480 15.6
rating and TP of Rs9,480 (16% upside).
We estimate FY22-25E Revenue/EBITDA/PAT CAGR of ~14%/13%/14%. We have valued the company using SOTP methodology considering 10x EV/EBITDA for Phenolics and
Deepak Nitrite ADD 2,109 2,325 10.2
20x for Advanced Intermediates and New Businesses. We initiate with ADD rating and TP of Rs2,325 (10% upside).
Galaxy We estimate FY22-25E Revenue/EBITDA/PAT CAGR of ~6%/9%/9%. We have considered 5.5% volume CAGR during FY22-25E. We have valued the company at 30.0x avg.
REDUCE 2,826 2,749 (2.7)
Surfactants FY24-25E EPS of Rs91.6. We initiate with REDUCE rating and TP of Rs2,749 (3% downside).
Gujarat We estimate FY22-25E revenue/EBITDA/PAT CAGR of 28%/32%/31%. We have valued the company at 30.0x avg. FY24E-25E EPS of Rs146. We initiate with a BUY rating
BUY 3,522 4,376 24.2
Fluorochemicals and TP of Rs4,376 (24% upside).
Navin Fluorine We expect Revenue/EBITDA/PAT CAGR of 33.2%/38.7%/35.0% over FY22-25E. We have valued the company at 45x avg. FY24E-25E EPS of Rs116.5. We initiate with an BUY
BUY 4,352 5,244 20.5
International rating and TP of Rs5,244 (20% upside).
We expect Revenue/EBITDA/PAT CAGR of 17.7%/18.2%/18.2% over FY22-25E. We have valued the company with SOTP methodology considering 22x EV/ EBITDA for
SRF BUY 2,279 2,646 16.1
Chemicals Business, 10x for Packaging Films Business and Technical Textiles Business, and 8x for Others. We initiate with a BUY rating and TP of Rs2,646 (16% upside).
We expect Revenue/EBITDA/PAT CAGR of 28.8%/25.6%/26.6% over FY22-25E. We expect EBITDA margins to hover at ~25%. We have valued the company at 40.0x avg.
Vinati Organics BUY 2,092 2,451 17.2
FY24-25E EPS of Rs61.3. We initiate with a BUY rating and TP of Rs2,451 (17% upside).
Source: Company, Centrum Broking

Thematic
India I Chemicals

29 November 2022
Chemicals NIFTY 50: 18,512
China+1 is here to Stay – Decadal Opportunity for India BSE Sensex: 62,294
India’s emergence in the chemicals space a decade ago was influenced by China’s Nifty 50 vs NSE Midcap
environmental drive since 2013, followed by multiple supply chain disruptions. Indian 120
chemical companies benefitted from Global MNCs diversification of sourcing which is 110 NIFTY 50
also reflected in 11% CAGR in chemical exports over 2009‐2019. Although rising
100
domestic consumption story still remains intact for India, we believe India to still NSE Midcap
remain a favourable destination for chemicals exports due to labor cost advantage, 90
regulatory compliances, favourable policy measures, strong technical/ synthesis 80

capabilities, and Indian entrepreneur’s drive for global presence. A part of China+1 has Nov‐2 1 Feb‐22 May‐22 Aug‐22 Nov‐2 2
Source: Bloomberg
played out, however India is now at a strong footing with ongoing investment
momentum which shall accelerate growth further. CMP* Target
Company Rating
(Rs) price (Rs)
Indian specialty chemicals continue to remain in flavor – Investment driven
Our analysis of 10 large specialty chemical companies over the past decade exhibits Aarti Industries Add 664 716
revenue/ PAT CAGR of 14%/ 15% during FY13‐22. Moreover, investments have surged Anupam Rasayan
Reduce 727 725
India
2.5x from Rs17bn in FY13 to Rs61bn in FY22. This capex momentum is further
Atul Ltd. Buy 8,202 9,480
accelerated with ~Rs175bn investments lined up over FY23‐24E, signifying ~Rs275bn
Deepak Nitrite Add 2,109 2,325
peak revenue potential. Overall, Indian specialty chemicals market growth is expected
to continue taking it to ~USD120bn by 2025 from ~USD70bn by 2020 (growing at ~12% Galaxy Surfactants Reduce 2,826 2,749
CAGR over 2020‐25). Gujarat
Buy 3,522 4,376
Fluorochemicals
Policy support favoring domestic manufacturing – Awaiting PLI for chemicals Navin Fluorine
Buy 4,352 5,244
International
Indian chemical industry’s last decade growth was purely driven organically apart from
SRF Buy 2,279 2,646
some policy in later years including reduction in corporate income tax rate in 2019,
customs duty reduction, BIS standards implementation etc. We believe further policy Vinati Organics Buy 2,092 2,451
Source: Centrum Broking, *as on 25 November2022
support from lower tax rate for newly formed companies at 15%, development of
PCPIRs, feedstock availability, and expected PLI scheme in chemicals would foster
growth for the chemicals sector.
Fluorine – Aspirational Chemistry
Fluorination space remains attractive as the applications are evolving apart from agro
and pharma segments which certainly indicates growth potential. Fluorine chemistry
has become a buzzword for the Indian chemical industry recently with new entrants.
Even some of specchem companies are upping their fluorination capabilities in their area
of applications. Despite new players entering the market, the incumbents such as SRF,
Navin Fluorine, Gujarat Fluorochemicals will remain go to vendors for global players. We
believe Anupam with its synthesis skills and recent Tanfac acquisition is better placed to
capitalise on the fluorination opportunity.
Exports rising, imports coming down
During 2010‐20, India’s exports rose at ~11% CAGR while imports have risen at ~4%
CAGR. China+1 is favoring exports while Make in India is favoring import substitution.
Deepak Nitrite started import substitution theme through large Phenolics investment
and is further banking on through downstream derivatives. Analyzing top 10 specchem
companies’ exports performance, it can be inferred that their exports contribution has
moved up over the past decade which is expected to improve further.
Chemicals for EV, new energy – Opens up a new frontier
Indian government has initiated PLI scheme for Advanced Chemistry Cell (ACC) Battery
Storage with incentives of Rs181bn. Although, the sun rising segment is at a nascent
stage, it has opened up a new and rapidly growing frontier for the Indian chemical
industry. The new energy value chain encompasses polymer films, fluoropolymers, Rohit Nagraj
Research Analyst, Chemicals
electrolyte salts, and additives. Some of the Indian companies have initiated their +91‐022‐4215 9645
Chemicals
participation in the value chain including Gujarat Fluorochemicals, Neogen Chemicals, rohit.nagraj@centrum.co.in
Tatva Chintan Pharma Chem, Ami Organics, Himadri Specialty Chemical among others.
New energy space, growing exponentially has opened up a new growth avenue for
domestic chemical industry with material benefits starting 2025 onwards.
Jay Bharat Trivedi
Research Associate, Chemicals
+91‐022‐4215 9201
jay.trivedi@centrum.co.in
Please see Appendix for analyst certifications and all other important disclosures.

India Chemicals benefitted since 2015, to continue further

Indian chemical industry has emerged as a clear winner of China+1 over the past decade; strong
financial performance supported by rise in valuations. We believe that Europe challenges further
foster the China+1 and India will be the key beneficiary due to ongoing investments, exports
focus, and government support. China’s 14th Five Year Plan further emphasizes tight supervision
of its chemical industry, relocation of chemical plants, self-sufficiency in high-end chemicals,
environment friendly routes, and control on energy consumption. China’s forte in low cost
manufacturing and global supplier is waning amidst the escalating challenges faced by its
chemical industry. Indian specchem segment has taken the mantle over the past decade and is
confidently marching ahead.
Specchem shifting gears to accelerate further – Initiate coverage on nine specialty chemical
companies
We like Navin Fluorine International and Gujarat Fluorochemicals due to their high growth. Atul
Ltd., Galaxy Surfactants, SRF, and Vinati remain compounding stories. Commodity to specialty
transformation can provide Deepak Nitrite valuation upside while Anupam Rasayan to benefit
from fluorination foray and financial performance improvement remains a key for Aarti
Industries.

Exhibit 3: Indian Chemicals Landscape
Chemicals
Dyes &
Commodity Agrochemicals Specialty Intermediates
Petrochemicals Others
Chlor-Alkali Pesticides Agri Inputs/ Seeds Aksharchem Aarti

Soda Ash Diversified CRAMS Non-CRAMS Tech/ Green
(Caustic/ Surfactants
(Salt, Chlorine) Asahi Songwon Andhra
Bayer JK Agri Amines and
Limestone, Aarti Ind. Bhageria Ind. Petrochemicals
(Salt/ power/ Cropscience Genetics Anupam Plasticizers
coke, Aether
Electrolysis) Rasayan Ami Organics Bodal Manali Black Rose
power) Bharat Rasayan Jubilant Industries Petrochemicals
Industries Navin Fluorine Atul Kiri Ind. Dynemic
Dhanuka Clean Science Panana
Agritech Kaveri Seed Alkyl Amines Poddar Products
GHCL Andhra Sugars PI Industries Petrochem
Fine Organic Pigments Fineotex
Chemfab DCM Shriram Heranba Nath Biogenes SRF Balaji Amines
Tata Chemicals Alkalis Tatva Chintan
Industries Shree Pushkar Himadri
Nirma (UL) DCW BASF
Grasim India Pesticides IG
Rohti GNFC Camlin Fine
Gujarat Alkalis Insecticides Petrochemicals
Surfactants GSFC Chemcon
(UL) Meghmani India Indo Amines
Finechem Chemplast
Punjab Sanmar Paushak
Punjab Alkalis Chemicals National
Deepak Nitrite
Sree Rallis Peroxide
Rayalseema Hi Galaxy
Sharda Surfactants Thirumalai
Strength Cropchem Chemicals
Tamilnadu Gujarat
Sumitomo Fluorochemicals Transpek
Petroproducts Chemical
Hikal Vidhi Specialty
UPL Vishnu
India Glycols
Chemicals
Jubilant Ingrevia
Yasho Ind.
Laxmi Organic
Meghmani
Organics
Oriental Arom.
Neogen
NOCIL
Privi Specialty
Rossari Biotech
SH Kelkar
Sudarshan
Chemicals
Valiant Organics
Vinati
Source: Centrum Broking

Exhibit 4: Companies with Key Chemistries/ Segments

Gujarat Fluorochemicals
Fluorine Chemistry Navin Fluorine
SRF
Benzene/ Toluene Chemistry Aarti Industries
Ami Organics
Anupam Rasayan India
Aether Industries
Pharma/ Agrochem – Primary customer segments Chemcon Speciality Chemicals
Hikal
Neogen Chemicals
Tatva Chintan (Catalysts)
Atul
Diversified BASF
Deepak Nitrite
Alkyl Amines
Amines
Balaji Amines
Camlin Fine
Food additives Clean Science and Technology
Fine Organic
PVC Chemplast Sanmar
Galaxy Surfactants
Surfactants India Glycols
Rossari Biotech
Jubilant Ingrevia
Acetyls
Laxmi Organic Industries
Oriental Aromatics
Flavour and fragrances Privi Specialty
SH Kelkar
Rubber Chemicals NOCIL

Meghmani Organics
Pigments
Sudarshan Chemicals
Rossari Biotech
Textile Chemicals
Fineotex Chemical
Source: Company Data

India Chemicals benefitted since 2015, to

continue further
China’s drive for environmental protection commenced in 2013 with China Air Pollution
Prevention and Control Action Plan. Subsequently, from January 2015 China’s new
Environmental Protection Law came into force. India’s resurgence in chemicals arena can
be correlated with China’s focus on environmental protection and stricter implementation
of the same. Chinese chemical companies bore the brunt of the tightened enforcement of
the new regulations leading to capacity closures and partial shutdowns. Also, environmental
related/ pollution control costs for the chemical industry started escalating, in turn
reflecting increase in the overall cost of products and final product pricing. China has been
competitive in the global chemicals market since 2000 due to its wage cost advantage, low/
subsidised financing, and non-adherence to environmental/ pollution control aspects.
China’s implementation of minimum wage act, reduced subsidised financing post 2008
financial crisis, and increase in pollution control costs led to rise in pricing. Increased
product pricing led to bridging the competitive gap between China and India to some extent.
Exhibit 5: China challenges over the past decade effected Indian chemicals growth
2017 -
Jan-2015 – Jan-2018
2013 – China Aug- Environment End- Sep-
New – New
Air Pollution 2015 – al crack Mar-2019 2019- 2021 –
Environme environm
Prevention Tianjin down with – Jiangsu 2020 – Dual
ntal ental
and Control port penalties to accident Covid- control
Protection protection
Action Plan accident companies 19 policy
Law tax
and officials
Source: Industry
Moreover, due to the multiple disruptions in China, the MNCs supply chain was
compromised several times. Looking for an alternative, MNCs who have presence in India
and have been working with Indian chemical industry since years, zeroed on India for their
supply chain. Compared with the other South East Asian countries such as Thailand,
Malaysia, Indonesia, and Vietnam, Indian chemical industry has inherent advantages of
long-standing chemical industry, synthesis capabilities, large talent pool, IP protection,
environmental compliance, regulatory approvals, and experience in serving the MNCs. The
other SE Asian countries have an established petrochemical industry which is technology
driven rather than research driven while the chemical industry isn’t their forte.
We believe that structural changes in China chemical industry dynamics started from
environmental drive have been beneficial for the Indian chemical industry. Incrementally,
government support from Make in India initiative to support manufacturing, Aatma
Nirbhar Bharat to support import substitution, PLI scheme will further foster growth for the
sector. Indian chemical companies’ capex plans themselves suggest growth visibility for the
next 5-10 years. We reinforce that one leg of China+1 has played out and the Indian
chemical sector is poised to take on China+1 further with strong balance sheet, import
substitution, growing exports opportunity, and burgeoning domestic market.

Indian chemical industry growth reflected

through surge in financial performance
during FY13-22
Our analysis of 10 large specialty chemical companies over the past decade exhibits
revenue/ PAT CAGR of 14%/ 15% during FY13-22. Moreover, investments have surged 2.5x
from Rs17bn in FY13 to Rs61bn in FY22. This capex momentum is further accelerated with
~Rs175bn investments lined up over FY23-24E, signifying ~Rs275bn peak revenue potential.
Overall, Indian specialty chemicals market growth is expected to continue taking it to
~USD120bn by 2025 from ~USD70bn by 2020 (growing at ~12% CAGR over 2020-25).
Devoid of any material government support, Indian chemical industry has grown organically
over the past decade benefited from China+1. Pricing-led competition from China subsided
and China+1 from MNCs emerged, leading to commencement of the investment cycle in
chemicals. Post-Covid, the enquiries from global MNCs have surged which is also reflected
in accelerated and large capex programs planned and under implementation across the
chemicals space.
Exhibit 6: Rev. and PAT trend for 10 large chemical comp. Exhibit 7: Capex trend for 10 large chemical companies
Revenues (Rs bn) PAT (Rs bn)
61
57
489
42
346 37
318 34
284
218 21 22
172 173 186 17
139 154 16 16
74
38 44 50
11 10 13 16 22 22
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Source: Company Data Source: Company Data
Note: 10 companies include Aarti Industries, Atul, Deepak Nitrite, Galaxy Surfactants, Gujarat Fluorochemicals (standalone), Hikal, Navin Fluorine, PI
Industries, SRF, and Vinati Organics
The reasons China benefitted from chemical industry’s transition from Europe to China
were labour cost advantage, subsidised financing, and scale benefits. Labour cost advantage
has waned over a period of time due to implementation of minimum wages. Minimum
wages in China have increased by over 30% during 2010-16. Based on the 2019 data, Indian
wages remain competitive against the other South East Asian countries. China’s subsidised
financing has also declined over the years and particularly post 2008 financial crisis.

Policy changes in China impacting chemical

sector dynamics
China’s 13th Five Year plan (2016-20) primarily emphasized on environmental aspect, apart
from the move towards away from quantity to quality, and relocation of chemical industry.
The policies outlined for chemicals in 13th Five Year plan continue in 14th Five year plan with
a further emphasis on tight supervision of the chemical industry, relocation of hazardous
chemicals, including largest chemical plants, self-sufficiency in high-end chemicals, and
environment friendly route for chemicals manufacturing. China’s strict policy measures
have impacted the chemical industry which can be exemplified from reduction in number
of parks from 54 to 29 and number of companies from ~7,000 to ~2,200 in 2021 in Jiangsu,
the largest chemical hub in China.
Exhibit 8: 14th Five Year plan highlights for chemicals
 Demand continues to exceed supply for some chemicals, such as propylene and
polypropylene, there is a serious overcapacity problem in certain areas – The
production of nitrogen fertiliser, sodium carbonate, caustic soda or potassium
carbide, for example, is now to be strictly controlled and reduced if possible
 Decisions on new production capacities must be taken with caution – for example,
with regard to the coal-to-olefins and coal-to-glycol value chains
 Away from quantity and towards more quality wherever possible
 During the 14th Five-Year Plan, it is necessary to make a breakthrough with urgently
needed new materials in key application areas
 In the area of traditional chemistry, the document again emphasises the goal of more
environmentally friendly production, for example the prevention of mercury
pollution in the chlor-alkali industry. The pesticide industry must produce more
‘friendly and innovative fertilisers’
 Further standardisation of Chemical Industrial Parks and stricter regulations for
hazardous chemicals
Source: Process Worldwide
Chinese chemical industry is expected to face challenges due to government focus on

capacity rationalisations, environmental protection, and move towards lowering carbon
footprint. Indian chemical sector has benefitted over the last decade and now stands at a
strong footing to serve the global market.

Levers for continued growth of Indian

Chemical industry
Indian chemical industry’s last decade growth was purely driven organically apart from
some policy in later years including reduction in corporate income tax rate in 2019, customs
duty reduction, BIS standards implementation etc. We believe further policy support from
lower tax rate for newly formed companies at 15%, development of PCPIRs, feedstock
availability, and expected PLI scheme in chemicals would foster growth for the chemicals
sector.
Indian chemical industry has experienced strong growth over the past decade while growth
over the next decade would be fuelled by multiple levers such as low per capita
consumption, demographic dividends, import substitution, increasing export demand, and
enabling government policies/ initiatives.
Exhibit 9: Demand-supply imbalance in some key building blocks
Source: India Chem 2021
To address the concern over lower availability of key building blocks, multiple large projects
are being implemented across different locations in India. Once commissioned, the
availability of key building blocks will improve substantially and can help proliferate the
downstream user industry. Apart from the projects under implementation, several projects
are under consideration which further provide visibility on availability of building blocks.
During September 2022, the Union Petroleum Minister said that he will try for a 20mn MTPA
refinery at Chandrapur, Maharashtra. If implemented, the downstream chemical industry
can come up in the region.

Exhibit 10: Major petrochemical projects under implementation
Exhibit 11: Major petrochemical projects under consideration
India remains competitive in labour costs against other Asian and developing countries.
Indian minimum wages are ~60% lower than that of China’s. However, India’s power cost
has been ~20% higher than that of China’s. Considering these operational costs, Indian cost
structure is broadly in line with Chinese cost structure. However, talking particularly for the
chemical industry, the environmental compliance costs have been increasing in China.
Indian companies have already invested in environment compliance over the past 2
decades, hence these costs are already absorbed.
Exhibit 12: Minimum Labor Rates (USD/ month) Exhibit 13: Power Rates (USD/ kWh)
India 60 India 0.12

Indonesia 118 Indonesia 0.07
Mexico 134 Mexico 0.16
China 158 China 0.10
Brazil 183 Brazil 0.13
Thailand 256 Thailand 0.12
Malaysia 277 Malaysia 0.11
Saudi Arabia 616 Saudi Arabia 0.07
Germany 1,708 Germany 0.23
Source: India Chem 2021 Source: India Chem 2021

During September 2019, Indian government slashed the corporate income tax (CIT) rate
from ~35% to ~25% providing fillip to the industry. Additionally, it proposed 15% CIT for
newly set up manufacturing units to promote domestic manufacturing. During Budget
2022-23, the government extended the 15% CIT deadline for newly incorporated
manufacturing units to March 2024. Many chemical companies have availed this benefit by
incorporating their subsidiaries for newer business segments. This shall further foster the
competitiveness for the domestic chemical companies.
Post slashing the CIT, Indian CIT is largely comparable to the other Asian economies.
Exhibit 14: Corporate Income Tax (CIT) rate across Asian countries
Country CIT (%)
Bangladesh 32.5
Cambodia 20.0
China 25.0
Hong Kong 16.5
India 25.2
Indonesia 22.0
Japan 30.6
Malaysia 24.0
Singapore 17.0
South Korea 27.5
Taiwan 20.0
Thailand 20.0
Vietnam 20.0
Source: Tradingeconomics, Note – December 2021 data
Based on the cost dynamics for manufacturing, India remains an attractive destination.
Although, China is slightly better off India, global MNCs are looking at supply chain
diversification away from China which bodes well for Indian manufacturing.
Exhibit 15: India remains a competitive destination for manufacturing
India Chem 2022 event was held on 2-3 November, 2022 in Delhi. It was expected that on
the onset of the event, there could be much awaiting announcement on PLI for chemicals
sector. However, the same didn’t go through and industry is still awaiting for PLI in
chemicals. Although the domestic chemical industry is in capex mode, PLI can accelerate
the capex momentum. If PLI is applicable for import substitute products, it shall help in
reducing reliance on imports.

Exhibit 16: Policy initiatives for Chemical industry
Dahej PCPIR has been a commendable success story for chemicals segment, however the
same is under slow process for the other three PCPIRs. Upcoming PLI scheme along with
general pick up in new projects, shall aid these new PCPIRs.
Exhibit 17: PCPIR hubs and investment

Impending Free Trade Agreement (FTA) with EU

So far, India has signed 13 free trade agreements (FTAs) with its trading partners, latest
being India-Australia Economic Cooperation and Trade Agreement (IndAus ECTA). India has
concluded first round of negotiations with the EU. Currently, EU is the second largest trade
partner for India and largest exports market, after the US. If FTA with EU goes through it
can open up more exports opportunity. Particularly for chemicals, it can be a further booster
due to the energy related challenges currently faced by EU.
Exhibit 18: Indian FTAs
Name of the Agreement
1 India-Sri Lanka Free Trade Agreement (FTA)
2 Agreement on South Asian Free Trade Area (SAFTA)
(India, Pakistan, Nepal, Sri Lanka, Bangladesh, Bhutan, the Maldives and Afghanistan)
3 India-Nepal Treaty of Trade
4 India-Bhutan Agreement on Trade, Commerce and Transit
5 India-Thailand FTA - Early Harvest Scheme (EHS)
6 India-Singapore Comprehensive Economic Cooperation Agreement (CECA)
India-ASEAN CECA - Trade in Goods, Services and Investment Agreement (Brunei, Cambodia, Indonesia,
7
Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam)
8 India-South Korea Comprehensive Economic Partnership Agreement (CEPA)
9 India-Japan CEPA
10 India-Malaysia CECA
11 India-Mauritius Comprehensive Economic Cooperation and Partnership Agreement (CECPA)
12 India-UAE CEPA (*)
13 India-Australia Economic Cooperation and Trade Agreement (ECTA) (*)
Source: PIB, Note – Signed, but yet to be implemented
Exhibit 19: Limited coverage Preferential Trade Agreements (PTAs)

1 Asia Pacific Trade Agreement (APTA)
2 Global System of Trade Preferences (GSTP)
3 SAARC Preferential Trading Agreement (SAPTA)
4 India-Afghanistan PTA
5 India-MERCOSUR PTA
6 India-Chile PTA
Source: PIB

Fluorine – Aspirational Chemistry

Incumbents to grow further, market wide enough to add few
more players
Fluorination space remains attractive as the applications are evolving apart from agro and
pharma segments which certainly indicates growth potential. Fluorine chemistry has
become a buzzword for the Indian chemical industry over the past couple of years and
players having synthesis capabilities are trying to enter into the area. Even some of
specchem companies are upping their fluorination capabilities in their area of applications.
Despite new players entering the market, the incumbents such as SRF, Navin Fluorine,
Gujarat Fluorochemicals will remain go to vendors for global players. We believe Anupam
Rasayan with its synthesis skills and recent Tanfac acquisition is better placed to capitalise
on the fluorination opportunity.
Formerly, only SRF, Navin Fluorine, and Gujarat Fluorochemicals were known for their forte
in fluorine. While some players such as Aarti were using fluorine molecule in some of their
products, now new players such as Anupam (acquisition of Tanfac), Laxmi Organic
(acquisition of Miteni, Italy) have expressed their strong interest to gain from the expanding
fluorination arena.
Although new players are entering the market, the market is wide enough to accommodate
them. Nonetheless, the incumbents have an upper hand and are expected to capitalise on
newer opportunities faster with a higher growth potential.
Global fluorochemicals market has grown at a CAGR of ~5% from USD17.9bn in 2014 to
USD22.6bn in 2019. It is expected to continue growing at a similar CAGR of ~5% to
USD28.8bn in 2024.
Asia Pacific is the biggest market for fluorochemicals with USD7.7bn in 2019, Europe came
a close second with USD6.0bn. India is set to become the fastest growing market almost
doubling its size from ~USD400mn in 2019 to ~USD700mn by 2024, followed by Asia Pacific
which is expected to witness a CAGR of 9.6% from USD7.7bn in 2019 to USD12.2bn in 2024.
Middle East and Africa is also expected to witness health growth of 4.6% CAGR rowing from
USD2.4bn in 2019 to USD3bn in 2024.
Air-conditioning and Refrigeration accounted for the biggest application of fluorochemicals
at USD4.5bn and USD4.1bn respectively in 2019. Both Air-conditioning and Refrigeration
are expected to grow at a CGAR of 5.2% and 4.9% respectively from 2019 to 2024. However,
Pharmaceuticals is expected to witness the highest CAGR of 7.7% amongst other
applications followed by Electric & Electronics and Agrochemicals at 6.6% and 6.2%
respectively.
Fluorine market in India is currently valued at USD406mn and is set to grow at a CAGR of
11.6% between 2019 and 2024 to reach market size of USD702mn. Fluorocarbons are the
biggest product category by type, however market growth will be driven by broad based
performance across product types led by Intermediates and Polymers at a CAGR of 15.9%
and 12.5% respectively between 2019 and 2024.

Exhibit 20: Fluorine applications
Source: Eurofluor
Exhibit 21: Fluorspar to fluorochemicals value chain
Source: http://www.cnchemicals.com/Special/HalogenDatabase.aspx

Global Fluorochemicals Market – To Grow at

a Faster Clip during 2019-24
India to be the fastest growing market; Pharma application set
to witness highest growth among others
During 2014-19, global Fluorine market grew at a CAGR of ~5% from USD17.9bn to
USD22.6bn, the growth trajectory is expected to remain the same during 2019-2024 leading
to fluorine market reaching USD28.8bn by 2024. Currently Asia Pacific, Middle East, and
North America are the biggest markets, however incremental growth will be driven by Asia-
Pacific, Middle-East & Africa, and India which are expected to grow ahead of other
geographies.
Globally, the fluorochemicals market is divided between Fluorocarbons, Basic Inorganics,
Fluoropolymers, and fluorine based intermediates. Fluorocarbons constitute the largest
share under fluorochemicals, constituting 32% in 2019 closely followed by fluorine based
intermediates at 29%. Fluorine based intermediates segment comprises of both basic and
advanced intermediates finding applications across Pharmaceuticals, Agrochemicals,
Speciality additives etc. Organic fluorine intermediates account for over 85% of total market
while the rest are constituted by inorganic fluorine intermediates.
Exhibit 22: Global Fluorochemicals Market Growth Trend Exhibit 23: Global Fluorochemicals Market by type (2019)
(USD bn)
28.8 Fluorine Fluorocarbon

based s, 32%
22.6 Intermediate
s, 29%
17.9
Fluoropolym Basic
ers, 17% Inorganics,
2014 2019 2024
22%
Source: RHPs, DRHPs Source: RHPs, DRHPs
Global fluorochemicals usage is dominated by air-conditioning and refrigeration, accounting

for around ~40% and is expected to remain the same in the future as well. However,
application in pharma is expected to experience growth ahead of other applications,
followed by consumer electronics and agrochemicals.
Market size for fluorine in pharma is expected to grow from USD2.0bn in 2019 to USD2.9bn
in 2024, followed by consumer electronics and agrochemicals which are expected to grow
from USD1.6bn/USD2.2bn to USD2.3bn /USD3.1bn respectively.

Exhibit 24: Global Fluorochemicals Market by type (2019) Exhibit 25: Global Fluorochemicals Market by application –
Growth trend
Pharma
9% Pharma Auto
Others Refrigeration Agrochem
21% 28.8
Auto
15% 22.6 5.5
Electrical &
Electronics 17.9 2.2
4.7
7% 1.6 5.8
4.1
1.1 4.5 3.1
Refrigeration 3.4 2.3
1.6 5.2
18% 4.1
Air 3.4 4.1
2.8 3.4
conditioning Agrochem 1.5 2.0 2.9
20% 10% 2014 2019 2024
Asia Pacific dominates the fluorochemicals market globally, followed by Europe.

Exhibit 26: Global fluorochemicals market by geography Exhibit 27: Global fluorochemicals market by geography (%,
(USD bn) 2019)
India Latin America Asia Pacific
Middle East& Africa North America (Excl. India),
34%
India, 2%
12.2
Latin
7.7
America, 9%
6.4 6.5
6.0
Europe, 26%
5.2 4.2
4.1 Middle
3.4 2.4 3.0
1.4 2.2 North East& Africa,
1.3 2.0
0.4 0.8
0.1 America, 11%
2014 2019 2024 18%
Exhibit 28: Market share of global players in Fluorchem market (%, 2019)
Chemours, 10%
Honeywell, 6%
Arkema, 9%
Dongyue, 2%
Others, 55%
Mexichem, 3%
Daikin, 8%
3M, 3%
Solvay, 4%
Source: RHPs, DRHPs

India Fluorochemicals Market – To Grow at a Faster Clip during

2019-24
During 2019-24, Indian Fluorochemicals market is expected to grow at faster clip of 11.6%
than 9.7% recorded in 2014-19. The incremental growth is expected to be driven by further
penetration of air conditioners benefitting refrigerants demand, expansion in
fluoropolymers segment particularly for exports demand, and major being fluorine based
intermediates for agro and pharma applications.
Fluorine based intermediates are expected to grow at faster clip registering a CAGR of 15.9%
during 2019-2024 as against 12.8% CAGR during 2014-2019. Fluoropolymers/Basic
Inorganics are expected to grow at 12.5%/10.4% CAGR during 2019-2024 vs 9.6%/8.6%
CAGR during 2014-2019. However, Fluorocarbons are anticipated to maintain similar
growth trajectory during 2019-2024 vs 2014-2019 at 8.6% CAGR.
Exhibit 29: India Fluorochemicals Market Growth Trend (USD mn)
Fluorocarbons Basic Inorganics Fluoropolymers Fluorine based intermediates
702
180
406
171
256 86
95 126
47
60 77
51 225
98 148
2014 2019 2024
Source: RHPs, DRHPs
Exhibit 30: Market share by products (%)
Fluorocarbons Basic Inorganics Fluoropolymers Fluorine based intermediates
18.4 21.2 25.6
23.4 23.4
24.4
19.9 19.0
17.9
38.3 36.5 32.1
2014 2019 2024
Source: RHPs, DRHPs

Exhibit 31: Fluorochemicals growth drivers

Segments Key Growth Drivers 2019-24 CAGR (%)
Indian API sector is growing at a promising rate due to its
research-based processes, low cost operations, and availability
Pharma of skilled manpower 11.3%
To meet the global demand, many international players are now
integrating with Indian companies
Many of the key technical grade pesticides are made in India,
and with many global customers looking to move away from
Agrochem 10.1%
China, India will be a key destination of production as well as
consumption
India being an Agrarian economy, there is an increased need for
cold storage facilities
Refrigeration 9-10%
The growth in industrial as well as commercial refrigeration
requirements for processed products
53.3 Mn Middle Class Households of which only 52% have ACs
giving a high opportunity for growth
Air Conditioning 10-12%
High-Rise Buildings, Shopping Complexes, Malls, Hypermarkets
which are growing in tier II cities increasing requirements of AC
Growth in urbanization and use of consumer electronics across
all economic segments is driving growth for the industry.
Electrical & Electronics 8-9%
Preference for smart homes and smart offices is also
accelerating the growth
Exports from India expected to drive the growth especially for
5-7%
Automobiles component and ancillary manufacturing segments.
Increased emphasis on EV and smart vehicles
Other applications like coatings , cookware, textiles, medical
7-8%
Others appliances are in niche stage but being accelerated by growth in
Infrastructure and urbanization
Source: RHPs, DRHPs
Exhibit 32: Market share of Indian players in domestic fluorochemicals market (2019)
Others, 11%
SRF, 36%
Navin Fluorine, 19%
Gujarat
Fluorochemicals,
34%
Source: RHPs, DRHPs
Exhibit 33: Fluorination capabilities of domestic players

Company Major Products Fluorination Capabilities
Trifluoro Acetyl Chloride, ETFAA, TFBA, Electrochemical
SRF Crotonate derivative of ETFAA (account for Nucleophilic – HF, KF, SF4, DAST and
40-50% of fluoro-specialty revenue) Electrophilic – Elemental fluorine
Hexafluoropropylene oxide & derivatives,
Gujarat Fluorochemicals Nucleophilic - HF, KF, and TFEDMA
tetrafluoropropanol & derivatives
Nucleophilic – AHF, HF amine complexes,
5 difluoro-methoxy 2 mercapto 1 H SF4 and Alkali Metal Fluorides
Navin Fluorine benzimidazole, benzo tri fluorides, boron Electrophilic – N-F class reagents
tri fluorides & bromo fluorobenzenes (primarily done at Manchester Organics
site)
Source: RHPs, DRHPs

Exhibit 34: Refrigerants Market – Global Addressable Market

Total Addressable 2021–2026 Growth % of Market Converted
Market Segment
Market (USDbn, 2026) (% CAGR) to Low GWP by 2026
Mobile Air Conditioning 2.4 6 50
Stationary – Commercial
2.2 10 50
Refrigeration
Stationary – Air Conditioning & Heat
3.5 11 30
Pumps
Stationary – Chillers for A/C & Heat
1.5 10 25
Pump
Foam Blowing Agents 1.9 6 50
Source: Chemours
Fluoropolymers Market
During 2018, global fluoropolymers market was estimated at 320,000MT. PTFE with 53%
share remained the largest fluoropolymers, followed by PVDF at 16% share. Due to the
versatile nature of fluoropolymers, the applications are increasing and evolving particularly
for newer energy applications such as lithium batteries, hydrogen fuel cells, solar among
others. Hence, the growth of fluoropolymers is expected to continue at a significantly faster
rate than the conventional polymers.
Exhibit 35: Global fluoropolymers consumption (MT, 2018)
Others
ETFE 17%
1%
PFA
1%
PVF
2%
FEP
10%
PTFE
53%
PVDF
16%
Source: EEA
Exhibit 36: Fluoropolymers user segments and their growth potential (USD bn)
2016 2027 2,300
1,900
1,100
850 910
105
Automobile Renewables Energy & Storage Cons. Electronics & Comm.
Source: Chemours

Exhibit 37: Trends shaping up for fluoropolymers

Consumer Electronics &
Automotive Renewable Energy & Storage
Communications
 Emission standards and fuel  Development of smart grid  Growth and innovation in
efficiency with internal with increasing amount of smart phones, wearables, IoT,
combustion engines renewable energy and energy artificial intelligence, etc.
storage
 Decarbonization of  Next generation connectivity
transportation via alternative  Government and OEM driven (5G), advances in circuit
energy alternative energy vehicles boards, LAN, antennas,
thermal and electrical
 Active safety and infotainment shielding
Source: EEA
Globally fluoropolymers market is dominated by Solvay, Arkema, Chemours, Daikin etc.

while Gujarat Fluorochemicals has emerged as a key Indian player competing against the
global ones.
Exhibit 38: Key players in fluoropolymers globally
p PTFE PVDF PFA FKM PFPE
Solvay Y Y Y Y Y
Arkema Y
Daikin Y Y Y Y
Dyneon -3M Y Y Y Y Y
Dow-DuPont Y Y Y Y
Kureha Y
Source: Solvay
Exhibit 39: Unique properties and applications of fluoropolymers
Source: AGC

Exhibit 40: Fluoropolymers – Consumer applications
Source: Industry
Exhibit 41: Fluoropolymers – Industrial applications
Source: Industry

Exhibit 42: Common commercial fluorinated polymers and trade names
Source: EEA
Exhibit 43: Types of Fluoropolymers
Source: EEA

Exhibit 44: Key characteristics of fluoropolymers

Tensile Dielectric
Melting temp. Break Appl. Temp.
Fluoropolymer Starting year modulus Strength Main applications
(Cel.) Elongation (%) (Cel.)
(Mpa) (kV/mm)
PTFE 1947 317–337 550 300-550 19.7 260 Chemical processing, wire and cable
PCTFE 1953 210-215 60-100 100-250 19.7 200 Barrier film, packaging and sealing
FEP 1960 260-282 345 ~300 19.7 200 Cable insulation
PVF 1961 190-200 2,000 90-250 12–14 110 Lamination, film and coating
PVDF 1961 155–192 1,040-2,070 50-250 63–67 150 Coating, wire, cable, electronic
ECTFE 1970 235–245 240 250-300 80 150 Flame resistant insulation
PFA 1972 302–310 276 ~300 19.7 260 Chemical resistant components
ETFE 1973 254–279 827 150-300 14.6 150 Wire and cable insulation
THV 1996 145–155 82–207 500-600 48–62 93 Barrier film and insulation
Source: EEA
Polytetrafluoroethylene (PTFE) – most widely used fluorinated

polymer
PTFE is hydrophobic, neither water nor water-containing substances can wet it. Applications
for characteristics such as low friction, excellent thermal resistance, chemical inertness and
electrical insulation. Used in numerous transport applications such as seals, gaskets and
valves; as coatings on metals including cookware and on plastics, on windmill blades;
electronics and batteries, lithium-ion batteries contain 1–2% of PTFE/PVDF.
Polyvinylidene fluoride (PVDF) – The second biggest global

market share after PTFE
PVDF has been found to be the strongest and more resistant to abrasion. It provides even
better electrical insulation than PTFE, but its heat resistance is not as high. Mainly used in
industrial metal coatings, membranes, wire insulation, and as a binding material in
batteries. It is widely used in electronics and batteries; lithium-ion batteries contain 1–2%
of PVDF/PTFE.
Per- and polyfluorinated polyethers (PFPE)

PFPE are low-molecular-weight polymers (500–15,000 daltons (Da)), which means they are
typically oils or greases, and therefore their most important application area is in high-
performance oils, lubricants for engines and machinery, and as electronic liquids. Their
unique properties include being resistant to ionising radiation, rendering them applicable
to the aerospace and nuclear industries. They have also been used as coatings of food-
contact paper and board.
Perfluorinated ethylene propylene (FEP) – A copolymer of TFE

and hexafluoropropylene (HFP)
FEP has the third largest market share for fluorinated polymers and is the most widely used
fluorinated copolymer. It is used especially in wire and cable insulation in various industries
including the automotive, aerospace, chemical processing, oil and gas, and electronics
sectors where resistance to chemicals and serviceability over wide temperature ranges is
required.

Fluorospecialty Chemicals
Registrations of fluoro-pharmaceuticals drugs surges in recent
past
During 1991-2019, the contribution of organofluorine compounds to pharmaceuticals (i.e.
it contained at least one fluorine molecule in the AI) was 18%.
Over the past few years, the percentages of fluoro-pharmaceuticals among the total
number of registered synthetic drugs has moved up substantially. This has led to surge in
fluorine based pharma intermediates over the past decade. The benefit of increased use of
fluoro-intermediates has also been reflected in the performance of the Indian
fluorochemicals players to some extent.
Exhibit 45: Fluoro-pharmaceuticals in globally registered drugs
Source: Contribution of Organofluorine Compounds to Pharmaceuticals,
Note – Prevalence of fluoro-pharmaceuticals among globally registered drugs (1991–2019). The list of the all pharmaceuticals (1072
compounds), small-molecule drugs (839 compounds), and fluoro-pharmaceuticals (191 compounds)
Exhibit 46: Fluoro-pharmaceuticals in small molecule drugs
Source: Contribution of Organofluorine Compounds to Pharmaceuticals, Note – Data for small-molecule drugs over the past five
years

Key reasons for prevalence of fluoro-organic compounds among

pharmaceuticals (as per Contribution of Organofluorine
Compounds to Pharmaceuticals)
 Fluorine (F) is the second-smallest atom after hydrogen (H) in the periodic table of
elements; thus, the replacement of an H atom in a drug candidate with F does not
drastically change the parent structure
 The C−F bond is the strongest bond that carbon can form, which often increases the
metabolic stability of fluoro-pharmaceuticals
 As the most electronegative element (3.98), F induces bond polarization, which may
alter the lipophilicity/hydrophilicity balance of a compound
 F acts as a weak hydrogen bond acceptor and can be used as a bioisostere of the
hydroxyl group (OH). The hydrogen-bond-accepting analogy would suggest a carbonyl
moiety, particularly relevant since the dipoles of the C−F and C=O are often viewed as
similar
Exhibit 47: Drugs approved by the FDA in 2020 classified on the basis of chemical structure
Source: Molecules, MDPI
Exhibit 48: Drugs approved by the FDA in 2021 classified on the basis of chemical structure
Source: Molecules, MDPI

Fluorine-containing pesticides on the rise

During 1991-2019, the fluorine containing pesticides (i.e. it contained at least one fluorine
molecule in the AI) accounted for 16%. Traditionally, Indian fluorochemicals players have
been serving the agrochemicals market which can be ascertained from the rising number of
agrochemicals containing fluorine molecule
Exhibit 49: Fluorine containing agrochemicals share at 53% over past three decades
Source: Current Contributions of Organofluorine Compounds to the Agrochemical Industry, Note - Agrochemicals (238 compounds)
including the fluoro-agrochemicals (127 compounds)
Classification of Fluoro-Agrochemicals by Agrochemical Types

Exhibit 50: All fluoro-agrochemicals – 424 compounds
Source: Current Contributions of Organofluorine Compounds to the Agrochemical Industry

Exhibit 51: Fluoro-agrochemicals with more than six fluorine atoms in their structures –
57 compounds
Source: Current Contributions of Organofluorine Compounds to the Agrochemical Industry

Global Refrigerants Market

Global vapor compression refrigerants
Globally, fluorocarbons constituted 83% of vapour compression refrigerants while
hydrocarbons account for 6%.
Exhibit 52: Global vapor compression refrigerants (%) Exhibit 53: Global refrigerants – All applications (%, 2019)
Hydrocarbo
Inorganic, ns, 6%
11%
Hydrocarbo Fluorocarbon,
ns, 44% 49%
Fluorocarbon,
83%
Inorganic,
7%
Source: US DoE Source: US DoE
Globally, almost 3/4th of fluorocarbon refrigerants are used for vapour compression
applications while foam blowing accounts for ~20%.
Exhibit 54: Global end use of fluorocarbon refrigerants (%) Exhibit 55: Global vapour compression use of refrig. (%)
Foam
Refrigeration
blowing
(Ind./ comm.)
agent
15%
20%
Aerosola
5%
Vapour Mobile air
compressio Solvents conditioning
n 2% (MAC) Heating,
72% 21% ventilations
Fire and air
suppresant/ conditioning
Other (HVAC)
1% 64%
Source: US DoE Source: US DoE

Refrigerants phasedown schedule

Exhibit 56: HFC phasedown schedule
A5 parties (developing A5 parties (developing Non-A5 parties (developed
countries) – Group 1 countries) – Group 2 countries)
Average HFC consumption for
Average HFC consumption for Average HFC consumption for
Baseline 2020-2022 + 65% of
2024-2026 + 65% of HCFC 2011-2013 + 15% of HCFC
formula hydrochlorofluorocarbon (HCFC)
baseline baseline
baseline
Freeze 2024 2028 -
1st step 2029 - 10% 2032 -10% 2019 -10%
2nd step 2035 - 30% 2037 -20% 2024 -40%
3rd step 2040 - 50% 2042 -30% 2029 -70%
4th step - - 2034 -80%
Plateau 2045 - 80% 2047 -85% 2036 -85%

Source: Industry
Exhibit 57: HFC Phase-down Schedule for Developed Countries
Source: Industry
Exhibit 58: HFC Phase-down Schedule for Developing Countries
Source: Industry

Exhibit 59: HFO-1234yf patents by company
Source: US DoE
Exhibit 60: HFO-1336mzz patents by company
Source: US DoE

Fluorspar
Fluorine is extracted from fluorspar mineral which is also sometimes known as fluorite
 Naturally occurring mineral which may contain up to 45% calcium fluoride (CaF2)
 In its natural shape it is formed with other minerals such as barytes, galena, pyrites,
and other sulphides
 In its pure form it is colourless and transparent or translucent, with a glossy lustre
 Impurities in the mineral can cause it a wide variety of colours, and some types may
exhibit fluorescence
 The main deposits of fluorspar are found in China, Mexico, Mongolia, South Africa, and
Namibia
 The most demanded is the acid grade, used as raw material to produce hydrofluoric
acid
Production of hydrofluoric acid (HF)

After the ore is dug from mines or from open quarries, impurities are removed to leave a
fluorspar which contains a minimum of 97% calcium fluoride. Most of the co-products are
also separated and collected, to serve a variety of industrial purposes. The acid grade
fluorspar is then transported to the hydrofluoric acid plants by ship, road, rail or barge. Here
it reacts with sulphuric acid to form hydrogen fluoride gas. This is either collected or stored
for use as a liquefied gas, or it can be diluted with water to produce aqueous solutions of
hydrofluoric acid.
HF manufacturing process
Source: Euroflour

Main grades of fluorspar

 Crude ore 25–30 %
 Metallurgical grade 75–82%
 Ceramic grade 94–96%
 Acid grade 97%
 Crystalline grade 99%
Exhibit 61: Global fluorspar production and reserves

Fluorspar ('000 MT) 2020 2021 Reserves
United States NA NA 4,000
Canada 100 140 NA
China 5,400 5,400 42,000
Germany 80 80 NA
Iran 56 56 3,400
Kazakhstan 77 77 NA
Mexico 915 990 68,000
Mongolia 685 800 22,000
Morocco 82 80 210
Pakistan 55 70 NA
South Africa 330 420 41,000
Spain 131 130 10,000
Vietnam 220 220 5,000
Other countries 110 110 120,000
Total 8,241 8,573 311,610
Source: USGS
Exhibit 62: Global Fluorspar Production 100% CaF2-2019 Exhibit 63: Global Fluorspar consumption 100% CaF2-2019
W.Europe Other Other Japan
Vietnam 3% 4% Countries 2%
4% 6%
Central and
Eastern
Africa Europe
5% China
4%
57%
China
Mongolia Other Asia
54%
8% 6%
North Western
America Europe North
22% 9% America
16%
Source: IHS Markit Source: IHS Markit
Exhibit 64: Global HF consumption 2019
Others
Uranium fuel
22%
production
1%
Petroleum
alkylation catalyst
1%
Glass processing
2%
Metal treatment Fluorocarbons

10% 64%
Source: IHS Markit

Chemicals for EV, New Energy – Opens up a

New Frontier
Indian government has initiated PLI scheme for Advanced Chemistry Cell (ACC) Battery
Storage with incentives of Rs181bn. Although, the sun rising segment is at a nascent stage,
it has opened up a new and rapidly growing frontier for the Indian chemical industry. The
new energy value chain encompasses polymer films, fluoropolymers, electrolyte salts, and
additives. Some of the Indian companies have initiated their participation in the value chain
including Gujarat Fluorochemicals, Neogen Chemicals, Tatva Chintan Pharma Chem, Ami
Organics, Himadri Specialty Chemical among others. New energy space, growing
exponentially has opened up a new growth avenue for domestic chemical industry with
material benefits starting 2025 onwards. Due to rising emphasis on renewable energy,
technologies surrounding the space are gaining traction.
Exhibit 65: Components for new energy segments
EV batteries Solar Panels Hydrogen fuel cells/ electolyzers
PVDF Electrode Binders PVDF Films Fluoropolymers(FKM, PTFE, FEP)
Battery Chemicals Back sheet Membranes
LiPF6 Charging Accessories
Additives
Electrolyte Formulations
Battery casings
Source: Gujarat Fluorochemicals
Three companies, Reliance New Energy Limited, Ola Electric Mobility Private Limited, and
Rajesh Exports Limited have been selected through a bidding process for the Advanced
Chemistry Cell (ACC) Battery Storage PLI scheme. The process for rapid adoption of EVs has
commenced and simultaneously the ecosystem for EV related components will be
established. The early entrants in the space as mentioned above stand a chance to gain
from this initiative as the technology development has already started by them.
Exhibit 66: Chemicals/ Polymers required in Lithium ion battery
Source: Gujarat Fluorochemical presentation

Exhibit 67: Polymers for Solar cell application
Exhibit 68: Polymers for hydrogen fuel cells

Exhibit 69: Cost break-up of Lithium ion battery
Source: Neogen Chemicals
If Indian companies establish the technologies for EV ecosystem, it can open up huge
opportunity as EV adoption in global context is growing exponentially.
Exhibit 70: OEM investment landscape in e-mobility
Source: Solvay

Exhibit 71: Accelerating EV transformation
Source: Solvay
Exhibit 72: Multiple types of Polymers used in EV
Source: Solvay
Exhibit 73: Chemicals/ polymers for Lithium ion battery
Source: Solvay

India Chemicals – Inevitable Growth

Opportunity
Last decadal growth to continue further (Pre Russia-Ukraine
disruption scenario)
India has been at the forefront of Chemicals/ Agrochemicals space during the last decade,
since the tightening of environmental regulations in China (effective 2015) and subsequent
fallout on the global chemicals supply chain. Backed by strong chemistry skills and
favourable business dynamics in terms of reasonable labour costs, environmental
compliance, safety standards, and global certifications, the Indian chemical industry
attracted attention from the MNCs. Latest supply chain issues due to Covid-19/ logistics
bottlenecks further reinforced India’s position in the minds of global MNCs.
Favourable business dynamics has been aiding the Indian chemicals industry growth,
industry grew at 9.8% CAGR over 2015-20. Coupled with rising domestic demand along with
exports opportunity, incrementally, the industry growth is expected to accelerate further
to 12.2% over 2020-25E (F&S estimates). Although commodity chemicals segment is
expected to grow (for self-sufficiency), specialty chemicals to remain focus area for the
Indian chemical players.
Exhibit 74: Focus on Specialty Chemicals
Commodity Chemicals Specialty Chemicals Others
350 330
300 45
250
186 148
(USD bn)
200
15
150
87
100
137
50 84
0
2020 2025E
Source: RHPs, DRHPs
Exhibit 75: Indian Specialty Chemicals Market – Growth across the Board
Segments 2015 2020 2025E CAGR % 2015-20 CAGR % 2020-25E
Pharmaceuticals APIs 9.6 16.6 28.5 11.6 11.4
Agrochemicals & Fertilizers 19.8 32.9 53.3 10.7 10.1
Construction Chemicals 0.7 1.2 1.9 11.4 9.6
Water Treatment Chemicals 1.4 2.1 3.1 8.4 8.1
Textile chemicals 1.5 2.2 3.5 8.0 9.7
Personal care ingredients 0.8 1.3 2.2 10.2 11.1
Home care ingredients 2.3 3.8 6.5 10.6 11.3
Paints & coating additives 4.1 6.4 10.7 9.3 10.8
Dyes & pigments 5.7 8.7 14.9 8.8 11.4
Flavors & Fragrance ingredients 1.2 2.0 3.7 10.8 13.1
Others 5.7 9.9 19.5 11.7 14.5
Total 52.8 87.1 147.8 10.5 11.2
Source: RHPs, DRHPs

CRAMS – Been there, done that, set to grow further

CRAMS has been traditionally the forte of Pharma segment, eventually percolated to the
Agrochem (PI Industries, SRF). However, over the past couple of decades, the Indian
chemical players have honed up their synthesis skills to cater to this high value and fast
growing segment. Some of the marquee Indian chemical companies such as PI Industries,
SRF, Navin Fluorine, Anupam Rasayan have already proven their capabilities and have been
catering to the global clientele since more than a decade. Their continuous growth in this
segment over the past decade is also a function of successful execution of the projects,
process optimisation, cost effectiveness, IP protection among others, leading to repeat
orders and more opportunities/ projects.
Change in MNCs perception towards the Indian chemical companies is expected to aid
growth of the CRAMS segment which is likely to witness 12.4% CAGR over 2020-25 against
5.0% CAGR over 2017-20, taking to USD18bn (~5% global market share).
Exhibit 76: CRAMS segment picking up momentum
20 Key Drivers
18  Lower capex costs
16
14  Widespread talent pool
12 
(USD bn)
Over 300 USFDA approved manufacturing facilities

10
8
18.1  IP protection
6
10.1  Long-term relationships with customers
4 8.7
2  Drugs/ agrochemical going off-patent
0
2017 2020 2025E
Source: RHPs, DRHPs
Indian CRAMS market has been skewed towards Pharma segment which accounts for over
45% of the total market while agrochemicals comes a close second at 35% market share.
Traditionally, the pharma companies dominated the pharma CRAMS segment while the
chemical companies have been catering to the agrochemicals segment. Due to
opportunities emanating from the pharma segment and backed by strong synthesis skills,
the chemical companies have also started catering to the pharma market. Incrementally,
the top CRAMS players such as SRF, PI Industries have been banking on pharma opportunity.
PI Industries has already raised money through QIP to further make inroads into pharma
market through an inorganic initiative.
Exhibit 77: CRAMS currently dominated by Pharma Exhibit 78: Primarily catering to the generic/ off-patent
Agrochemica
molecules
ls
35% Patented
molecules
25%
Others
Pharmaceuti (Personal
cals care,
45% specialty Generic
chemicals) molecules
20% 75%

Exhibit 79: Indian players in CRAMS space

Company name Crop Protection/ Agrochem Pharma/ APIs Other Specchem
PI Industries Yes Yes
SRF Yes Yes
Navin Fluorine Yes Yes Yes
Anupam Rasayan Yes Yes Yes
Hikal Yes Yes Yes
Deccan Fine Chemicals Yes Yes Yes
Sajjan India Yes Yes Yes
Jubilant Ingrevia Yes Yes
Jubilant Pharmova Yes
Divi's Laboratories Yes
Dishman Pharmaceuticals Yes
Aurobindo Pharma Yes
Laurus Labs Yes
Nicholas Piramal Yes
Source: RHPs, DRHPs
Indian API market reached a size of USD9.3bn in 2020 and is expected to grow at 10.2%
CAGR over 2020-25E to reach USD15.1bn. API key starting materials (KSM) market is also
likely to follow a similar growth which poses opportunity for the Indian specchem players
catering to the pharma segment or entering the segment.
Exhibit 80: India API market (USD bn)
15.1
13.7
12.4
11.3
10.2
9.3
8.6
7.9
7.1
6.6
6.1
2015 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E
Source: RHPs, DRHPs
India has been import dependent on API key starting materials (KSM), which is likely to
subside with the backward integration by incumbents and expansion/ entry by existing/
new players.

Exhibit 81: India API-KSM market (USD bn)
8.0
7.3
6.6
5.9
5.4
4.8
4.5
3.9
3.6
3.3
3.0
2015 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E
Source: RHPs, DRHPs
Import/ Exports – Import dependency coming down/ Exports

rising at a faster clip
Although India has been an import dependent market for chemicals, the exports have
grown at a faster clip than imports over the past decade. Nonetheless, China still dominates
the exports market. Global MNCs’ China+1 strategy is expected to fuel further growth in the
exports segment while reliance on imports is likely to reduce owing to backward
integration/ Make in India.
Exhibit 82: Chemicals Exports Trend Exhibit 83: Chemicals Imports Trend
India China India China
160 200
140
120 150
100
(USD bn)
(USD bn)
80 100
60
40 50
20
0 0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: World Bank Source: World Bank
Interestingly, Indian exports have clocked 8.1% CAGR over 2010-20 (11.0% CAGR over 2009-
19, 2020 being Covid affected year) while China’s has risen by 6.2% CAGR (9.2% CAGR over
2009-19).

Exhibit 84: US accounts for the largest share in India’s Exhibit 85: ~50% exports to Europe & Central Asia and
chemical exports (2020) North America (2020)
United Netherlands Japan Others East Asia & Sub-Saharan
Kingdom 2% 2% 55% Pacific Africa
2% 20% 10% Middle East
& North
United Arab Africa
Emirates 9%
3%
North
Germany
America Latin
3%
Brazil 24% America &
4% Caribbean
8%
China United Europe &
7% States Central Asia South Asia
22% 24% 5%
On the contrary, Indian imports have risen at a slower pace of 4.3% CAGR over 2010-20
(7.6% CAGR over2009-19) while China’s have been closer to its exports pace at 4.9% CAGR
(8.4% CAGR over 2010-20).
Exhibit 86: Import dependency from China @ 30% (2020) Exhibit 87: ~50% imports from East Asia & Pacific (2020)
Germany Belgium Others Middle East
Europe &
3% 3% 40% & North
Central Asia
21% Africa
17% North
Singapore
America
4%
10%
Korea, Rep. Latin
4% America &
Caribbean
Japan 1%
4%
Sub-Saharan
Saudi Arabia United East Asia & Africa
4% States China Pacific South Asia 1%
8% 30% 50% 0%
India’s exports are well diversified across the US, Europe, and Asia (~70% of total exports)
while almost 50% of imports are sourced from Asia, China being the largest trade partner
with ~30% share in imports. Make in India initiative and backward integration is aiding to
reduce import dependency while thrust on exports is helping to reduce the trade gap.

India Chemicals/ Agrochem on capex mode –

Momentum accelerated
Sea change in Indian chemicals/ agrochemicals sector over the past decade can easily be
ascertained from the capex/ investments by large, marquee companies operating in the
sector from decades. Capex data for a mix of large 13 chemicals/ agrochemical companies
signifies that the investments have grown at 16% CAGR over FY13-22 while picked up
momentum in recent past growing at 20% CAGR over FY17-22 (devoid of Covid challenges).
Exhibit 88: Investments by Indian Chemical players surged substantially over the past
decade
140
120
100
80
(Rs bn)
60
40
20
0
FY12
FY16
FY13
FY14
FY15
FY17
FY18
FY19
FY20
FY21
FY22
FY23-24
Cumulatively, these companies have invested over Rs475bn during the past decade and are
planning to invest over Rs237bn over the next couple of years (FY23-24). With an average
asset turns of 1.5-2.0x, the peak revenue potential from these incremental investments
stands at Rs350-470bn (USD4.5-6.0bn).
Exhibit 89: Indian Chemicals/ Agrochemical Companies’ Capex
(Rs mn) FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23-24
Aarti 2,314 2,879 2,947 4,498 4,715 5,781 7,910 11,255 13,144 13,061 26,000
Atul 1,064 1,132 2,024 3,670 2,041 1,431 2,084 3,734 3,215 5,905 13,500
Deepak Nitrite 1,707 969 1,061 867 2,962 6,217 2,427 3,984 2,125 1,865 14,500
Dhanuka Agritech 279 288 253 271 193 63 47 104 123 582 3,000
Hikal 269 514 485 588 1,221 1,060 1,284 1,580 1,576 2,733 6,000
Gujarat Fluorochem 1,772 1,440 1,794 1,166 1,832 4,134 5,096 11,954 2,734 6,665 25,000
Navin Fluorine 162 179 622 177 489 211 612 979 906 5,758 12,100
Rallis 409 591 605 733 686 577 465 786 1,685 1,850 4,500
SRF 6,744 7,897 4,845 5,789 6,409 12,829 10,526 13,730 12,047 18,171 58,000
Sudarshan Chemicals 1,207 309 567 851 1,356 873 1,023 2,554 2,696 3,102 7,500
PI Industries 1,510 640 1,613 3,181 1,413 1,696 3,677 6,695 4,375 3,362 7,000
UPL 4,457 5,664 7,751 10,120 12,030 14,040 15,530 19,350 20,650 25,650 54,600
Vinati Organics 1,131 254 568 766 985 463 2,060 1,372 830 1,737 6,000
Total 23,025 22,757 25,136 32,678 36,334 49,375 52,742 78,076 66,104 90,441 237,700
Source: Company Annual Reports, Presentations

China’s entry into WTO marked the

beginning of Europe+1
India = (China+1)2 (China+1 complemented with Europe+2)
It’s worth pondering over, whether India will be a beneficiary of the current disruptions in
the EU due to gas shortages emanating from supply disruptions from Russia. In short term
and immediate future, shifting manufacturing from Europe to India with more outsourcing
seems to be a challenging proposition. Had this gas supply disruption event occurred during
a normal business environment, probably the short-term benefits could have been reaped.
However, globally, the chemical industry is facing demand side challenges which has been
purported by the global chemical companies such as BASF, Eastman, Huntsman, Chemours
among others. So, possibility of any short-term benefits for the Indian chemical industry
seem to be quite low, nonetheless the benefits may be exhibited in pockets rather than an
industry wide phenomenon.
However, in the medium to long-term, India still remains a favourable destination for
chemicals/ CRAMS outsourcing. Indian chemical industry has already demonstrated its
chemistry/ synthesis skills, execution capabilities, environmental compliance, safety
adherence, global accreditations, and protecting the IP. So, India is on a strong footing to
further accelerate the China+1 momentum in coming decade.
Transformation of Global Chemical Industry over the past two

decades
Global Chemicals industry has transformed over the past two decades, post China acceded
in WTO in December 2001. During 2000, Europe dominated the chemicals industry with
total sales of EUR363bn, accounting for 25% market share (total industry sales EUR1.5tn).
Back then, China’s chemical industry was still burgeoning and was focused primarily on the
domestic consumption with market share of 6%.
Inclusion of China to WTO was the inflection point for China’s exponential growth of the
chemicals industry. With opening up of doors to exports, China’s market share in global
chemicals surged from a mere 6% in 2000 to 26% in 2010 and further to 45% in 2020
Exhibit 90: Top 10 countries accounted for 87% of 2020 Exhibit 91: China with a lion’s share of ~45% in 2020 vs.
chemicals sales ~26% in 2010
Top 10 Total Sales China EU27 USA India
4,000 3,000
3,500 2,500
2,000
(EUR bn)
3,000
(EUR bn)
1,500
2,500
1,000
2,000 500
1,500 0
2017
2010
2011
2012
2013
2014
2015
2016
2018
2019
2020
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: CEFIC Source: CEFIC
Rise in China’s market share came in at the expense of declined market share of EU, USA,
and Japan. During 2010-20, China’s market share rose from 25.8% to 44.6% while EU market
share in chemicals declined from 19.3% to 14.4%, USA from 16.5% to 12.3%, and Japan from
6.9% to 4.1%. Under the top 10, apart from China, only India gained market share, albeit
marginal, from 2.5% to 2.7%.

Exhibit 92: China gained while EU, USA, Japan lost market share
China EU27 USA Japan India
50
45 44.6
40
35 39.6
30
(%)
25 25.8
20 19.3
14.6 14.4
15 16.5
12.3
10 13.9
6.9 4.6 4.1
5
2.5 2.5 2.7
0
2010 2015 2020
Source: CEFIC

EU Energy/ Gas crisis – A short-term hiccup

Energy intensity in EU chemical industry down ~47% over the
past three decades
Despite rising levels of chemicals production, over the past three decades, EU’s chemical
industry (incl. pharma) energy consumption has declined through efficient use of energy.
During 1990, EU’s total fuel and power consumption was 64.6 million tonnes of oil
equivalent (MTOE) which declined to 52.5MTOE by 2005 (down ~19%) and further to
50.8MTOE by 2019 (down ~3%). Energy composition too changed during the period,
primarily, solid fossil fuels more than halving while natural gas + electricity remaining largely
unchanged. During 2019, gas accounted for ~36% while electricity accounted for ~28% of
the total energy consumption (together accounting for ~2/3rd of total energy consumption).
Exhibit 93: Declining energy consumption in EU chemicals Exhibit 94: Natural gas accounted for 1/3rd of energy
industry consumption in 2019
Non-renewable waste Electricity
70
1% 28%
64.6
65
Renewables Heat
60 and biofuels 15%
(MTOE)
55.7 1%
55 51.8 52.5 51.5 51.6 50.8
50.2 50.8 Oil and
49.1
50 petroleum prod.
(excl. biofuel
45 portion) Solid fossil
15% fuels
40 5%
Natural gas
1990 1995 2000 2005 2010 2015 2016 2017 2018 2019
35%
During 1990-2019, chemical production increased ~47% while energy consumption

decreased ~21%. Overall, the energy intensity declined 47% during the period. During the
same period, total industry production increased ~38% while energy consumption
decreased ~23% resulting in 44% reduction in energy intensity.
Energy efficiency in chemical industry was achieved primarily through reduction in gas
consumption by 27% while solid fossil fuels consumption declined by 64% on a lower base.
Exhibit 95: EU managed to increase production with Exhibit 96: Better energy intensity in Chemicals vs. overall
lowering energy intensity industry
Production Index Energy Intensity Chemicals Total Industry
160 100
140 90
120
80
100
80 70
60 60
40
50
20
0 40
1990 1995 2000 2005 2010 2015 2016 2017 2018 2019 1990 1995 2000 2005 2010 2015 2016 2017 2018 2019

LNG to displace Russian gas, REPowerEU

plan to eliminate Russian dependence
EU natural gas – Russian threat and European Commission’s
action plan
EU’s reliance on Russian gas increased over the past decade from 30% in 2009 to 47% by
2019. Fall in EU gas production since 2010 while consumption remaining largely the same
resulted in rising imports. During 2020, due to global LNG oversupply, EU demand for
Russian gas remained depressed to about 40%. Nonetheless, EU remained a significant
outlet for Russian gas with 60% of total gas exports to the region. Due to Russia-Ukraine
issue, gas supplies to EU during 1H2022 fell to ~25% after Russia’s Gazprom cut supplies to
several EU member states.
Exhibit 97: Russian gas supplies to EU
Source: Gas Market Report, IEA
International Energy Agency (IEA) in its Gas Market Report, Q3-2022 forecasts Russian
pipeline exports to the EU to decline by over 55% by 2025 from 2021 levels, with Russia
supporting 20% of EU gas demand.
Exhibit 98: EU Gas supply events – 2022

Exhibit 99: EU gas dependency from Russia
Source: IMF
Following Russia’s invasion of Ukraine, the European Commission has carved out a 10‐point
plan to reduce its dependence on Russian natural gas. Since past few months, Gazprom had
already cut supplies to Bulgaria, Poland, Finland, Denmark, and Netherlands due to issue
regarding payment in Roubles. Germany, the largest Russian gas consumer has outlined to
significantly reduce Russian gas supplied by summer 2024. Based on the reduction in gas
imports from Russia, IEA points out that, “Altogether, Russian gas supplies to the European
Union could fall by over 120 bcm/yr from their 2021 levels to just 30 bcm by 2025. This
would effectively reduce Russia’s share of total EU gas demand to below10%, putting it
on a pathway to zero by 2027”
Exhibit 100: European Commission plan to reduce Russian gas dependency
2022 EU gas supply shortage made up partially by LNG imports

EU has been facing challenges on account of curtailed gas supplies from Russia, thus leading
to significant surge in EU gas prices. Nonetheless, EU has spruced up its efforts to secure
gas supplies from other routes. During Jan-Jun 2022, EU LNG imports have been up 55% YoY
to make up for lower pipeline gas supplies from Russia. IEA report suggests that EU LNG
imports are expected to increase by 50% in 2022 at the expense of delicense in China, India,
and Korea. From supply side, new liquefaction capacities in the US are expected to bring in
additional supplies which are expected to increase by 12% YoY in 2022.

Exhibit 101: Curtailed Russian gas supplies made up from additional LNG sourcing
Russia Norway Algeria LNG
180
160 153
153
140 138
122
120 132 122
100
(bcm)
107
98
80
60 64
40 37
30
20 22
0
2020 2021 2022
Source: https://www.bruegel.org, Note – 2022 data till 22 November
Latest weekly gas storage situation in EU signifies that ahead of the winter season, it has
braced up with higher YoY storage. By week ended November 22, the EU gas storage is up
~30% YoY which alleviates the concern over gas supplies.
Exhibit 102: Global LNG trade dominated by EU in 2022
Min value Max value 2021 2022
120000
100000
80000
Axis Title
60000
40000
20000
0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53
Due to the declined Russian gas supplies, European gas prices are expected to remain
elevated in near to medium term.
Exhibit 103: Dutch TTF prices to remain at premium over Asian spot LNG pricing in
2022/23

Impact on EU chemicals due to curtailed gas supplies

EU business dynamics has been impacted due to the surge in energy prices and among other
sectors, chemical sector is also likely to take a brunt of the same. Higher gas prices amidst
limited supply may continue in short-term for the EU region thus keeping uncertainly on the
regional chemicals sector. Perception is building up that this event may have repercussions
on the global chemical sector dynamics with a Europe+1 favouring the Indian chemicals
sector, due to further shift in manufacturing from EU to India.
Looking at the historical data, it can be inferred that the Europe+1 has already played out
over the past couple of decades. Chemical manufacturing activity shifted from Europe to
China with consequent gains in China’s market share in global chemicals. European MNCs
already have their manufacturing bases in China and have faced supply chain challenges
due to multiple disruptions in China starting 2015 due to environmental issues, accidents,
and the latest being Covid-19 related disruptions. China+1 was culmination of these factors,
and global companies started to look at India as an alternate import destination, thus
benefitting the Indian chemical industry since past 8-10 years.
Exhibit 104: China's dominance in global chemical arena
China EU27
50 44.6
39.6 39.5 41.0
38.6 38.5
40 36.4
34.3
31.4
28.4
30 25.8
24.9
(%)
20
19.3 18.7 17.1 16.5 15.9
10 6.4 14.6 14.6 15.3 15.3 14.7 14.4
0
2000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: CEFIC
Although, EU’s dependence or rather overdependence on Russian gas supplies has risen over
the past decade, structurally the natural gas consumption in the chemical sector has declined
by 27% over the past three decades, from 24.6MTOE in 1990 to 18.0MTOE in 2019.
Dependency/over dependency on Russia was instigated by declining gas production in the EU
region. Russian tactics of secession in gas supplies to some of the EU countries and lowered
supplies to others resulted in sudden spike in the EU gas prices. However, the same have got
alleviated over the past few months. Meanwhile, EU has embarked on securing additional LNG
supplies and is currently at a better situation in gas storage for the upcoming winter season.
Exhibit 105: Declining gas consumption in EU
26
24.6
24
22
(MTOE)
19.4 19.4 19.1

20
18.3 18.4
18.0
18 17.3
16.9
15.8
16
14
1990 1995 2000 2005 2010 2015 2016 2017 2018 2019
Source: CEFIC

Global Chemicals Market

Sector growth to accelerate in 2020-25, Asia remains the largest
market (Pre Russia-Ukraine disruption scenario)
Based on pre Russia-Ukraine disruption estimates, Global chemicals market is expected to
clock higher growth rate during 2020-25E, growing at 6.2% CAGR reaching 6.8tn vs. 3.6%
CAGR reported in 2015-20 (5.0tn) (F&S estimates). Although, during 2015-20, specialty
chemicals market exhibited higher growth rate than commodity chemicals, incrementally,
both the segments are expected grow at similar rate. Asia Pacific has been the driving force
during 2015-20, while based on F&S estimates, Europe and North America are expected to
exhibit higher growth rate than Asia Pacific.
Exhibit 106: Chemicals sector to grow at 6.2%CAGR over Exhibit 107: Interestingly, Europe and North America to
2020-25E grow at faster clip
Commodity Chemicals Specialty Chemicals Others Asia Pacific Europe North America Rest of the World
8,000
6,780 1,200 1,200
1,091
7,000
910 1,000 109 1,000
6,000 848
5,027 240
5,000 1,090 800 110 800
695
(USD bn)
4,220 435
(USD bn)
4,000 337 847 90 178
600 273 600
696 153
3,000 204
4,780 400 181 400
2,000 3,745
3,187 200 469 200
1,000 271 356
0 0 0
2015 2020 2025E 2015 2020 2025E
Global specialty chemicals (specchem) market is expected to clock 5.2% CAGR over 2020-
25E vs. 4.0% CAGR over 2015-20. Personal care ingredients and home care ingredients
clocked faster growth rate in earlier period while incremental growth is expected to be
driven by all the segments.
Exhibit 108: Growth all across specialty chemical segments
Specialty chemicals segments (USD bn) 2015 2020 2025E CAGR 15-20 CAGR 20-25E
Agrochemicals & Fertilisers 166 200 264 3.8 5.7
Construction Chemicals 90 110 139 4.1 4.8
Water Treatment Chemicals 44 55 70 4.6 4.9
Textile chemicals 9 10 13 2.1 5.4
Personal care ingredients 21 27 36 5.2 5.9
Home care ingredients 62 79 103 5.0 5.4
Paints & coating additives 24 29 38 3.9 5.6
Dyes & pigments 59 72 89 4.1 4.3
Flavours & Fragrance ingredients 35 42 54 3.7 5.2
Others 16 11 3 (7.2) (22.9)
Total 526 635 809 3.8 5.0
Source: RHPs, DRHPs
During 2015-20, specchem market growth was driven by Asia Pacific and is expected to
continue its growth trajectory in 2020-25E.

Exhibit 109: Global specchem to clock 5.0% CAGR over 2020- Exhibit 110: Asia Pacific remains the largest specchem
25E market (2020)
Asia Pacific Europe North America Rest of the World Europe
24%
1,000
808 North
America
800 81
633 21%
524 178
(USD bn)
600 82
68 133 202
400 115
152
136
200 347
205 266 Asia Pacific Rest of the
0 42% World
2015 2020 2025E 13%
Indian specchem market is all set to make further inroads in the global specchem arena by
growing at more than double the industry growth rate during 2020-25E. During 2020-25E,
Indian specchem market is expected to exhibit 11.2% CAGR while China is expected to grow
at 7.0% CAGR.
Exhibit 111: Indian specchem market to clock highest CAGR over 2020-25E
India 11.2
China 7.0
MEA 4.0
LATAM 3.0
North America 2.5
Europe 2.5
Japan 1.5
0 2 4 6 8 10 12
2020-25E CAGR %
Source: RHPs, DRHPs
During 2015-20, global CRAMS market registered 7.6% CAGR reaching at USD220bn while
the growth is expected to accelerate in 2020-25E, with an expected CAGR of 10.0%, reaching
at USD354bn. North America dominates the market with slightly more than a third of the
total CRAMS market.
Exhibit 112: CRAMS market to grow at 10.0% CAGR over Exhibit 113: North America dominates the CRAMS market
2020-25E (2020)
400 APAC
China India
12%
350 15% 6%
300
Middle East
250
(USD bn)
& Africa
200 2%
354
150
220 Europe Others
100 2%
153 26%
50
North
0
America
2015 2020 2025E
37%

During 2020, global API market reached USD170bn and is expected to grow at 6.1% CAGR
over 2020-25E to reach USD229bn. API key starting materials (KSM) market is also expected
to follow a similar growth trend reaching USD40bn by 2025E from USD30bn in 2020.
Exhibit 114: Global API market (USD bn)
250 229
215
203
200 191
180
170
159
149
150 140
128 132
100
50
0
2015 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E
Source: RHPs, DRHPs
Exhibit 115: Global API-KSM market (USD bn)
40
38
36
34
32
30
28
25 26
24
22
2015 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E
Source: RHPs, DRHPs

Germany – The largest Chemicals hub in EU

Germany is the third largest chemicals market globally, behind China and the US. It accounts
for 4.6% of the global market (2020) and under the EU28 (including UK), Germany has a
lion’s share of 30% in chemicals.
Exhibit 116: German chemicals industry – Third largest globally
EU27 incl. Germany 499 Belgium

6%
Taiwan 66
Rest EU-28
France 67 19%
Spain
India 92
7%
South Korea 102
Germany
Japan 144 UK 30%
Germany 160 7%
US 426
China 1,547 Italy
Netherlands 10%
0 500 1000 1500 2000 8% France
(EUR bn) 13%
During the past decade the European chemical industry has consolidated while Germany
has retained its leadership position with a share of ~30%.
Exhibit 117: Germany retains its top position in EU chemicals market
Germany France Italy Netherlands UK Spain Belgium Rest EU-28
700
600
92 99 111
500 93 90 89 90 86 35 34 104
37 38 40 43 35
36 37 34 43 31
(EUR bn)
400 39 38 38 39 33 34
38 38 37 35 40
40 41 36 47 66 36
55 50 50
300 49 47 44 69 44
52 52 52 71 59
50 50 53
200 77 83 80
78 77 67 67 78 67
100 165 180 166

161 154 163 160 160 160
0
2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: CEFIC
German chemical industry has a rich history and proliferated post World War II. During
1960-80, it exhibited very strong growth which tapered off during 1980-2000. China’s
emergence in the chemical arena changed complete dynamics of the chemical industry
since early 2000 which further led to nominal growth of the German chemical industry post-
2000.

Exhibit 118: Historical growth trend in Germany’s chemical and pharmaceutical industry
226
171
135
100
65
12 30
1960 1970 1980 1990 2000 2010 2020
Source: GTAI
During 2020, China surpassed the US in terms of chemical exports globally for the very first
time while Germany has maintained its third spot.
Exhibit 119: Germany – Third largest chemicals exporter globally
2018 2019 2020 2021
180 161
160 150
140 127
114 119
120 110
(EUR bn)
100 86
70 74 78 70 64 69
80 60 65
60 52
41 42
40 32 33 28 33
20
0
Germany
UK
Singapore
Japan
France
USA
Belgium
South
Korea
India
Netherland
China
Source: VCI, Note – bold numbers for 2021, others for 2018
During 2020, chemical industry’s share in German manufacturing stood at 11%, automobiles
being the largest one at 21%. The energy challenge due to gas supply shortage is expected
to impact all the industrial activity in Germany including the chemical industry due to usage
of natural gas as a feedstock. Nonetheless, the proportion of natural gas as a feedstock in
the RM pie is relatively lower at 14% while naphtha being the largest feedstock.
Exhibit 120: Chemical share in German manufacturing Exhibit 121: RM for chemical industry
Vehicle
Renewable
Others construction
13%
36% 21%
Coal
3%
Mechnical
Gas
Engineering
14%
13%
Electrical Chemical
Enginnering Food industry Naphtha
10% 9% 11% 72%
Source- VCI Source- VCI

Exhibit 122: German chemical + pharmaceutical sales by segments

2009 2011 2016 2021
70
60
50
40
(EUR bn)
30
20
10
0
Polymers
Specialty
Basic Inorganics
Petrochemicals
Pharmaceuticals
Consumer chem.
Source- VCI
Exhibit 123: German chemical + pharmaceutical composition by geography

Domestic Exports
160
140
120
100
(EUR bn)
80
60
40
20
0
2011
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Source- VCI
Exhibit 124: German chemical and pharma exports Exhibit 125: German R&D investments – Chemical and
Pharma
Africa Others
Asia
2% 1%
15% 10 Chemical Pharma
Latin
America 8
2%
(EUR bn)
6
North
America EU27
4
14% 50%
Other 2
European
Countries 0
16% 2015 2016 2017 2018 2019 2020 2021
Source- GTAI Source- GTAI

Exhibit 126: German chemical and pharma capex trend – Domestic and abroad
Domestic Abroad
10,000
9,000
8,000
7,000
6,000
(EUR mn)
5,000
4,000
3,000
2,000
1,000
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Source- VCI
Exhibit 127: German Chemical and Pharmaceutical companies sales 2021 (EUR bn)
79
44
38
21 20 20 19 16 15
8 8 8 6 4 3 3 3 3 2 2
Symrise
Bayer
Merck
Wacker Chemie
B. Braun
Fresenious
BioNTech
Covestro
Beiersdorf
Lanxess
K+ S
C.H.Boehringer Sohn
Fuchs Petrolub
Henkel
Evonik
Altana
Paul Hartmann
Stada Arzneimittel
West Galen
BASF
Source- VCI
Exhibit 128: German Inorganic chemical production trend

Inorganic Chemical production ('000MT) 2011 2021
Caustic Soda 3,301 3,115
Aluminium hydroxide 1,405 1,404
Soda Ash 2,668 2,540
Chlorine 3,858 3,413
Titanium Oxides 411 357
Source- VCI
Exhibit 129: German Organic chemical production trend

Organic Chemical production ('000MT) 2014 2021
Ethylene 5,070 5,195
Propylene 3,986 3,552
Benzene 2,150 1,577
Toluene 636 566
Vinyl Chloride 1,451 1,468
Acetic Acid 29 31
Methanol 993 1,358
EDC 2,477 2,409
Ethylene Oxide 989 870
Ethylene Glycol 278 253
Propylene Oxide 846 754
Propylene Glycol 404 390
Source- VCI

Initiating Coverage
India I Chemicals
29 November, 2022
Aarti Industries ADD

Price: Rs664
Operating to financial conversion remains the key Target Price: Rs716
Forecast return: 8%
We like Aarti Industries (Aarti) given (a) among top 3 players in its core chemistries, (b) Market Data
Chlorotoluenes diversification, and (c) project management skills. Aarti has invested a Bloomberg: ARTO IN
massive Rs68.6bn over FY13-22 period with major investments of Rs37.5bn during 52 week H/L: 976/584
FY20-22. However, due to Covid related issues the utilisation levels have remained Market cap: Rs240.8bn
subdued without any conversion to profitability. During the last 2 quarters, the Shares Outstanding: 362.5mn
operational performance has improved, nonetheless consistent improvement in Free float: 55.8%
performance remains a key monitorable. Aarti’s capex momentum is expected to Avg. daily vol. 3mth: 930,843
continue with ~Rs27bn capex lined up during FY23-24E. Future stock price Source: Bloomberg
performance will be dependent on conversion of capex into financial performance. We
ARTO relative to Nifty Midcap 100
estimate adj. FY22-25E Revenue/ EBITDA/PAT CAGR of ~15%/21%/22%. We initiate
130
coverage on Aarti Industries with an ADD rating and TP of Rs716 (8% upside) valuing
NIFTY Midcap 100
the stock at 30x 1HFY25EPS of Rs23.9. 110
Growth to be led by scale up of newly commissioned projects 90
Projects commissioned during the past couple of years will be ramped up over the next 70
Aarti Industries
2-3 years which shall entail volume growth for Aarti. Also, entry into Chlorotoluenes and
50
new value added products across specialty chemicals is expected to further aid growth Nov-2 1 Jan-22 Mar-22 May-22 Jul-22 Sep-22 Nov-2 2
for the company. Projects related to the second long-term contract and new chlorination Source: Bloomberg
unit were commissioned in FY22 and will be ramped up to its full yearly revenue
Shareholding pattern
potential during FY24E. Sep-22 Jun-22 Mar-22 Dec-21
Substantial capex momentum to continue Promoter 44.2 44.2 44.2 44.2
Aarti invested Rs13bn during FY22 (incl. pharma segment) and plans to invest ~Rs27bn FIIs 12.1 11.8 12.5 12.3
over FY23-24E (only specchem). Optimum utilisation takes about 3-4 years, so DIIs 14.8 14.8 14.5 14.2
progressive rise in utilisation shall aid volume growth. Further, excluding Covid related Public/other 29.0 29.2 28.9 29.4
disruptions, Aarti has demonstrated history of project executions which shall benefit its Source: BSE
overall performance in the wake of massive capex.

Strong R&D backbone and project execution capabilities
Aarti has consistently increased its R&D infrastructure and investments over the past
decade. In last five years alone, it has invested Rs3.6bn in R&D including a new R&D
center in Navi Mumbai. Moreover, 40+ new projects under development with 25-30%
EBITDA margins are likely to aid future growth and profitability.
Outlook and valuations
Post demerger of pharma business recently, management guided Rs11bn EBITDA for
FY23E and 25% EBITDA CAGR over FY24-25E. Continuous scale up in quarterly
performance is necessary if the company were to achieve its FY24E guidance, which only
can instill confidence. Post pharma business demerger, the company has restated its
FY22 financials. We have valued Aarti Industries (now only the specialty chemicals) at
30x avg. FY24-25E EPS of Rs23.9. We initiate coverage with an ADD rating and TP of
Rs716 (8% upside).
Risks – Delays in conversion of capex to revenues/EBITDA, demand challenges on
discretionary product portfolio accounting for ~50% of revenues.
Financial and valuation summary
YE Mar (Rs mn) FY21A FY22A FY23E FY24E FY25E
Revenues 45,061 60,855 62,114 69,853 81,120
EBITDA 9,815 17,201 11,079 13,951 17,373 Rohit Nagraj
EBITDA margin (%) 21.8 28.3 17.8 20.0 21.4 Research Analyst, Chemicals
Chemicals
Adj. Net profit 4,096 5,687 5,379 7,421 9,891 +91-022-4215 9645
Adj. EPS (Rs) 11.3 15.7 14.8 20.5 27.3 rohit.nagraj@centrum.co.in
EPS growth (%) (23.6) 38.8 (5.4) 38.0 33.3
PE (x) 58.8 42.3 44.8 32.5 24.4
EV/EBITDA (x) 26.7 15.2 24.0 19.3 15.5
PBV (x) 6.9 5.3 4.8 4.2 3.6
RoE (%) 16.2 29.6 11.3 13.8 15.9 Jay Bharat Trivedi
RoCE (%) 11.1 20.0 9.4 10.9 12.3
+91-022-4215 9201
Source: Company Data, Centrum Broking (Note: FY21 and FY22 revenue and EBITDA unadjusted for termination fees) jay.trivedi@centrum.co.in
Aarti Industries 29 November, 2022
Thesis Snapshot
Centrum vs. consensus Valuations
Centrum Consensus Variance Centrum Consensus Variance We estimate adj. FY22-25E Revenue/EBITDA/PAT CAGR of ~15%/21%/22%.
YE Mar (Rs bn)
FY23E FY23E (%) FY24E FY24E (%) We have valued Aarti Industries (now only the specialty chemicals) at 30x
Revenue 62,114 71,829 (13.5) 69,853 81,540 (14.3) avg. FY24-25E EPS of Rs23.9. We initiate coverage with an ADD rating and
EBITDA 11,079 12,998 (14.8) 13,951 16,344 (14.6) TP of Rs716 (8% upside).
PBT 6,600 7,777 (15.1) 9,161 10,109 (9.4)
Valuation Rs/share
PAT 5,379 6,270 (14.2) 7,421 8,493 (12.6)
1HFY25E EPS 23.9
Source: Bloomberg, Centrum Broking
Target multiple (X) 30
Aarti Industries vs. NIFTY Midcap 100 Target Price 716
1m 6m 1 year
P/E mean and standard deviation
ARTO IN (3.3) 2.7 (19.7)
85
NIFTY midcap 100 2.0 17.3 2.1
65
Key assumptions
45
YE Mar FY23E FY24E FY25E
Revenue growth (%) 2.1 12.5 16.1 25
EBITDA growth (%) (35.6) 25.9 24.5
EBITDA margin (%) 17.8 20.0 21.4 5
May-18
May-19
May-20
May-21
May-22
Nov-17
Nov-18
Nov-19
Nov-20
Nov-21
Nov-22
NCB volume growth (%) 12.0 10.0 12.0
P/E Mean
Mean + Std Dev Mean - Std Dev
EV/EBITDA mean and standard deviation
40
30
20
10
0
May-18
May-19
May-20
May-21
May-22
Nov-17
Nov-18
Nov-19
Nov-20
Nov-21
Nov-22
EV/EBITDA Mean
Peer comparison
Mkt Cap CAGR FY22-FY25E (%) PE (x) EV/EBITDA (x) FY22
Company
Rs bn Sales EBIDTA PAT FY23E FY24E FY25E FY23E FY24E FY25E ROE(%) ROCE(%) Div. Yield (%)
Aarti Industries 240.8 15.1 21.4 22.4 44.5 32.2 24.2 23.8 19.2 15.4 29.6 20.0 0.2
Anupam Rasayan India 77.9 28.1 28.6 33.4 40.7 29.4 21.6 14.7 11.5 9.1 9.2 7.8 0.1
Atul Ltd. 242.1 16.8 21.2 19.4 37.9 28.9 23.5 24.6 18.4 15.0 14.6 14.2 0.3
Deepak Nitrite 287.6 13.7 12.4 14.2 32.1 21.1 18.0 21.1 14.3 12.1 37.5 33.5 0.3
Galaxy Surfactants 100.2 5.9 8.8 8.9 31.1 33.2 30.3 20.4 21.3 19.3 18.3 15.7 0.6
Gujarat Fluorochemicals 386.9 28.1 32.1 30.7 30.7 27.0 22.2 20.4 17.4 14.5 20.3 15.6 0.1
Navin Fluorine International 215.6 33.2 38.7 35.0 59.7 41.7 32.7 40.7 28.2 22.8 15.1 14.8 0.3
SRF 675.5 17.7 18.2 18.2 31.2 26.0 21.5 19.7 16.5 13.7 24.5 18.0 0.3
Vinati Organics 215.0 28.8 25.6 26.6 48.4 38.8 30.7 37.1 30.4 24.7 20.6 20.5 0.0
Source: Company Data, Centrum Broking

Company overview
Aarti is amongst the leading specialty chemicals companies with a strong prowess in
benzene chemistry and benzene derivatives. Aarti has historically been successful to
combine process chemistry competence (recipe focus) along with scale-up engineering
competence (asset utilization). These achievements are seen in Aarti’s revenue
composition, which has now skewed towards value added products (FY22 contribution from
VAP 70%). The company currently operates across the Nitro Chloro Benzenes (NCBs), Di-
Chloro Benzenes (DCBs), Phenylenediamines (PDAs), Nitro Toluene Value Chain, Equivalent
Sulphuric Acid (E.S.A), and downstream derivatives.
Over its four-decade long journey, Aarti has created a strong integrated business model.
The company has evolved into a formidable player in benzene chemistry, ranking among
the top three global players in nitro chlorobenzenes (NCB), dichlorobenzene (DCB), and top
two global players in hydrogenation of the benzene value chain.
Aarti’s business was divided into two segments i.e., specialty chemical and pharmaceutical
segment (demerged from July 2021). The company is a key player in the benzene based
chemistry and it caters to leading consumers across the globe in pharmaceuticals, agro
chemicals, polymers, pigments, printing inks, dyes, fuel additives, aromatics, surfactants
and various other specialty chemicals. Under its erstwhile pharmaceutical segment, Aarti
manufactures various APIs, pharma intermediates, and xanthine derivatives.
Exhibit 130: Segments, products, applications (Pharma segment till Q1FY22)
Segment Sub Segment Products Application
Product Value chains: Nitro Chloro Benzenes (NCBs), End User- Polymer and additives; agrochemicals and
Specialty Chemical Di-Chloro Benzenes (DCBs), Phenylenediamines intermediates; dyes, pigments, paints, and printing
Segment (PDAs), Nitro Toluene Value Chain, Equivalent inks; pharma intermediates, and fuel additives, rubber
Sulphuric Acid (E.S.A) & downstream chemicals, resins, etc.
Anti-hypertensive, Anti-asthmatic, Anti-cancer, Anti
Supply to innovators and generic firms for a variety of
thalassaemic, Central Nervous System, (CNS) Agents,
API applications such as anti-cancer, anti-asthmatic,
Skin Care, Ophthalmologic, Decongestant, Analgesic,
antihypertensive, oncology medicines, etc.
Calcimimetic
Pharmaceutical
Supply to innovators and generic firms for a variety of
Segment Abemaciclib, Acalabrutinib, Lumacaftor, Montelukast,
Intermediates applications such as anti-cancer, anti-asthmatic,
(demerged) Ramipril
antihypertensive, oncology medicines, etc.
Xanthine derivatives are used for beverage
Xanthine Caffeine Anhydrous, Theophylline, Aminophylline,
applications, as well as nutraceutical and other pharma
Derivatives Acephylline Piperazine, Theobromine
applications.
Source: Company data
Aarti manufactures 150+ products catering to 1,100+ global and domestic customers. The
company has employee base of over 6,000+. Employee addition is justified through its
ongoing expansion plans across specialty chemicals and pharma segments.
Due to diversified customer profile, Aarti’s top 10 customers accounted for 22% of revenues
during FY21 while top customer contribution was only 3% (including the erstwhile pharma
segment). Similarly, large product basket offers product diversification, top 10 specialty
chemicals products accounted for 45% of its revenues in FY21.

Exhibit 131: Lower customer concentration Exhibit 132: Diversified product basket
Top 5 Products Top 10 Products (excluding top 5) Others
31%
22%
31%
55%
3%
14%
Largest Top 10 Top 20
Source: Company Data, Centrum Broking Source: Company Data, Centrum Broking
Manufacturing footprint
Aarti’s 15 plants (specialty chemicals) are located in Gujarat and Maharashtra. Its
manufacturing is supported by four R&D centres. Aarti’s drive towards sustainability
initiatives and environment can be ascertained by its 16 zero liquid discharge (ZLD) plants
out of 21 plants (including pharma segment).
Exhibit 133: Aarti’s manufacturing and R&D locations
Specialty chemical segment

Over the years, Aarti has mastered benzene chemistry and is among the top four players
globally for 75% of its portfolio. Apart from its forte in Benzene chemistry, Aarti has
presence across a wide range of chemistries with integrated operations. Some of the key
raw materials for Aarti are benzene, toluene, nitric acid, chlorine, methanol, aniline, and
sulphur among others.
Aarti is amongst the top three players globally in NCB and DCB manufacturing. It is the only
manufacturer of nitro fluoro aromatics using the Halex process, and the only manufacturer
of phenylene di amines (PDA) value chain in India. Aarti currently has 40+ specialty chemical
products in its R&D pipeline. Apart from existing chemistries, the company is also working
on new niche chemistries such as photochlorination, ammoxidation, and specialty
fluorination. Aarti is planning to set up a universal multipurpose plant (UMPP).

Exhibit 134: Benzene value chain
Aarti’s value addition can be exemplified from the different reactions carried out using
benzene as the starting material. It has some distinct advantages due to its prowess in the
chemistry including
Co-products/Isomer balancing
Optimizing product mix
Ability to meet stringent specifications
First two stages (A, B) account for 1/4th of the specialty chemicals revenues
Diversified end use
Aarti also manufactures multiple products under the sulphuric acid product chain starting
with Sulphur as key RM.
Exhibit 135: Sulphuric acid product chain – Key products
Some of the other specialty products manufactured by Aarti are:

Single Super Phosphate (SSP)
Export Grade Calcium Chloride Granules (for Oil exploration & De-icing)
Fuel Additives
Phthalates

Exhibit 136: Diversified global and domestic customers in Specialty chemicals segment
Given its scale and R&D capabilities, Aarti enjoys distinct advantages and has been able to
effectively use co-products to generate value added products, balancing the isomer
production based on its demand and value.
Exhibit 137: Aarti’s distinct advantages in specialty chemicals due to its large scale and
R&D
Last decade has been a transformation period for Aarti due to investment led capacity
expansions which strengthened its position in the global market

Exhibit 138: Aarti Industries – Growth journey

Investment arguments
Expanding capabilities into newer areas
As a part of its product basket expansion, Aarti is working on niche chemistries such as
photochlorination, ammoxidation, and specialty fluorination. These are relatively complex
chemistries and are exercised by a very few companies. Aarti’s proven R&D capabilities
provide confidence that the company will be able to make inroads into these areas which is
essential for its next leg of growth.
The company has indicated that it is working on over 40+ products in specialty chemicals
segment. Aarti’s base business margins (as a % of revenues) get distorted due to vagaries in
its key RM i.e., benzene prices. However, the management has guided that the new
products will have 25-30% EBITDA margins at constant benzene prices.
Key capabilities
Among top 4 players globally for 75% of its portfolio
Aarti is amongst the top three players globally in NCB and DCB manufacturing
Only manufacturer of nitro fluoro aromatics using the Halex process, and the only
manufacturer of phenylene di-amines (PDA) value chain in India
Chlorotoluenes and downstream derivatives to come onstream in FY23E
Aarti is setting up plant to manufacture Chlorotoluenes and downstream products of the
value chain. Foray into this area opens up a new growth opportunity for Aarti as none of
the Indian chemical companies are present in the value chain. Aarti’s toluene chemistry
knowledge shall help to optimise the processes to earn better margins.
Exhibit 139: Entering chlorotoluene and downstream value chain

New projects commissioned in FY22 to aid volume growth

Aarti had commissioned Rs13bn projects during FY21 and similarly commissioned Rs13bn
projects during FY22 including unit for second long-term contract (incl. pharma). However,
due to Covid issues the ramp up of these projects was delayed. Ongoing scale up in these
projects shall entail volume growth from FY23E. Apart from these units, the other projects
commissioned during the year would also start contributing to growth.
The company has chalked out a significant capex plan of ~Rs30bn for FY23-24E (only for
specialty chemicals) which shall help in company’s growth ambition from FY25E onwards.
Exhibit 140: FY23-24E capex and growth avenues
FY23-24E capex ~Rs30bn FY23-24E growth avenues
x Expansion cum asset upgradation for acid unit at x Ramp-up of second and third long-term
Vapi contracts
x Expansion, asset restoration, sustainability x Chlorotoluene value chain
initiatives, etc. x Newer range of value-added products and other
x Unit at Jhagadia for 3rd long-term contract specialty chemicals
x NCB capacity expansion at Vapi x Custom manufacturing opportunities
x Manufacturing outsourcing/strategic alliances
x Setting up Universal Multipurpose Plants (UMPP)
Aarti’s manufacturing and project management prowess can be ascertained by its financial
performance over the last decade. In the Indian chemical industry, Aarti became the
flagbearer for starting the long term contracts with global MNCs. Eventually, it signed a total
of three long-term contracts. However, the first contract was terminated by the client due
to its product related issues. Nonetheless, Aarti was duly compensated for the same.
Aarti’s business has grown multi-fold over the past decade while new opportunities across
different areas are emerging which shall continue the growth journey for the company. Its
diversification is signified from its multi-product, multi-customer, multi-geographies, and
multi- end-user industry approach.
Exhibit 141: Multi-dimensional growth

Apart from the projects commissioned during FY21-22, ongoing expansions will be
commercialised during FY23-24E which shall also add to growth. These projects shall reach
optimal utilisation by third year, which provides visibility beyond FY24E and shall be able to
help the company attain its long-term FY27E guidance.
Ramp up in second long-term contract in FY23E, full potential from FY24E
During FY22, Aarti commercialised unit for the project related to second long-term contract
at Dahej SEZ. Ramp up of the facility is expected in FY23E which shall start contributing to
revenues and profitability. This project for a Global MNC shall attain full revenue potential
of ~Rs5bn in FY24E.
Aarti had signed USD1.54bn multi-year supply contract with major Specialty Chemical
Conglomerate in FY18 for which supplies commenced in FY22. Contours of the deal are,
Contract term – 20 Years
Supply of specialty chemical intermediate, polymer additive
Basic technology provided by Customer
Aarti was finalized due to strong HSE practices, robust manufacturing & operations and
IP governance
Annual revenue of ~USD76mn
Capex – USD35-40mn
Advance from Customer – USD42mn, advance to be adjusted against supply
Unit being setup in Dahej SEZ, eligible for tax incentives
Capex momentum to continue

Aarti’s historical growth was propelled through continuous capex and this capex
momentum is expected to continue even going ahead. Its capex guidance suggests the
impending opportunities for the company and its ability to capitalise on the same. Aarti was
the first Indian company to officially receive a long-term contract from an MNC which was
based on its R&D skills, project management capabilities, and customer confidence gained
over a period of years. Unfortunately, due to adverse business conditions at the customer’s
end, the customer had to terminate the contract. However, Aarti was completely
compensated for the lost opportunity. Later, it also entered into two more long-term
contracts which reinforced the company’s ability to serve the MNC clients.
Exhibit 142: Continuing capex intensity
Gross block Capex 85.0
75.0
61.5
51.1 50.0
38.0
33.2
30.6
26.1
20.4
13.1 13.1 13.5
7.9 11.3 11.5
10.0
4.7 5.8
4.5
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E

Exhibit 143: Expansion plans

Land bank Expansion plans
NCB capacity expansion at Vapi, Working towards
Initiated 100acre site development at Jhagadia, Gujarat
new chemistry capabilities.
Purchased 120acre land at Atali, Gujarat for future
Unit expansion at Jhagadia for 3rd long-term contract
expansions
Management guidance remains intact

Management remained upbeat on its medium and long-term guidance based on the
ongoing projects. Although, Aarti has been the best performing stock in the chemicals
universe during the past decade, incremental performance will be judged by the company’s
commissioned and ongoing projects reflecting in financials and FCF generation thereof.
Exhibit 144: Long-term guidance (including pharma segment)
Management’s long-term growth strategy hovers around product basket expansion though
value added products, continue to leverage on its manufacturing capabilities for
outsourcing opportunities, R&D backed new product introduction in both specialty
chemical and pharma segments, and strengthen its long-standing relationships with
customers through long-term contracts.
Exhibit 145: Long-term growth strategy

Financial analysis
During FY19-22, Aarti reported revenue/EBITDA/PAT CAGR of 4.2%/0.2%/3.1% (excluding
long term contract fees). However, the company received Rs7.7bn termination income from
its first long-term contract in FY22. EBITDA margins declined 180bps from 20.5% in FY19 to
18.3% in FY22 (excl. termination income).
Exhibit 146: Revenue and PAT trend (Rs bn) Exhibit 147: EBITDA (Rs bn)/ EBITDA margin (%) trend
Operating revenue PAT
EBITDA EBITDA Margin (%)
60.9
28.3
53.2
47.1 23.3
41.9 43.7 20.7 20.5
38.1 19.0 18.4 19.3 18.3
17.2
30.1 31.6
9.7 9.8 8.4 9.7

5.7 6.5 7.0
11.9
3.2 3.3 4.9 5.4 4.2 5.4
2.6
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY22

FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY22
Note: Second FY22 column data represents including the termination income
Over the past few years, Aarti’s exports have been hovering around 45% which jumped to
50% in FY22, one of the elements for this surge being the termination income.
Incrementally, with the scale up of second long-term contract and later the commissioning
of third long-term contract, the exports pie is expected to move up.
Exhibit 148: Domestic/ Exports mix (Rs bn)
Domestic Exports
34.8
21.9
19.8 19.7
16.9
14.3 14.1
35.2
27.3 26.6 28.4
21.2
15.8 16.4
FY16 FY17 FY18 FY19 FY20 FY21 FY22

In exports, Europe and the US remain key markets for Aarti accounting for over 50% of
exports. Aarti being among the global leaders in benzene/toluene chemistry, is an exporter
to China as well. During FY22, China accounted for 12% of total exports.

Exhibit 149: US and Europe key exports market (%) Exhibit 150: Region wise revenue split (FY22)
North America Europe China Japan ROW
ROW North
21.0 21.0 25.1 25.0 26.8 America
30.0 30.8 27%
10.0 10.0 27%
9.1 10.0 7.3
9.1 10.0 7.7
16.0 16.0 7.5 12.2
7.5 15.4
25.0 25.0 34.2 27.5 35.0 26.8 Japan
28.2 7%
China Europe
28.0 28.0 22.8 25.0 22.5 26.8
17.9 12% 27%

Since a decade, Aarti has been on a capex drive which has been upped over the period. In
FY12, Aarti invested Rs1.2bn while the investments surged over 10-folds by FY22 with
investments of Rs13.1bn in FY22. Incrementally too, the capex momentum is expected to
continue with over Rs25bn capex planned for FY23-24E.
Exhibit 151: Capex momentum picked up in past couple of years, to continue (Rs bn)
Gross block Capex
51.1 50.0
38.0
33.2
30.6
26.1
20.4
13.1 13.1
11.3
7.9
4.7 5.8
4.5

Source: Company Data, Centrum Broking, Note – FY22 gross block excl. pharma segment, including pharma segment gross block for
FY22 was at Rs62.3bn
Segmental financial performance

During FY22, specialty chemicals accounted for 81% and pharma accounted for 19% of total
revenues. Excluding termination income, specialty/pharma contribution to total revenues
was 79%/21%. Till FY18, Aarti had home and personal care segment which was demerged
into Aarti Surfactants.
Exhibit 152: Segmental revenues (Rs bn)
Specialty Chemicals Pharmaceuticals Home & Personal Care Chemicals

0.0
13.0
0.0 0.0
0.0 8.7
7.3 7.6
2.6
1.7 5.6
1.3 4.3
3.8 49.3
39.8 38.6 40.1
25.7 29.9
22.6


Specialty chemicals
During FY22, specialty chemicals revenues increased 37.3% yoy incl. termination income to
Rs57.0bn and 18.8% yoy excluding termination income to Rs49.3bn. Specialty chemicals
contribution to the total revenues in FY22 was 79.1% (82.6%). Reported EBIT stood at
Rs16.1bn, which includes Rs6.1bn termination income. Adjusted EBIT stood at Rs8.7bn
(Rs6.1bn), representing 17.6% (15.3%) EBIT margins.
Exhibit 153: Revenue trend (Rs bn) Exhibit 154: EBIT (Rs bn)/ EBIT margin (%) trend
EBIT (Rs bn) EBIT margin (%)
49.3 22.2 22.0
20.6 21.1
39.8 40.1 19.5
38.6 17.6
15.3
29.9
25.7
22.6
8.2 8.1 8.7
5.7 5.8 6.1
5.0
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Specialty chemical performance was impacted due to supply shortage of nitric acid, a key
RM. The situation is alleviated now, however the management is exploring backward
integration plant to convert weak nitric acid to concentrated nitric acid. Recently Aarti
announced long-term nitric acid purchase agreement with Deepak Fertilizers for
uninterrupted supplies. The company was able to pass on the RM inflation with a lag. It
commercialised the unit for second long-term contract in Q4FY22.
Exhibit 155: EBITDA (Rs bn)/ EBITDA margin (%) trend
EBITDA EBITDA %
25.7 25.8 24.9

23.4 23.9
22.2
19.9
11.0
9.5 9.6
8.0
6.6 7.0
5.8

Pharma (Till FY22)

During FY22, Aarti’s pharma segment reported robust 49.1% yoy revenue growth to
Rs13.0bn (Rs8.7bn). Healthy top-line growth was attributed to demand pick up in key
products. Reported EBIT stood at Rs2.2bn (Rs2.0bn) with EBIT margins of 16.9% (23.5%).
Margins were impacted due to continuous increase in RM costs which the company has
been passing on with a lag.
Exhibit 156: Revenue trend (Rs bn) Exhibit 157: EBIT (Rs bn)/ EBIT margin (%) trend
13.0 EBIT (Rs bn) EBIT margin (%)
23.5
8.7 18.2
16.9
7.3 7.6 15.5
14.2
5.6 11.3
10.1
3.8 4.3
1.4 2.0 2.2

0.4 0.5 0.8 1.1
Exhibit 158: EBITDA (Rs bn)/ EBITDA margin (%) trend
EBITDA EBITDA %
28.8
23.1
21.4
19.5 20.0
17.1
15.3
2.5 2.8
1.1 1.5 1.7
0.6 0.7
Demerger of pharma segment into Aarti Pharmalabs

Aarti’s pharma and specialty segments don’t have any overlap in terms of RMs or products.
The company is demerging its pharma segment into Aarti Pharmalabs which will facilitate a
focused approach to the growth opportunities and shall also enable the separate entity to
take strategic calls to capture these growth opportunities. Earlier too, Aarti had demerged
its Home and Personal Care segment into a separate entity, Aarti Surfactants.
Aarti’s pharma segment has a sizable revenue profile with healthy margins, which have
consistently improved over the past seven years. The company currently has over 50+
products in its R&D pipeline. These products are value added products with higher margin
profile, and EBITDA margins of 25-30%. Also, Rs3.5-5.0bn investments are earmarked for
pharma segment during FY23-24E, which shall drive growth from FY25E onwards.
During October, Aarti received final approval for Aarti Pharmalabs demerger and since then
the listed entity Aarti Industries reflects Aarti’s specialty chemicals business only. Aarti
Pharmalabs shall be listed separately in coming weeks.

Cash flow analysis

Under our universe of eight stocks (excl. Anupam Rasayan), Aarti is the only company with
negative FCF in nine out of ten years (excl. FY16), due to consistently rising capex intensity
(cum. investment of Rs68bn). Consequently, Aarti’s debt rose over the years while it also
raised Rs7.5bn and Rs12.0bn through QIP in FY19 and FY22, respectively. OCF, though
positive has been lumpy over the period.
Exhibit 159: Lumpy OCF, peaked in Covid year and tapering off since then
16,000 Termination income from
cessation of long-term contract
12,000
8,000
4,000
Rsm
0
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
(4,000)
(8,000)
(12,000)
Operating profit before WCap changes WCap changes OCF
Exhibit 160: Controlled WC until peaking in Covid year, exacerbated by chemical price inflation, tapering since then
180 154
150 136
128
127 112 112 115
109 109 109
120
90
days
60
30
0
Receivables Days Payables Days Inventories Days NWC Days
Exhibit 161: EBITDA to OCF conversion of 50% over 10 years Exhibit 162: Consistently neg. FCF, funded through debt/ QIP
120% 50%
QIP in March 2019 – Rs750cr @ Rs699
100% 0%
80% -50%
-100%
60%
-150%
40%
-200%
20%
-250%
QIP in June 2021 – Rs1,200cr @ Rs855
0% -300%
OCF/EBITDA (%) Aggregate FCF/ OCF (%) Aggregate
Aarti managed to control its WC to ~110 days until Covid year, however it has been
increasing thereafter. Pre-tax RoCE and RoE have been ~ 20% and 20%+, respectively
barring FY20/21. Despite negative FCF, due to strong earnings growth, ironically Aarti
delivered the highest 54% CAGR returns over FY12-22.

Exhibit 163: Consistent return ratios till Covid year, deteriorated thereafter, optically higher in FY22 due to one-time income
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY13-22 average
Net Debt/Equity 1.0 1.1 1.0 1.0 1.0 1.1 0.5 0.5 0.6 0.3 0.8
Net Debt/EBITDA 2.2 2.3 2.2 2.1 2.2 2.7 1.3 1.6 2.1 1.0 2.0
RoCE pre-tax 20.5% 19.2% 19.9% 21.3% 20.2% 17.4% 19.2% 16.5% 13.8% 23.2% 19.1%
RoCE 14.6% 14.1% 15.1% 15.7% 15.9% 14.1% 15.5% 13.3% 11.1% 19.9% 14.9%
RoIC (pre-tax) 15.1% 15.7% 16.6% 19.0% 19.3% 16.3% 19.6% 16.1% 13.1% 19.6% 17.0%
RoE 20.0% 20.0% 21.5% 23.9% 25.3% 22.6% 23.4% 19.1% 16.2% 27.8% 22.0%
Exhibit 164: DuPont Analysis – Asset turnover deteriorated over the years lowering RoE
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY13-22 avg
PAT/PBT 0.71 0.74 0.76 0.74 0.79 0.81 0.81 0.81 0.81 0.86 0.78
Revenue/average total assets 1.26 1.29 1.23 1.17 1.12 1.10 1.03 0.77 0.74 0.93 1.06
Average total assets/Average NW 2.41 2.46 2.46 2.28 2.13 2.22 2.07 1.88 1.84 1.60 2.13
PBT/EBITDA 0.52 0.51 0.54 0.63 0.64 0.61 0.64 0.69 0.68 0.79 0.63
EBITDA/Revenue 0.18 0.15 0.16 0.19 0.21 0.19 0.21 0.23 0.22 0.28 0.20
RoE 20.0% 20.0% 21.5% 23.9% 25.3% 22.6% 23.4% 19.1% 16.2% 27.8% 22.0%
Exhibit 165: Price movement vs. Financials – Stock returns led by superior P&L performance
75% 52% 54%
46%
50% 28% 33%
16% 23% 21% 23%
25% 14%
0%
-25% -7%
-50%
-75% -66%
Gross Margin*
PBT CAGR^
EBITDA Margin*
NWC (Ex-cash) as a
FCF/Sales*
RoE (Avrg)
PBT Margin*
OCF/EBITDA*
Stock return
Revenue CAGR^
FCF/OCF*
EBITDA CAGR^
% of revenue
Source: Company Data, Centrum Broking; ^: FY12-22 CAGR; *: aggregate
Exhibit 166: Consistently negative FCF due to rising capex

Rs mn FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
FCF (a) (964) (1,015) (922) 84 (1,750) (3,955) (2,373) (1,482) (5,280) (9,496)
FCF yield NA NA NA 0% NA NA NA NA NA NA
Dividend + Buyback (b) 342 415 483 952 960 1,067 440 1,064 451 1,269
Distribution of FCF (b/a) NA NA NA 1,129% NA NA NA NA NA NA
Cash & equivalents*/Capital employed 0.8% 0.8% 1.6% 1.2% 1.0% 0.9% 16.7% 5.1% 6.9% 3.2%
Source: Company Data, Centrum Broking *including liquid investments

Valuations
Aarti registered relatively muted operational performance over FY20-22 with
revenue/EBITDA/PAT CAGR of 12.7%/(0.3)%/0.3% excluding total termination income of
Rs9.1bn (termination income in FY21 – Rs1.4bn, FY22 – Rs7.7bn). Discretionary segment
reported muted performance in FY21 which was impacted due to Covid-19. Also, the
terminated first long-term project was commissioned without any material utilisation. New
projects (~Rs26bn) commissioning in FY21-22 escalated the operating costs but without any
meaningful utilisation which led to weak overall performance.
Exhibit 167: Financial performance – Adjusted (Rs mn)
FY20-22 FY22-25E
Parameters FY20A FY21A FY22A FY23E FY24E FY25E
CAGR% CAGR%
Revenues 41,863 43,681 53,165 62,114 69,853 81,120 12.7 15.1
EBITDA 9,773 8,435 9,721 11,079 13,951 17,373 (0.3) 21.4
EBITDA % 23.3 19.3 18.3 17.8 20.0 21.4
PAT 5,361 4,241 5,394 5,379 7,421 9,891 0.3 22.4
EPS 14.8 11.7 14.9 14.8 20.5 27.3 0.3 22.4
Source: Company Data, Centrum Broking Note: FY21/ FY22 numbers adjusted for termination income
We estimate revenue/EBITDA/PAT CAGR of 15.1%/21.4%/22.4% over FY22-25E adjusted for

termination income. Our estimates imply FY21-24E revenue/EBITDA/PAT growth of
1.6x/1.7x/1.7x based on unadjusted numbers. We believe increase in utilisation rates shall
bring in operational leverage which shall aid the overall improvement in performance.
Exhibit 168: Financial performance – unadjusted (Rs mn)
Parameters FY20A FY21A FY22A FY20-22 CAGR%
Revenues 41,863 45,061 60,855 20.6
EBITDA 9,773 9,815 17,201 32.7
EBITDA % 23.3 21.8 28.3
PAT 5,361 5,235 11,858 48.7
EPS 14.8 14.4 32.7 48.7
We like Aarti due to (a) among top 3 players in its core chemistries, (b) Chlorotoluenes
diversification, and (c) project management skills. Aarti has invested a massive Rs68.6bn
over FY13-22 period with major investments of Rs37.5bn during FY20-22. Benefit of the
recent investments shall start reflecting in financial performance from FY23E onwards.
Aarti has received NCLT approval to demerge its business into Aarti Industries (specchem)
and Aarti Pharmalabs (pharma) in October 2022. We have valued Aarti Industries (now only
the specialty chemicals) at 30x avg. FY24-25E EPS of Rs23.9. We initiate coverage with an
ADD rating and TP of Rs716 (8% upside).
Risks
Delays in conversion of capex to revenues/EBITDA
Over the past couple of years, Aarti’s financial performance was marred by delays in project
executions and its resultant impact on revenues. Thus, consistently improving quarterly
performance remains a key factor to watch out for the next 2-3 quarters.
Inability to generate free cash flows
Over the last decade, Aarti has generated free cash flows only in one year. The company’s
massive capex drive led to negative FCF generation. Incrementally, the capex momentum is
continuing which shall result in negative FCF generation for the foreseeable future.

Exhibit 169: Consistent historical trend of negative free cash flows

OCF FCF
10
7.6
8
6 4.4
4 2.3
1.7 1.8
2 0.5 0.6
0.1
0
-2 FY16 FY17 FY18 FY19 FY20 FY21 FY22
-1.7 -1.5
-4 -2.4
-4.0
-6
-5.3
-8
-10
-9.5
-12

Story in Charts
Operating revenue PAT EBITDA EBITDA Margin (%)
23.3
81.1 20.7 20.5 21.4
19.0 19.3 20.0
69.9 18.4 18.3 17.8
62.1 17.4
53.2 14.0
47.1 43.7
41.9 9.7 9.8 9.7 11.1
38.1 8.4
30.1 31.6 6.5 7.0
5.7
7.4 9.9
2.6 3.2 3.3 4.9 5.4 4.2 5.4 5.4
Exhibit 172: Geography wise revenue split (Rs bn) Exhibit 173: Balanced domestic/exports mix (%)
Domestic Exports Domestic Exports
34.8 47.6 46.4 44.4 42.0 42.5 43.5 49.7
19.8 21.9
19.7
16.9
14.3 14.1
35.2 52.4 53.6 55.6 58.0 57.5 56.5 50.3
27.3 26.6 28.4
15.8 16.4 21.2
Exhibit 174: US and Europe key exports market (%) Exhibit 175: Region wise revenue split (FY22)
North America Europe China Japan ROW
21.0 21.0 ROW North

25.1 30.0 25.0 30.8 26.8
27% America
10.0 10.0 9.1 10.0 27%
7.3
9.1 10.0 7.7
16.0 16.0 7.5 12.2
7.5 15.4
25.0 25.0 34.2 27.5 35.0 26.8 Japan
28.2 7%
China Europe
28.0 28.0 22.8 25.0 22.5 26.8 27%
17.9 12%

Exhibit 176: Capex trend (Rs bn) Exhibit 177: Declining return ratios (%)
Gross block Capex ROE ROCE
85.0
75.0
29.6 COVID
61.5 19 effect
51.1 50.0 23.9 25.3 22.6 23.4
19.1
38.0 16.2 15.9
30.6 33.2 13.8
26.1 20.0 11.3
20.4
15.7 15.9
11.3 13.1
13.1 13.5 14.1 15.5 13.3
11.5
4.7 5.8
7.9 10.0 11.1 10.9 12.3
4.5 9.4
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E

Exhibit 178: Stable debt equity ratio (x) Exhibit 179: Working capital cycle
Debt to Equity
1.1 Debtor Days Inventory Days Creditors Days
1.0 1.0
152
143
112 120 114
108 110 103 109 109
0.6
0.5 0.5 0.5 0.5
0.4 0.4
58 60 67 63 65 62 61
57 55 57
79
57 63 55 55 59 56
52
43 42
Operational Charts
Exhibit 180: Segmental revenue split (Rs bn) Exhibit 181: NCB production volume trend (MT)
Specialty Chemicals Pharmaceuticals Nitro Chloro Benzene (NCB) % chg
105.6
94.3
85.7
76.6
63.7 68.7 67.6 66.8
59.5 59.6
13.0
7.3 7.6 8.7
81.1
5.6 69.9
4.3 62.1 12.0 14.7 12.0
3.8 49.3 11.4 7.1 7.8 10.0 12.0
39.8 38.6 40.1
25.7 29.9
22.6 -1.6 -11.8
Exhibit 182: Specchem – Domestic/exports mix (%) Exhibit 183: Specialty chemicals performance
EBIT (Rs bn) EBIT margin (%)
Domestic (%) Exports (%)
22.2 22.0
20.6 21.1
19.5
30.9 17.6 18.0 18.0 18.0
47.2 40.8 42.2 42.5
54.0 50.4 15.3
14.6
12.6
11.2
8.2 8.1 8.7
69.1 5.7 5.8 6.1
52.8 59.2 57.8 57.5 5.0
46.0 49.6
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E

Quarterly Trend
Exhibit 184: Quarterly performance
Quarterly (Rs mn) Q2FY21 Q3FY21 Q4FY21 Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 YoY (%) QoQ (%)
Revenues 11,726 11,868 12,094 13,168 15,516 23,760 17,556 19,720 16,850 34.2 4.6
Q-o-Q gr. (%) 25.1 1.2 1.9 8.9 17.8 53.1 (26.1) 12.3 4.6
Raw Mat. Cons. 5,045 4,805 5,074 5,520 7,690 8,596 8,268 10,311 9,200 50.0 6.3
% of net sales 43.0 40.5 42.0 41.9 49.6 36.2 47.1 52.3 54.6
Purchase of prod. 737 644 512 580 530 804 950 670 581 19.0 (4.1)
% of net sales 6.3 5.4 4.2 4.4 3.4 3.4 5.4 3.4 3.4
Employee Costs 935 906 976 995 989 1,236 1,201 1,214 928 27.0 2.0
% of net sales 8.0 7.6 8.1 7.6 6.4 5.2 6.8 6.2 5.5
Others 2,467 2,664 2,928 2,934 3,209 3,463 3,747 3,832 3,471 30.7 11.4
% of net sales 21.0 22.4 24.2 22.3 20.7 14.6 21.3 19.4 20.6
EBITDA 2,543 2,850 2,603 3,138 3,098 9,661 3,391 3,693 2,670 4.8 (5.1)
Q-o-Q growth (%) 39.7 12.1 (8.7) 20.6 (1.3) 211.9 (64.9) 8.9 (5.1)
EBITDA Margin (%) 21.7 24.0 21.5 23.8 20.0 40.7 19.3 18.7 15.8
Dep. & Amor. 550 587 656 686 711 716 772 865 729
EBIT 1,993 2,263 1,947 2,452 2,387 8,945 2,619 2,828 1,941 (1.7) (7.5)
Interest exp. 222 173 216 383 185 269 306 498 437 202.6 (1.8)
Other Income 0 4 0 1 5 1 2 4 0
EBT 1,772 2,094 1,731 2,070 2,208 8,676 2,314 2,334 1,504 (18.0) (9.2)
Provision for tax 337 403 337 419 447 951 377 443 259 (22.8) (13.8)
Eff. tax rate (%) 19.0 19.2 19.5 20.2 20.2 11.0 16.3 19.0 17.2
Profit 1,435 1,692 1,393 1,651 1,761 7,725 1,938 1,891 1,245 (17.0) (8.2)
Minority Interest 33 39 32 2 -1 1 0 0 0
PAT 1,402 1,653 1,361 1,649 1,761 7,725 1,937 1,891 1,245
PAT Margin (%) 12.0 13.9 11.3 12.5 11.3 32.5 11.0 9.6 7.4

P&L Balance sheet

YE Mar (Rs mn) FY21A FY22A FY23E FY24E FY25E YE Mar (Rs mn) FY21A FY22A FY23E FY24E FY25E
Revenues 45,061 60,855 62,114 69,853 81,120 Equity share capital 871 1,813 1,813 1,813 1,813
Operating Expense 21,823 28,545 34,400 36,402 41,577 Reserves & surplus 34,158 43,347 48,457 55,507 64,904
Employee cost 3,714 3,570 4,212 4,970 5,865 Shareholders fund 35,029 45,160 50,270 57,320 66,716
Others 9,709 11,540 12,423 14,529 16,305 Minority Interest 122 7 7 7 7
EBITDA 9,815 17,201 11,079 13,951 17,373 Total debt 24,921 22,040 25,290 28,790 28,590
Depreciation & Amortisation 2,313 2,464 2,843 3,071 3,600 Non Current Liabilities 2,244 2,385 2,385 2,385 2,385
EBIT 7,502 14,737 8,235 10,880 13,773 Def tax liab. (net) 2,339 1,796 1,796 1,796 1,796
Interest expenses 864 1,023 1,644 1,727 1,572 Total liabilities 64,656 71,387 79,747 90,297 99,493
Other income 7 8 8 9 10 Gross block 51,147 50,000 61,500 75,000 85,000
PBT 6,646 13,722 6,600 9,161 12,211 Less: acc. Depreciation (15,222) (13,624) (16,467) (19,538) (23,138)
Taxes 1,293 1,863 1,221 1,741 2,320 Net block 35,925 36,376 45,033 55,462 61,862
Effective tax rate (%) 19.5 13.6 18.5 19.0 19.0 Capital WIP 12,979 13,030 13,030 13,030 13,030
PAT 5,352 11,858 5,379 7,421 9,891 Net fixed assets 48,905 49,406 58,063 68,492 74,892
Minority/Associates (118) 0 0 0 0 Non Current Assets 3,201 4,152 4,152 4,152 4,152
Recurring PAT 5,235 11,858 5,379 7,421 9,891 Investments 635 283 283 283 283
Extraordinary items (1,139) (6,171) 0 0 0 Inventories 9,357 9,341 10,830 11,428 13,048
Reported PAT 4,096 5,687 5,379 7,421 9,891 Sundry debtors 7,937 10,915 11,215 12,612 14,647
Cash & Cash Equivalents 4,123 1,736 438 72 152
Ratios Loans & advances 1,875 0 0 0 0
YE Mar FY21A FY22A FY23E FY24E FY25E
Other current assets 384 4,469 4,469 4,469 4,469
Growth (%) Trade payables 5,763 3,526 4,313 5,821 6,760
Revenue 7.6 35.1 2.1 12.5 16.1 Other current liab. 5,596 4,549 4,549 4,549 4,549
EBITDA 0.4 75.2 (35.6) 25.9 24.5 Provisions 401 841 841 841 841
Adj. EPS (23.6) 38.8 (5.4) 38.0 33.3 Net current assets 11,915 17,546 17,249 17,370 20,166
Margins (%) Total assets 64,656 71,387 79,747 90,297 99,493
Gross 52.8 53.1 45.4 48.8 49.6
EBITDA 21.8 28.3 17.8 20.0 21.4 Cashflow
EBIT 16.6 24.2 13.3 15.6 17.0 YE Mar (Rs mn) FY21A FY22A FY23E FY24E FY25E
Adjusted PAT 11.6 9.3 8.7 10.6 12.2 Profit Before Tax 6,646 13,722 6,600 9,161 12,211
Returns (%) Depreciation & Amortisation 2,313 2,464 2,843 3,071 3,600
ROE 16.2 29.6 11.3 13.8 15.9 Net Interest 864 1,023 1,644 1,727 1,572
ROCE 11.1 20.0 9.4 10.9 12.3 Net Change – WC 2,917 (8,018) (1,001) (487) (2,716)
ROIC 10.6 18.3 8.5 9.8 11.2 Direct taxes (1,062) (1,639) (1,221) (1,741) (2,320)
Turnover (days) Net cash from operations 11,670 7,544 8,857 11,723 12,337
Gross block turnover ratio (x) 0.9 1.2 1.0 0.9 1.0 Capital expenditure (11,991) 1,504 (11,500) (13,500) (10,000)
Debtors 63 57 65 62 61 Acquisitions, net 0 0 0 0 0
Inventory 152 120 109 114 109 Investments (265) 352 0 0 0
Creditors 79 59 42 52 56 Others 7 8 8 9 10
Net working capital 97 105 101 91 91 Net cash from investing (12,250) 1,864 (11,492) (13,491) (9,990)
Solvency (x) FCF (580) 9,408 (2,635) (1,768) 2,347
Net debt-equity 0.6 0.4 0.5 0.5 0.4 Issue of share capital 0 941 0 0 0
Interest coverage ratio 11.4 16.8 6.7 8.1 11.0 Increase/(decrease) in debt 6,816 (2,882) 3,250 3,500 (200)
Net debt/EBITDA 2.1 1.2 2.2 2.1 1.6 Dividend paid (467) (544) (269) (371) (495)
Per share (Rs) Interest paid (864) (1,023) (1,644) (1,727) (1,572)
Adjusted EPS 11.3 15.7 14.8 20.5 27.3 Others (6,834) (10,019) 0 0 0
BVPS 96.6 124.6 138.7 158.1 184.0 Net cash from financing (1,348) (13,526) 1,337 1,402 (2,267)
CEPS 36.8 22.5 22.7 28.9 37.2 Net change in Cash (1,928) (4,118) (1,298) (366) 80
DPS 2.7 1.5 0.7 1.0 1.4 Source: Company Data, Centrum Broking
Dividend payout (%) 11.4 9.6 5.0 5.0 5.0
Valuation (x)
P/E 58.8 42.3 44.8 32.5 24.4
P/BV 6.9 5.3 4.8 4.2 3.6
EV/EBITDA 26.7 15.2 24.0 19.3 15.5
Dividend yield (%) 0.4 0.2 0.1 0.2 0.2
Source: Company Data, Centrum Broking (Note: FY21 and FY22 revenue and EBITDA
unadjusted for termination fees)

Appendix
R&D and Technology
Over a period of time, Aarti has imbibed various technological advancements into its
operations, thus expanding its operational efficiencies.
Exhibit 185: Technology developments
2022 2021 2020 2019 2018
Process intensification of batch Process intensification of batch
Forward Integration for Forward Integration for Forward Integration for
process to semi continuous process to semi continuous
downstream products downstream products downstream products
fluorination; technology has been fluorination; pilot study
and expansion also with and expansion also with and expansion also with
successfully commercialized for successfully completed and scale
in-house technology in-house technology in-house technology
one of its products up of the technology initiated
Continuous Vapour phase Continuous endeavour Continuous endeavour Continuous endeavour
Continuous Vapour phase
technology is under to improve product to improve product to improve product
technology is being validated in
implementation in pilot plant of quality and process quality and process quality and process
pilot plant
new product yields yields yields
Incorporation of advanced Efforts are made to Efforts are made to Efforts are made to
separation processes for recover products from recover products from recover products from
distillation like extractive the effluents and the effluents and the effluents and
distillation for current and future reduce impurities in by- reducing impurities in reducing impurities in
products products by-products by-products
Evaluation of micro reaction
technology for highly hazardous
chemical reactions
Benefits
Lower project cost for expansion
Reduction in cost of production
Reduction of carbon emissions, waste, and effluents
Enhancing safety and sustainability
Exhibit 186: Management Details
Name Designation Details
Shri Chandrakant V. Gogri founded Aarti Industries as a modest manufacturing facility
and aided in its evolution into the innovative company it is today. The Institute of
Shri Chandrakant V. Gogri Chairman Emeritus
Chemical Technology (ICT), previously known as the University Department of
Chemical Technology (UDCT), awarded him with a degree in Chemical Engineering.
Shri Rajendra V. Gogri has served as the company's Managing Director since 1993. He
Shri Rajendra V. Gogri Chairman and Managing Director has a Master of Science in Chemical Engineering from the United States, and holds a
rank from ICT, Mumbai.
Shri Rashesh C. Gogri was appointed as the company's Vice Chairman and Managing
Vice Chairman and Managing
Shri Rashesh C. Gogri Director in 2012. Prior to that, he served as the Company's Director from June 1997.
Director
He received a degree in Production Engineering from Mumbai University.
Since September 1984, Shri Parimal H. Desai has served as Executive Director of the
Shri Parimal H. Desai Executive Director Company. He is a Chemical Engineer from Mumbai's UDCT (ICT). He has over 35 years
of experience in process development and project implementation.
He graduated from Mumbai University with a degree in commerce and has over 28
Shri Manoj M. Chheda Executive Director
years of expertise in the marketing of specialty chemicals.
She got a Bachelor's degree in Electronics Engineering from Mumbai University, and
completed a programme in management education at IIM Ahmedabad. She handles
Smt. Hetal Gogri Gala Executive Director
the pharmaceuticals section, and is engaged in the company’s supply chain
management.
Renil R. Gogri was appointed as Executive Director of the Company. He has a
Bachelor’s of Technology (Mechanical) from IIT Bombay. He leads the Specialty
Renil R. Gogri Executive Director
Chemicals division's production processes, including people and excellence efforts,
adoption of IT advancements, sustainability initiatives, and projects.
Shri Kirit R. Mehta has served as Executive Director of the Company. He is a Commerce
Shri Kirit R. Mehta Executive Director
graduate with more than 35 years of expertise in corporate affairs management.
He joined the organisation in 2001. Utilising his 35 years of expertise, he leads the
Shri Narendra Salvi Executive Director pharmaceuticals division's operations, projects, regulatory compliances, and
sustainability efforts.

Exhibit 187: Key Team Members

Shri Rajendra V. Gogri Chairman and Managing Director
Shri Rashesh C. Gogri Vice Chairman and Managing Director
Shri Chetan Gandhi Chief Financial Officer
Shri Ajaykumar Gupta Chief Manufacturing Officer
Shri Raj Sarraf Company Secretary

Initiating Coverage
India I Chemicals
29 November, 2022
Anupam Rasayan India REDUCE

Price: Rs727
Custom synthesis player upping fluorination capabilities Target Price: Rs725
Forecast return: 0%
We like Anupam Rasayan India (Anupam) given (a) R&D backed synthesis, (b) entry Market Data
into fluorination, and (c) robust EBITDA margins. Anupam is an established custom Bloomberg: ANURAS IN
synthesis player primarily catering to the agrochem market for over four decades. The 52 week H/L: 1,108/547
company has unique reaction capabilities such as flow chemistry/photo chemistry and Market cap: Rs77.9bn
is enhancing its ante in fluorination through its investment in Tanfac. Long standing Shares Outstanding: 107.2mn
relationships with global MNCs such as Syngenta, Adama, UPL, Sumitomo, etc., have Free float: 34.8%
aided Anupam’s growth over the past few years. This is also reflected in multiple long- Avg. daily vol. 3mth: 176,004
term contracts of ~Rs28bn signed by Anupam during 2021-22. Due to its multi-step Source: Bloomberg
synthesis capabilities backed by a strong R&D team, Anupam is poised to capitalise on
ANURAS relative to Nifty Midcap 100
the CRAMS opportunity and is expected to continue its growth journey with 27-28%
155
EBITDA margins. We estimate FY22-25E Rev/EBITDA/PAT CAGR of 28%/29%/33%. We
initiate coverage on Anupam with a REDUCE rating and TP of Rs725 (0% upside) valuing 130
NIFTY Midcap 100
the company using SOTP methodology. 105
Inroads into fluorination with backward integration into HF through Tanfac 80 Anupam Rasayan
Anupam has been working on fluorination since past 5-6 years. It has worked on 55
fluorination using potassium fluoride (KF) compound and with Tanfac acquisition, the Nov-2 1 Jan-22 Mar-22 May-22 Jul-22 Sep-22 Nov-2 2
company would enhance its capabilities using hydrofluoric acid (HF). Anupam’s Source: Bloomberg
addressable market for value added fluorination products is ~USD5bn with revenue
potential of ~USD220-260mn p.a. over the next few years. The company has already Sep-22 Jun-22 Mar-22 Dec-21
identified and has plans to launch 14+ fluorination molecules over the next two years. Promoter 65.2 65.2 65.2 65.4
R&D backed synthesis/technical capabilities FIIs 4.6 5.0 5.7 5.7
Anupam is a R&D driven company serving the global MNCs with customized solutions. DIIs 4.4 4.0 3.1 3.2
In most of its products it is either a sole or second supplier which demonstrates its ability Public/other 25.9 25.9 26.0 25.7
to service the customer with right and consistent quality, quantity, price, and adhering Source: BSE
to timelines. Anupam’s growth has been fueled from repeat and incremental business
from these customers. Since April 2021, the company has secured 6 long-term contracts
with a total revenue potential of ~Rs28bn, further reinforcing customer confidence.
Robust EBITDA margins to continue
Barring FY19, Anupam has consistently delivered EBITDA margins in excess of ~22% with
average margin of ~24% over FY16-22 period. Margins are expected to remain high at
26-28% due to its R&D driven product slate and focus on niche chemistries.
Outlook and Valuation
New product launches, long-term contracts, and expansion into fluorination space are
expected to bolster top-line while maintaining margins at 26-28%. High WC concern is
addressed by Anupam through changing contracts to half yearly basis. Anupam recently
raised Rs5bn through QIP to fund its new capex, which reinforces growth visibility. The
stock is available at 29.2x/21.5x FY24E/FY25E EPS of Rs24.9/Rs33.7. We initiate with a
REDUCE rating and SOTP based TP of Rs725 valuing the company at a discount to other
specchem companies due to its lower asset turns and lower return ratios
Risks – Low asset turns, low return ratios, high inventories leading to high WC

Revenues 8,109 10,660 13,796 17,603 22,429
Chemicals
+91-022-4215 9645
Adj. Net profit 703 1,522 1,919 2,663 3,613
rohit.nagraj@centrum.co.in
Adj. EPS (Rs) 8.6 15.2 17.9 24.9 33.7
EPS growth (%) 22.8 77.4 0.0 0.0 0.0
PE (x) 84.9 47.9 40.6 29.2 21.5
EV/EBITDA (x) 28.0 20.3 14.7 11.4 9.1
PBV (x) 4.6 4.2 3.2 3.0 2.6 Jay Bharat Trivedi
RoE (%) 6.5 9.2 9.3 10.6 12.9 Research Associate, Chemicals
RoCE (%) 7.4 7.8 7.5 8.8 11.0 +91-022-4215 9201
Source: Company Data, Centrum Broking jay.trivedi@centrum.co.in
Anupam Rasayan India 29 November, 2022
Thesis Snapshot
Centrum Consensus Variance Centrum Consensus Variance We estimate FY22-25E Rev/EBITDA/PAT CAGR of 28%/29%/33%. The stock
YE Mar (Rs bn)
FY23E FY23E (%) FY24E FY24E (%) is available at 29.2x/21.5x FY24E/FY25E EPS of Rs24.9/Rs33.7. We initiate
Revenue 13,796 14,472 (4.7) 17,603 18,375 (4.2) coverage on Anupam with a REDUCE rating and SOTP based TP of 725.
EBITDA 3,808 4,001 (4.8) 4,928 4,964 (0.7)
SOTP 1HFY25E EPS PE (x) Value (Rs/ share)
PBT 2,657 2,901 (8.4) 3,716 3,871 (4.0)
Anupam 27.9 25 698
PAT 1,919 2,000 (4.0) 2,663 2,759 (3.5)
Tanfac 1.4 20 28
Target price 725
Anupam vs. NIFTY Midcap 100
1m 6m 1 year P/E mean and standard deviation
65
ANURAS IN (6.3) (0.6) (9.3)
NIFTY midcap 100 2.0 17.3 2.1
55
45
Key assumptions
YE Mar FY23E FY24E FY25E 35
Revenue growth (%) 29.4 27.6 27.4
EBITDA margin (%) 27.6 28.0 28.2 25
Mar-21
Mar-22
Jan-22
May-21
May-22
Nov-21
Nov-22
Jul-21
Jul-22
Sep-21
Sep-22
P/E Mean
35
30
25
20
15
10
Mar-22
May-22
Jan-22
Oct-22
Nov-21
Nov-22
Dec-21
Apr-22
Jul-22
Jun-22
Feb-22
Aug-22
EV/EBITDA Mean Sep-22

Peer comparison
Company
Atul Ltd. 242.1 16.8 21.2 19.4 37.9 28.9 23.5 24.6 18.4 15.0 14.6 14.2 0.3
Deepak Nitrite 287.6 13.7 12.4 14.2 32.1 21.1 18.0 21.1 14.3 12.1 37.5 33.5 0.3
SRF 675.5 17.7 18.2 18.2 31.2 26.0 21.5 19.7 16.5 13.7 24.5 18.0 0.3
Vinati Organics 215.0 28.8 25.6 26.6 48.4 38.8 30.7 37.1 30.4 24.7 20.6 20.5 0.0

Company overview
Anupam is one of the leading specialty chemicals companies in India engaged in custom
synthesis and manufacturing. The company has a strong R&D backbone which forms one of
the key strengths apart from its excellent customer service. Its custom-made solutions
approach for the diverse needs and requirements of customers has earned it global
recognition coupled with long association with several global chemical and agrochemical
companies including many large MNCs.
Exhibit 188: Key highlights (FY22)
Proven track record/ history 38 years
Complex products manufactured 49 products
Capacity 27,200 MTPA
Clients 71 of which 27 MNCs
Team members 1,516
R&D team members 85
Customer profile, concentration

It caters to over 71 global customers including 27 MNCs across the spectrum of specialty
chemicals and agrochemicals.
Exhibit 189: Anupam’s key customers
Anupam has a high customer concentration with ~80% of its revenues generated from top
10 customers in FY22. However, the revenues are diversified with top 10 customers’
revenues spread across 24 products. For its key customers, the company has contracts
ranging from two years to five years, providing revenue visibility.

Exhibit 190: Customer concentration
87
81
80
74
FY19 FY20 FY21 FY22

Manufacturing footprint, R&D capabilities

Anupam has 6 multi-purpose manufacturing capacities located at Sachin and Jhagadia in
Gujarat. The company, till date, has cumulative installed capacity of ~27,200MT. The
company’s capacity expansion is in line with the product demand. Also, being multipurpose
facilities, the capacities are fungible.
Exhibit 191: Anupam’s manufacturing capacity (MTPA)
27,157
24,295
23,396
14,882
12,178
FY18 FY19 FY20 FY21 FY22

Being an R&D driven company, Anupam specializes in multi-step synthesis, undertaking

complex chemical reactions with a strong focus on developing innovative manufacturing
processes. It has a DSIR recognized R&D center. Company’s flow chemistry skills are
recognized by Corning and Anupam has received the ‘Corning Green Innovation FlowTM
Award’ for customer excellence in Advanced Reactor applications development in 2015.
Over the past five years, the company has expanded its R&D strength significantly with new
Unit at Sachin. By end-FY22, the company had R&D strength of over 77 personnel. Expanded
R&D capabilities is also reflected in expanded product bracket which over the past five years
has almost doubled from 25 products in FY18 to 48 products in FY22.

Exhibit 192: Upgraded R&D capabilities
Segments
Anupam has two business segments i.e., Life science related Specialty Chemicals and Other
Specialty Chemicals. During FY22, life science specialty chemicals accounted for 90% of
revenues while the rest was from other specialty chemicals. Life science specialty chemicals
primarily cater to agro and pharma segments while the other chemicals segments form part
of the other specialty chemicals.
Exhibit 193: Segments, applications
Segment Industry catered Products
Agrochemicals/ crop protection Agro intermediates and agro active ingredients
(insecticides, fungicides, herbicides)
Life Science specialty Anti-bacterial and ultraviolet protection
Personal care
chemicals intermediates and ingredient
Intermediates and ‘key starting materials’ for
Pharmaceuticals
APIs, material sciences and surface chemistry
Other specialty Specialty Pigments, Specialty Dyes,
chemicals and Polymer Additives
Exhibit 194: Anupam – Growth journey

Fluorination – The next frontier
To strengthen its presence in the expanding fluorination space, Anupam acquired 26% stake
in Tanfac along with management control. Over the past 5-6 years, Anupam has expanded
its fluorination capabilities under R&D and is poised to commercialize these products.
Through Tanfac acquisition, the company has secured supplies of key RMs – HF and KF,
strengthening its supply chain.
Anupam has already successfully integrated key areas of Tanfac including Finance, IT, and
HR. Moreover, it plans to increase Tanfac’s capacities of existing product portfolio through
process improvement and debottlenecking
Tanfac acquisition highlights

Tanfac, a Specialty Fluoride chemical manufacturer, incorporated in 1972, is the leading
producer of Hydrofluoric acid (HF) and organic and inorganic Fluorine based products
such as aluminium fluoride, sodium silico fluoride, potassium fluoride (KF), and sulfuric
acid.
Tanfac acquisition was funded through debt, wherein the company acquired an
aggregate of 25.79% voting share capital of Tanfac, as on May 20, 2022, which includes:
24.96% voting share capital acquired from the sellers Aditya Birla Group for the
consideration of Rs.1.5bn (on March 11, 2022)
0.83% voting share capital of Tanfac at a consideration of Rs495.5mn from the
public shareholders through an Open Offer floated by the company, in compliance
with the SEBI (SAST) Regulations (completed on May 20, 2022)
Exhibit 195: TANFAC integration benefits
Fluorination opportunity
Under fluorination segment, the company has identified 14 molecules across polymers,
pharma, and agrochem space which have been developed in R&D and pilot scale. Anupam
plans to commercialize them over the next two years. All of these molecules are high value,
high margin products and Anupam will be the single exclusive supplier out of Asia for the
global innovators.
Total addressable market (TAM) for the targeted molecules is ~USD5bn+ with Anupam’s
revenue potential estimated at USD220-260mn p.a. We believe Anupam’s legacy of serving
the innovators shall help it in establishing presence in this new space. Also, generally
fluorochemicals earn high margins which will in turn lift the overall margins in future.
However, we haven’t considered any such margin upside from this segment.

Exhibit 196: Anupam’s overall opportunity size of USD220-260mn p.a. in fluorination
Anupam is working on few molecules under the fluorospecialty space for Indian pharma
MNCs. Based on the total addressable global market of ~USD3.5bn for these intermediates,
Anupam’s revenue potential is estimated at USD80-90mn.
Exhibit 197: Fluorospecialty – Pharma opportunity
Apart from the fluorospecialty intermediates for pharma and agro, Anupam is also eyeing
on intermediates for fluoropolymers. Fluoropolymers is a large, expanding global market
with a market size of ~USD8.1bn. The market is growing significantly faster than other
chemical segments due to the newer applications evolving across renewable energy space.
Of the total USD600mn addressable market for Anupam, revenue potential is expected at
USD40-70mn. For these fluoropolymers intermediates, Anupam will be the sole
manufacturer from India.
Exhibit 198: Fluoropolymers intermediates opportunity size of USD40-70mn

Product commercialization supported by strong R&D

Anupam is R&D driven company and boasts of a strong R&D team comprised of over 85
professionals. The company is among very few who have been using continuous flow
technology and has received the ‘Corning Green Innovation Award’ for customer excellence
in Advanced-Flow Reactor applications development for 2015. The R&D is equipped with
multi-step synthesis skills and is capable of handling different kinds of reactions.
Exhibit 199: R&D focus areas
Anupam has multitude of chemistry/ synthesis skills ranging from amination, alkylation,
diazotization, fluorination among others. With its investment in R&D infrastructure and
personnel, it is further expanding its capabilities into other chemistries/ reaction areas.
Exhibit 200: Key chemistry capabilities
Anupam’s product basket has expanded from 25 products in FY18 to 48 products in FY22.
During the period, it has commercialized 17 life science related specialty chemicals and 6
products in other specialty chemicals. During FY22, four products were commercialized and
it plans to commercialize seven products in FY23. The company had four molecules
contributing more than USD10mn in FY22, which is expected to move up to seven molecules
in FY23E, due to scale up of new molecules commercialized over the past 2-3 years.

Exhibit 201: Complex value added product profile

Molecules contributing USD10mn+ revenue in FY22 4
Molecules expected to contribute USD10mn+ revenue in FY23 7
Number of molecules commercialised in FY23 7
Number of molecules in R&D and Pilot >90
Anupam caters to major innovators in the pharmaceuticals and agrochemicals industry.

Prominent clients include Syngenta, Adama, Sumitomo Chemical, UPL, etc. with whom the
company has long-term relationships. This has enabled the company to increase wallet
share of existing products and to earn new projects.
Exhibit 202: Long term MNC partners
Process capabilities
Continuous process technology
Anupam has been consistently striving to upgrade its processes and products from batch to
continuous process technology. Currently, it uses continuous process technology for
carrying out chemical reactions including diazotization, hydrolysis, nitration, chlorination
and distillation.
These continuous processes can be undertaken under flow reactors i.e. flow chemistry, and
photo reactors i.e. photochemistry. Key advantages of continuous processes are…
Reduced batch cycle time
Safer, environment friendly, energy and cost efficient
Small and easy to handle equipment
Eliminate contamination particularly in pharma segment
Flow chemistry – Anupam is one of the early adopters of flow chemistry and is among the
leading Indian companies in manufacturing products using continuous and flow chemistry
technology on a commercial scale. Continuous processes have significant advantages over
conventional batch processes such as…
Flow screening techniques can rapidly search a multi-dimensional reaction space to
improve process design, performance, and efficiency
Time-efficient and material-efficient flow screening platforms can be utilized to
develop the next generation of process development technologies including predictive
reaction models and process scale-up strategies
Huge opportunity for flow chemistry technology in specialty chemicals, specifically
pharmaceuticals, as it reduces the cost and lead-time significantly
Photo chemistry – It is a relatively new technology for specialty chemicals but is increasingly
gaining importance in search of new active compounds for specialty chemicals &
pharmaceuticals. It offers advantages such as…
Achieving highly sustainable production
Shorter and simplified multistep synthesis of complex molecules and typically, a high
molecular complexity is generated in one step from simple precursors
Larger potential for automation
Increased accessibility of a portfolio of novel compound families

Strong margin visibility

Anupam, in the past has demonstrated sustainability of high EBITDA margins. Margins
averaged ~24% over FY16-22. Margin traction is supported from its technology backbone,
customized products, being the only or second supplier for customers, and scalability of
molecules. We believe, its forte into niche chemistries will aid in sustaining margins for
existing products. Incrementally, fluorochemicals may offer better than current company-
wide margins, however we are not factoring the same in our estimates as of now.
Exhibit 203: EBITDA margins expected to remain at ~28%
EBITDA EBITDA Margin
27.7 27.9 27.6 28.0 28.2

25.5
24.4 23.9
21.5
18.6
6.3
4.9
3.0 3.8
1.3 1.9
0.8 0.7 0.7 0.9

Financial analysis
During FY19-22, Anupam reported revenue/EBITDA/PAT CAGR of 28.6%/47.2%/45.7%.
EBITDA margins improved substantially from 18.6% in FY19 to 27.9% in FY22. Improvement
in EBITDA margins was propagated primarily from gross margin expansion which surged
from 48.7% in FY19 to 65.3% in FY22. During FY22, Anupam witnessed 31.5% yoy surge in
revenues to Rs10.7bn (Rs8.1bn). EBITDA margins expanded 600bps yoy to 27.9% (23.9%)
primarily driven by gross margin expansion.
Operating revenue PAT EBITDA EBITDA Margin
10.7
27.7 25.5 27.9
23.9
8.1 24.4
21.5
18.6
5.0 5.3
3.4
2.9 2.9
1.5 1.9 3.0
0.5 0.7 0.8 0.7 0.7 0.9 1.3
0.4 0.3 0.4 0.5
Lower interest outgo due to debt repayment through IPO proceeds led to robust 116.5%
yoy surge in bottom-line to Rs1,522mn (Rs703mn) in FY22.
Exhibit 206: Domestic/exports mix (Rs bn)
Domestic Exports
6.0
4.7
3.0 3.6
2.0 4.7
3.4
2.0 1.7
1.4

Anupam’s life science specialty chemicals segment remains the largest business segment
and accounted for over 90% of its total revenues in FY22. Other specialty chemicals segment
has also gained traction over the past five years with revenues quadrupling from Rs253mn
in FY18 to Rs1,086mn by FY22. Nonetheless, company’s focus remains on the life science
specialty chemicals with a strong product pipeline.

Exhibit 207: Segmental revenue break-up (Rs mn)

Life Science Specialty chemicals Other Specialty Chemicals
1,086
680
338 245
9,543
7,429
253
4,677 5,044
3,162

Anupam’s mix has skewed towards domestic since past three years. During FY22, domestic
sales accounted for 44% of total revenues while exports accounted for 66%. However, with
commissioning of new long-term contracts, share of exports is expected to move up.
Exposure to Europe is the highest and it accounted for 47% (48%) of export sales during
FY22. Japan and Singapore are also key exports geographies. The ongoing issues in Europe
may not affect Anupam significantly as its product basket is agrochemicals focused which is
relatively resilient than other chemical segments.
Exhibit 208: Europe heavy exports basket (%) Exhibit 209: Region wise revenue split (FY22)
Europe India Singapore Singapore
Japan China North America 11%
ROW
China
3.0 3.0 3.0 1.0 1.0 4%
1.0 1.0 4.0 4.0 1.0 Japan
7.0 6.0
12.0 12.0 15.0 12.0 12%
17.0 10.0 11.0 North
40.0 America
40.0 1%
32.0 42.0 44.0 India
45%
Europe
43.0 37.0 36.0 26% ROW
28.0 26.0 1%

Capex decisions are made on the basis of LOIs entered with the customers. During FY17-20,
Anupam invested ~Rs8bn in capex which is yet to be utilised fully hence capex run-rate has
slowed down over the past couple of years.
Exhibit 210: Capex momentum slowed in past couple of years
Gross block Capex
13.7
12.3
10.4
7.7
4.5
3.7
3.0 2.6 2.5
1.8 1.4
0.9 1.3
2.0

Valuations
Anupam registered a strong operational performance over FY20-22 with revenue/ EBITDA/
PAT CAGR of 42.0%/48.5%/69.1%. EBITDA margins too improved from 25.5% in FY20 to
27.9% in FY22. Surge in bottom-line, which was higher than EBITDA growth was supported
by reduction in interest outgo as the company repaid debt from IPO proceeds.
Management has guided 30% top-line growth over the next couple of years. We believe
that the company is well positioned to achieve higher growth due to rising demand for
existing products, new product commercialization, commencement of long-term
contracted supplies, and associate income from Tanfac. Thus, we expect
revenue/EBITDA/PAT CAGR of 28.1%/28.6%/33.4% over FY22-25E. We expect EBITDA
margins to hover at ~28%; margins may exhibit upward trend from commercialization of
fluorination products.
Exhibit 211: Financial performance (Rs mn)
FY20-22 FY22-25E
CAGR% CAGR%
Revenues 5,289 8,109 10,660 13,796 17,603 22,429 42.0 28.1
EBITDA 1,348 1,938 2,970 3,808 4,928 6,320 48.5 28.6
EBITDA % 25.5 23.9 27.9 27.6 28.0 28.2
PAT 532 703 1,522 1,919 2,663 3,613 69.1 33.4
EPS 6.9 7.0 15.2 17.9 24.9 33.7 47.6 30.5
We like Anupam given (a) R&D backed synthesis, (b) entry into fluorination, and (c) robust
EBITDA margins. We believe that the company will be able to hold its high growth rate with
product basket expansion coupled with its foray into fluorination space. We have valued
Anupam on SOTP methodology considering EBITDA margin differential between the
standalone Anupam business and acquired entity, Tanfac. Hence, we have assigned 25x to
Anupam’s standalone business which has 25%+ EBITDA margins and 20x for Tanfac which
has sub-20% EBITDA margins. We have valued Anupam’s business at lower than other
specchem company multiples due to its lower asset turns and lower return ratios. Based on
our SOTP methodology, we initiate coverage with a REDUCE rating and TP of Rs725 (0%
upside).
Exhibit 212: SOTP valuation
SOTP valuation 1HFY25E EPS PE (x) Value (Rs/ share)
Anupam 27.9 25 698
Tanfac 1.4 20 28
Target price 725

Risks
Lower asset turns, lower return ratios
Anupam’s asset turns are lower than industry average while return ratios are also muted.
Although with higher utilisation levels, both, asset turns and return ratios are expected to
improving going forward, we believe it is still a bit far away and a likely cause for lower
valuations.
Exhibit 213: Low asset turns, improvement still a bit far Exhibit 214: Return ratios to improve going ahead (%)
ROE ROCE
Gross block turnover ratio (x)
33.5
0.93 0.95
0.85 0.89 Increase in debt due to high
0.76 0.77 0.78 WC req. led to deterioration
0.65 0.66 in return ratios
0.51 18.7
17.5
11.7 10.2 12.9
9.7 9.2 9.3 10.6
7.4
11.0 11.0
7.5 7.0 6.5 7.8 7.5 8.8
7.0
High working capital

Historically, Anupam has been roiled under high working capital. Earlier the company had
year-long contracts for which it simultaneously invested in inventories, thus impacting the
WC. During last couple of quarters, the company has renegotiated these contracts with a
half yearly reset, which shall incrementally alleviate WC concerns aiding the return ratios.
Recently, Anupam has raised Rs5bn through QIP for its capex plans. With this additional
capital, CFs from operations can be utilized to curb the debt.
Demand challenges
Current product slate is agrochem heavy and any demand related challenges due to the
issues in Europe and the US may impact growth for the company.
Delay in commercialization of fluorination products
The company has been working on fluorination, however has not commercialised any
products yet. Fluorination being a niche area, may suffer from prolonged teething issues
during commercialisation, which can hamper Anuapm’s growth prospects.

Story in charts
Operating revenue PAT 22.4 EBITDA EBITDA Margin
17.6
27.7 27.9 27.6 28.0 28.2
24.4 25.5
13.8 23.9
21.5
10.7
18.6
8.1
5.0 5.3 6.3
2.9 2.9 3.4 3.5 3.8 4.9
1.9 2.6 3.0
0.7 1.5 0.9 1.3 1.9
0.4 0.3 0.4 0.5 0.5 0.8 0.7 0.7
Exhibit 217: Geography wise revenue split (Rs bn) Exhibit 218: Domestic/exports mix
Domestic Exports Domestic % Exports %
6.0 58.0 56.0

60.0 60.0
68.0
4.7
3.0 3.6
2.0 4.7 44.0
3.4 40.0 40.0 42.0
2.0 32.0
1.4 1.7
Exhibit 219: Europe heavy exports basket (%) Exhibit 220: Region wise revenue split (FY22)
Europe India Singapore Singapore
Japan China North America 11%
ROW China
4%
3.0 3.0 3.0 1.0 1.0
1.0 1.0 4.0 4.0 1.0 Japan
7.0 6.0
12.0 12.0 15.0 12.0 12% North
17.0 10.0 11.0
America
40.0 India 1%
40.0
32.0 42.0 44.0 45%
Europe ROW
43.0 37.0 36.0 26% 1%
28.0 26.0

Exhibit 221: Accelerated capex in FY22-25E (Rs bn) Exhibit 222: Stretched WC cycle
Gross block Capex Debtor days Inventory days Creditors days
23.7
669
19.7 621
515
16.2
427 425 449
13.7
12.3 328
10.4 264 261
7.7 211 199 211
177 178 186
4.5 117 128 136
3.0 3.7 3.5 96
2.6 2.5 4.0
2.5 1.8 1.3 1.4 52
2.0 0.9 49 77 76 86 75 83 83 81 81
14

Exhibit 223: Declining debt, benefitting D/E

Debt/Equity
1.62
1.20 1.24
1.07
0.83
0.35
0.07 0.08 0.11
(0.00)
Operational charts
Exhibit 224: Capacity expansion commensurate with Exhibit 225: Revenue contribution – Top 10 customers
visibility
Top 10 Customers Others
27,157
23,396 24,295
20%
14,882
12,178
80%

Quarterly trend
Revenues 2,197 1,841 2,717 2,337 2,489 2,662 3,172 3,066 3,107 24.8 1.3
Q-o-Q gr. (%) 62.3 (16.2) 47.6 (14.0) 6.5 6.9 19.2 (3.4) 1.3
Raw Mat. Cons. 1,102 559 1,213 874 897 900 1,028 1,127 1,155 27.9 2.5
% of net sales 50.1 30.4 44.7 37.4 36.0 33.8 32.4 36.8 37.2
Employee Costs 59 71 120 109 128 123 126 127 141 10.7 11.7
% of net sales 2.7 3.8 4.4 4.6 5.1 4.6 4.0 4.1 4.6
Others 593 678 753 748 824 888 1,046 873 893 8.3 2.2
% of net sales 27.0 36.8 27.7 32.0 33.1 33.3 33.0 28.5 28.7
EBITDA 444 534 630 607 640 751 973 939 917 44.6 (2.3)
Q-o-Q growth (%) 34.3 20.3 18.1 (3.7) 5.5 17.3 29.6 (3.5) (2.3)
EBITDA Margin (%) 20.2 29.0 23.2 26.0 25.7 28.2 30.7 30.6 29.5
Dep. & Amor. 127 131 133 144 148 155 154 157 162 9.1 2.9
EBIT 316 402 497 463 492 596 819 782 756 55.5 (3.3)
Interest exp. 173 144 190 66 52 52 138 122 158 202.5 29.8
Other Income 192 55 25 43 62 50 -4 -94 -20 - -
EBT 336 313 332 440 502 593 677 566 578 16.5 2.2
Provision for tax 73 96 110 118 141 214 223 192 166 20.3 (13.3)
Eff. tax rate (%) 21.8 30.8 33.3 26.9 28.1 36.1 33.0 33.8 28.7
Net Profit 263 216 221 321 361 379 454 374 412 15.0 10.0
Q-o-Q gr. (%) 11,478.0 (17.6) 2.3 45.1 12.3 5.1 19.7 (17.5) 10.0
PAT Margin (%) 11.0 11.4 8.1 13.5 14.1 14.0 14.3 12.6 13.3

P&L Balance sheet

Employee cost 324 485 606 758 947 Shareholders fund 15,734 17,269 23,996 26,393 29,645
Depreciation & Amortisation 517 601 696 845 1,015 Non Current Liabilities 322 195 195 195 195
EBIT 1,421 2,369 3,113 4,083 5,304 Def tax liab. (net) 244 546 546 546 546
Interest expenses 685 308 446 417 287 Total liabilities 19,207 26,177 31,905 33,301 34,553
Other income 264 151 (10) 50 60 Gross block 12,318 13,680 16,180 19,680 23,680
Taxes 297 697 850 1,189 1,625 Net block 10,656 11,467 13,279 15,943 18,936
Effective tax rate (%) 29.7 31.5 32.0 32.0 32.0 Capital WIP 432 437 437 437 437
PAT 703 1,515 1,806 2,527 3,452 Net fixed assets 11,583 12,459 14,274 16,939 19,933
Minority/Associates 0 7 113 136 161 Non Current Assets 250 492 492 492 492
Recurring PAT 703 1,522 1,919 2,663 3,613 Investments 0 1,488 1,488 1,488 1,488
Extraordinary items 0 0 0 0 0 Inventories 4,922 8,632 9,197 9,535 11,214
Reported PAT 703 1,522 1,919 2,663 3,613 Sundry debtors 2,055 2,801 3,449 4,401 5,607
Cash & Cash Equivalents 2,957 2,097 5,585 4,117 940
Ratios Loans & advances 114 40 40 40 40
Other current assets 1,098 896 896 896 896
Revenue 53.3 31.5 29.4 27.6 27.4 Other current liab. 1,623 359 359 359 359
EBITDA 43.8 53.3 28.2 29.4 28.2 Provisions 153 92 92 92 92
Adj. EPS 22.8 77.4 0.0 0.0 0.0 Net current assets 7,374 11,738 15,651 14,383 12,640
Gross 58.2 65.3 62.0 62.3 62.4
EBITDA 23.9 27.9 27.6 28.0 28.2 Cashflow
Returns (%) Depreciation & Amortisation 517 601 696 845 1,015
ROE 6.5 9.2 9.3 10.6 12.9 Net Interest 685 308 446 417 287
ROCE 7.4 7.8 7.5 8.8 11.0 Net Change – WC (1,743) (5,351) (426) (199) (1,435)
ROIC 6.6 6.7 8.0 9.5 10.7 Direct taxes (244) (394) (850) (1,189) (1,625)
Turnover (days) Net cash from operations (50) (2,769) 2,646 3,676 3,421
Gross block turnover ratio (x) 0.7 0.8 0.9 0.9 0.9 Capital expenditure (1,299) (1,373) (2,510) (3,510) (4,010)
Inventory 425 669 621 515 449 Investments 4 (1,488) 0 0 0
Creditors 178 211 186 199 211 Others 264 151 (10) 50 60
Net working capital 332 402 414 298 206 Net cash from investing (1,031) (2,710) (2,520) (3,460) (3,950)
Solvency (x) FCF (1,080) (5,479) 126 216 (529)
Net debt-equity 0.0 0.4 0.1 0.1 0.1 Issue of share capital 499 3 5,000 0 0
Interest coverage ratio 2.8 9.6 8.5 11.8 22.0 Increase/(decrease) in debt (4,711) 5,260 (1,000) (1,000) (2,000)
Net debt/EBITDA 0.0 2.0 0.4 0.4 0.5 Dividend paid 0 (100) (192) (266) (361)
Per share (Rs) Interest paid (685) (308) (446) (417) (287)
Adjusted EPS 7.0 15.2 17.9 24.9 33.7 Others 8,121 (1,911) 0 0 0
BVPS 157.5 172.3 224.0 246.3 276.7 Net cash from financing 3,224 2,944 3,362 (1,683) (2,648)
CEPS 12.2 21.2 24.4 32.7 43.2 Net change in Cash 2,143 (2,534) 3,488 (1,467) (3,177)
Dividend payout (%) 0.0 6.6 10.0 10.0 10.0
Valuation (x)
P/E 84.9 47.9 40.6 29.2 21.5
P/BV 4.6 4.2 3.2 3.0 2.6
EV/EBITDA 28.0 20.3 14.7 11.4 9.1
Dividend yield (%) 0.0 0.1 0.2 0.3 0.5

Appendix
Exhibit 227: Management details
Dr. Patel is a qualified medical practitioner, holding a degree in Bachelor’s of Medicine

Chairman & Non-Executive and Bachelor of Surgery from Gujarat University and having secured diplomas in the
Dr. Kiran C. Patel
Director specialty of internal medicine and the subspecialty of cardiovascular diseases from the
American Board of Internal Medicine.
Mr. Desai has Bachelor’s degree of Science from Vinoba Bhave University. Mr. Desai is
Mr. Anand S. Desai Managing Director one of the first Directors of the company, being associated with it since 1992 and with
the chemicals industry for close to three decades.
Ms. Desai holds a Bachelor’s of Home Science from Shreemati Nathibai Damodar
Vice-Chairperson & Thackersey Women’s University. She has been associated with the Board of the
Ms. Mona A. Desai
Whole-Time Director company since 2003 and brings nearly two decades of experience in the chemicals
industry
Exhibit 228: Key team members

Mr. Anand S. Desai Managing Director
Mr. Amit Khurana CFO
Ms. Suchi Agarwal Company Secretary and Compliance Officer
Dr. Nileshkumar Naik Technical Head
Dr. Anuj Thakar R&D (Process Development) Head And Unit II Head
Mr. Ravi Desai Head Sales & Marketing
Mr. Vikash Chander Senior Business Manager
Mr. Vishal Thakkar Deputy Chief Financial Officer

Initiating Coverage
India I Chemicals
29 November, 2022
Atul Ltd BUY

Price: Rs8,202
Transforming from conservative to aggressive Target Price: Rs9,480
Forecast return: 16%
We are positive on Atul Ltd. (Atul) owing to (a) rising capex momentum, (b) huge land Market Data
availability, (c) debt-free balance sheet, and (d) strong R&D skills and adherence to EHS Bloomberg: ATLP IN
policies. Traditionally, Atul has been a conservative chemical company with capital 52 week H/L: 10,849/7,743
allocation purely based on strong growth visibility. However, due to change in global Market cap: Rs242.1bn
chemical industry dynamics with a large domestic as well as exports opportunity, the Shares Outstanding: 29.5mn
investment philosophy has changed during last couple of years with capex of Rs5.9bn Free float: 55.0%
in FY22 vs. earlier yearly run rate of Rs2.5-3.0bn. Notably, by end-FY22, investments Avg. daily vol. 3mth: 33,844
for the projects under implementation stood at ~Rs17bn signifying aggressive capex in Source: Bloomberg
place. We estimate FY22-25E Revenue/EBITDA/PAT CAGR of 17%/21%/19%. We
ATLP relative to Nifty Midcap 100
initiate coverage on Atul with a BUY rating and TP of Rs9,480 (16% upside) valuing the
130
company at 30x FY24E-25E avg. EPS of Rs316.
120 NIFTY Midcap 100
Investments under implementation of ~Rs17bn 110
Before FY22, Atul’s capex drive was conservative; over FY16-21, the company invested 100
~Rs16bn, however in FY22 alone it has invested ~Rs6bn while by end-FY22 the projects 90
Atul Ltd
under implementation stood at ~Rs17bn. This capex trajectory clearly signifies the
80
change/aggression propagated by the impending growth opportunities in the chemicals Nov-2 1 Jan-22 Mar-22 May-22 Jul-22 Sep-22 Nov-2 2
sector. We believe with a large land bank at its disposal and project management Source: Bloomberg
capabilities Atul is set for a renewed growth drive.
Diversified chemicals conglomerate Sep-22 Jun-22 Mar-22 Dec-21
Over the years, Atul has transformed itself from a dyestuff manufacturing company to Promoter 45.1 45.1 44.9 44.9
diversified chemicals company catering to large domestic and international customers. FIIs 9.2 8.8 9.2 10.0
Diversification provides cushion from any particular segment related headwinds. DIIs 23.0 23.0 23.1 21.9
Debt-free balance sheet with rising return ratios Public/other 22.8 23.2 22.7 23.2
Source: BSE
Atul has been virtually debt-free since FY16. Healthy FCF generation without significant
capex has further strengthened the company’s balance sheet over the past few years.
Despite the large capex in FY22, the company still remains debt-free and boasts of
Rs7.5bn investments on its balance sheet. Return ratios which remained depressed in
FY22 due to challenging operational environment are expected to rise incrementally.
Outlook and valuation
FY20-22 period was a transition period for Atul with muted financial performance. Post-
Covid, in FY22 the performance got impacted due to cost/logistics inflation and
company’s inability to pass on the increases completely. With alleviating RM inflation
and cost concerns, performance is expected to improve going ahead. Partially executed
capex of ~Rs4bn along with ongoing capex of ~Rs16bn holds ~Rs23bn revenue potential
at optimal utilisation levels, thus providing growth visibility. The stock is available at
28.9x/23.5x FY24E/FY25E EPS of Rs283.6/Rs348.4. We initiate coverage with a BUY
rating and TP of Rs9,480.
Risks – Project execution delays, demand slowdown from domestic/ exports market

Revenues 37,315 50,809 58,545 68,562 80,862
EBITDA 9,171 9,114 9,864 13,186 16,212
EBITDA margin (%) 24.6 17.9 16.8 19.2 20.0 Rohit Nagraj
Adj. Net profit 6,558 6,043 6,392 8,368 10,282 Research Analyst, Chemicals
Chemicals
+91-022-4215 9645
Adj. EPS (Rs) 222.2 204.8 216.6 283.6 348.4
EPS growth (%) (1.6) (7.9) 5.8 30.9 22.9
PE (x) 36.9 40.1 37.9 28.9 23.5
EV/EBITDA (x) 26.1 26.6 24.6 18.5 15.0
PBV (x) 6.3 5.5 4.8 4.2 3.6
RoCE (%) 18.3 14.2 13.2 15.2 16.3 +91-022-4215 9201
Source: Company, Centrum Broking jay.trivedi@centrum.co.in
Atul Ltd 29 November, 2022
Thesis Snapshot
YE Mar Centrum Consensus Variance Centrum Consensus Variance We estimate FY22-25E Revenue/EBITDA/PAT CAGR of 17%/21%/19%. The
(Rs bn) FY23E FY23E (%) FY24E FY24E (%) stock is available at 28.9x/23.5x FY24E/FY25E EPS of Rs283.6/Rs348.4. We
Revenue 58,545 59,867 (2.2) 68,562 67,230 2.0 initiate coverage on Atul with a BUY rating and TP of Rs9,480 (16% upside)
EBITDA 9,864 10,272 (4.0) 13,186 12,698 3.8 valuing the company at 30x FY24E-25E avg. EPS of Rs316.
PBT 8,599 8,914 (3.5) 11,210 11,061 1.4 Valuations Rs/share
PAT 6,392 6,915 (7.6) 8,368 8,575 (2.4) 1HFY25E EPS 316
Atul vs. NIFTY Midcap 100 Target Price 9,480
1m 6m 1 year
ATLP IN 0.1 2.6 (3.5)
NIFTY midcap 100 2.0 17.3 2.1
55
45
Key assumptions 35
25
Revenue growth (%) 15.2 17.1 17.9
EBITDA Margin (%) 16.8 19.2 20.0 15
5
May-18
May-19
May-20
May-21
May-22
Nov-17
Nov-18
Nov-19
Nov-20
Nov-21
Nov-22
P/E Mean
40
30
20
10
0
May-18
May-19
May-20
May-21
May-22
Nov-17
Nov-18
Nov-19
Nov-20
Nov-21
Nov-22
EV/EBITDA Mean
Peer comparison
Company
Atul Ltd. 242.1 16.8 21.2 19.4 37.9 28.9 23.5 24.6 18.4 15.0 14.6 14.2 0.3
Deepak Nitrite 287.6 13.7 12.4 14.2 32.1 21.1 18.0 21.1 14.3 12.1 37.5 33.5 0.3
SRF 675.5 17.7 18.2 18.2 31.2 26.0 21.5 19.7 16.5 13.7 24.5 18.0 0.3
Vinati Organics 215.0 28.8 25.6 26.6 48.4 38.8 30.7 37.1 30.4 24.7 20.6 20.5 0.0

Company overview
Atul is one of the pioneers of chemical manufacturing in Independent India. Incorporated
on September 05, 1947, Atul commenced its first plant in the year 1952 with production of
dyes for the first time in India.
Over the years, Atul’s business has been diversified across chemical segments catering to
varied industries such as Adhesives, Agriculture, Animal Feed, Automobile, Composites,
Construction, Cosmetic, Defence, Dyestuff, Electrical & Electronics, Flavor, Food, Footwear,
Fragrance, Glass, Home Care, Horticulture, Hospitality, Paint & Coatings, Paper, Personal
Care, Pharmaceutical, Plastic, Rubber, Soap & Detergent, Sport & Leisure, Textile, Tyre and
Wind Energy.
The company has classified its business into two broader segments i.e., Life science
chemicals and Performance & other chemicals. Further, the Life science chemicals segment
has two sub segments i.e., crop protection and pharmaceuticals. The Performance & other
chemicals segment is sub-segmented into aromatics, bulk chemical and intermediates,
colours, and polymers.
Exhibit 229: Segments, products, applications
Segment Sub Segment Product Application
2, 4-D, Indoxacarb, Isoprothiolane and
Product portfolio comprises 34 products and 70
Crop protection Sulfonylurea herbicides are some of the key
formulations catering to crop protection.
products
Life Science chemical The products under these product groups are used
segment Dapsone and acyclovir (APIs) carbonates, for various therapeutic categories such as
Pharmaceutical chloroformates and carbamoyl chloride antidepressant, antidiabetic, anti-infective,
derivatives (key intermediates) antifungal, antiretroviral and cardiovascular. The
product groups comprise 85 products.
para-Cresol, para-Anisicaldehyde and para- Personal Care, Fragrance, etc., group comprises of
Aromatics
Cresidine 37 products.
Bulk Chemical and Resorcinol, Resorcinol–formaldehyde resin and Cosmetic, Dyestuff, Pharmaceutical and Tyre
Intermediaries 1, 3–Cyclohexanedione industries. Group comprises 23 products.
The product groups comprise 430 products.
Vat Green 1, Sulphur Black 1 and Pigment Red
Performance and Other Colours Applications in Textile, Paint and Coatings and Paper
168
chemical segment industries.
Applications in the Aerospace, Automobile,
Composites, Construction, Defence, Electrical and
Electronics, Footwear, Paint and Coatings, Paper,
Polymers B11, P62 and P101
Sport and Leisure, and Wind Energy industries. The
product groups comprise 82 synthetic products and
500 formulations.
Atul manufactures over 900 products and 400 formulations, catering to over 4,000
customers across 75 countries. It owns 140 brands. Its manufacturing facilities are spread
over ~1,500 acres, in six sites, located in Ankleshwar, Atul, Panoli, and Tarapur. The
company has built a wide distribution network with over 2,000 distributors and its retail
footprint is spread across a network of 38,000 retail outlets in India.
Over the years, Atul has strengthened its position not only in the domestic market but also
in the international market by integrating its operations and capacity additions. With
increasing capacities, in some of the products, Atul has become a global market leader.
The company’s technology prowess comes from its multiple JVs with international
companies, some of which have dissolved while others continue to remain. Partnerships
with global companies have provided the company technological edge and helped to
expand its product basket/ segments.

Exhibit 230: Atul’s JVs, subsidiaries
Atul’s leadership in some of its products can be exemplified from its global positioning in
Para-cresol and its derivatives, crop protection chemicals such as 2,4-D and Indoxacarb, API
Dapsone among others. The company derives scale benefits with global size capacities
across these products.
Exhibit 231: Atul’s global/ domestic leadership in some products
Product Market Share (FY22) Competition
Para-Cresol 42% Asia (4), North America (1)
Para- Cresidine (P-CD) 30% Asia (4)
Para-Anisic Aldehyde (P-AA) 66% India (3), Asia (1), Europe (1)
P-AAI 88% India (2)
Significant (India), Insignificant
Resorcinol Asia (2)
(World)
Resorcinol Formaldehyde Resins India (2), Asia (5)
(World)
Significant (India), Significant
1,3CHD India (1), Asia (2)
(World)
Textile dyes India (>100), Asia, Europe
(World)
HP pigments Insignificant (World) India (5), Asia, Europe
North America (1), Australia (1),
2,4D and downstream products 12% (World) Europe (1) (1), Asia (5), South
America (1)
Indoxacarb 13% (World) Asia (2), USA (1)
Dapsone 50% India, Europe
Phosgene chemicals Insignificant (world) Asia, Europe, North America
India (3), Asia, Europe, North
Epoxy resins | Curing agents Significant (India)
America
India (2), Asia, Europe, North
Reactive diluents Significant (India)
America
Sulfones Significant (World) India (3), Asia, North America

Exhibit 232: Atul – Growth journey
Incorporated by Mr Kasturbhai Lalbhai as the first private sector company of independent India to be inaugurated
by its first Prime Minister.
1947-1951 Joint venture (JV) with American Cyanamid Company of the USA, Cyanamid India Ltd, to produce crop protection
chemicals and pharmaceuticals
Commenced the manufacture of dyes (including Vat dyes) for the first time in India
JV with Imperial Chemical Industries (ICI) plc of the UK, Atic Industries Ltd (Atic), to produce textile dyestuffs
JV with Ciba-Geigy Ltd (Ciba-Geigy) of Switzerland, Cibatul Ltd (Cibatul), to produce epoxy resins and curing
1952-1971 agents
Set up a JV with American Cyanamid (65%) to manufacture crop care chemicals
Commenced the manufacture of Phosgene for the first time in India
Commenced manufacturing of Carbamite, 2,4-D Acid, Para- Cresol for the first time in India
Modernised epoxy plant and expanded Vat dyes manufacturing unit
1972-1991 Acquired controlling interest in Piramal Rasayan Ltd engaged in the production of dye-intermediates and
renamed Amal Ltd
Merged Atic after the JV partner ICI PLC exited

Acquired DPD Ltd in the UK engaged in the production of tissue culture raised date palms
1992-2011 Acquired Anchor Adhesives Pvt Ltd which owned Polygrip, a leading Rubber and Polyurethane based adhesive
brand in India
Established Atul Bioscience Ltd, to produce Active Pharmaceutical Ingredients (APIs) and their intermediates
Merged Cibatul after the JV partner Ciba-Geigy exited
Established a JV with Rudolf GmbH of Germany, Rudolf Atul Chemicals Ltd, to produce textile chemicals
Expanded para-Cresol manufacturing facility – the world’s largest

2012-2013 Established a 22,000 sq ft research facility to build the business of APIs and API intermediates
Decreased effluent(liquid) in 41 products by 79% on an average, converted Ankleshwar site into a ‘zero liquid
2013-2014 effluent discharge’ facility
Developed 67 new products and formulations in R&D
‘Atul mobSales’ – open source integrated mobility solution for brand sales
‘Atul i-Quote’ – open source vendor portal to ensure better connect with vendors
2014-2015 ‘Saral' – open source human resource self-service multi-lingual kiosk system
Achieved zero liquid effluent discharge in 1 key product
Achieved zero liquid discharge in the manufacture of a key product

Built 6,500 kL reservoir for rainwater harvesting
2015-2016 Replaced mercury based caustic-chlorine plant with an environment-friendly, membrane based plant
USFDA approval received for Dapsone manufacturing plant
Established a JV with Nouryon of the Netherlands, Anaven LLP, to produce MCA

2016-2019 Acquired manufacturing facility of Polydrug Laboratories Pvt Ltd at Ambernath, Maharashtra through, Atul
Bioscience Ltd
2020 Formed subsidiary company, Atul Products Ltd

Conservative to aggressive – Capex led growth hereon
Historically, Atul has always been conservative in its capex approach despite having a strong
balance sheet, professionally managed, large land bank, and project management
capabilities. Based on strong growth visibility, the company had planned its capex. However,
favorable domestic chemical sector dynamics instigated the company to go in for aggressive
capex.
Looking at the historical capex numbers and the FY22 capex, the aggression is clearly seen.
Projects under implementation too dictate the same story. We believe that FY22 has been
a turning point for Atul and the capex momentum has just begun. It shall accelerate based
on the successful execution of the current large capex.
Exhibit 233: Rising capex trend (Rs bn)
Gross block Capex
50.4
40.4
Accelerated capex 31.4
23.4
19.4
14.1 15.5
11.6 12.7
8.2
9.0 10.0
8.0
5.9
3.7 3.7 3.2
2.0 1.4 2.1
Exhibit 234: Projects under implementation (Rs mn) – Accelerated capex
Atul Finserv 270
Amal Specialty 760
Atul Products 8,170
Atul - St. 7,770
Unrealized sales potential from the capex stands at ~Rs8bn

Over the last couple of years, Atul has made investments across its segments. However, due
to challenges, it has not been able to reap benefits from the same. The total sales potential
from the capex across aromatics, bulk chemicals, pigments, and pharma stands at ~Rs8bn.

Exhibit 235: Unrealized sales potential (Rs mn)

3,800
1,850
1,500
500
Aromatics Bulk Chemicals and Textile dyes, Pigments APIs and API
Intermediates intermediates
Multiple projects under implementation provide growth

visibility
Atul’s ongoing capex plan of over Rs17bn through the standalone entity, Atul Products, and
its subsidiaries is expected to be commissioned over FY22-23E. The capex provides growth
visibility for the company. Management has indicated revenue potential of over Rs23bn
from the capex of ~Rs20bn. The asset turnover seem to be lower due to significant capex in
caustic expansion with lower asset turns.
Exhibit 236: Projects under execution and their revenue potential
Segment Product details (Rs mn) (Rs mn)
Bulk chemicals 300TPD Caustic soda, 100TPD flaking capacity 8,170 4,390
Crop protection 1,470 1,080
Textile dyes, pigments Vat dyes and others 960 1,160
Diversified business
Atul has a diversified product profile through which it caters to a vast array of user
industries. In some of the product categories, it is the largest player globally (refer table
below). This diversified product basket and customer profile provides natural hedge against
concentration risk.
Exhibit 237: Atul’s global leadership in some chemicals
Product Segment category Market positioning
Para-Cresol, Para-Anisicaldehyde
Aromatics Largest globally
and Para-Cresidine
Dapsone API One of the largest globally
Resorcinol and Resorcinol
Bulk chemicals and intermediaries Only Integrated player in India
Formaldehyde
3,3 Diaminodiphenyl sulfone Polymers Largest globally
Vat dyes and Sulphur black dyes Colours Largest in India
2,4 D Acid and its derivatives Crop Protection Largest globally

Not only is the product profile diversified but also the user industries. Apart from the
pharmaceuticals and agrochemicals segments, Atul also caters to aroma, textiles, paints &
coatings etc.

Exhibit 238: User segments/industries
Atul’s business is divided into two segments i.e. Life Science Chemicals and Performance
and Other Chemicals. Further these two segments are divided into six sub-segments. Life
Science Chemicals segment comprises of pharmaceuticals and agrochemicals while
Performance & Other Chemicals segment comprises of aromatics, bulk chemicals &
intermediates, colors, and polymers.
The company has identified few common growth drivers such as improving efficiencies and
WC management while some specific to individual sub segments which are represented in
the table below.
Exhibit 239: Growth drivers across business segments
Business segment Growth driver
Improving internal efficiencies and WC management
Promoting retail sales
Crop Protection
Expanding the product portfolio and securing more registrations
Evaluating investment opportunities in vertical integrations
Increasing manufacturing efficiencies
Debottlenecking and adding capacities
Pharmaceuticals
Introducing new products
Forming long-term strategic alliances with other companies.
Broadening market reach
Aromatics Debottlenecking and adding capacities
Evaluating inorganic growth opportunities
Bulk Chemicals and Debottlenecking and adding capacities
Intermediates Introducing downstream products
Widening its market reach
Increasing manufacturing and working capital efficiencies
Introducing new dyes, pigments, textile chemicals and products for non-textile
Colours applications
Broadening market reach in newer geographies
Investing in newer capacities of existing and new products
improving manufacturing and working capital efficiencies
Debottlenecking and adding capacities
Polymers
Widening market reach in new geographies.
Return ratios to improve with business growth

Atul’s financial performance during FY20-22 remained lackluster due to Covid challenges,
cost inflations and the company’s inability to completely pass on the increased costs.
Although the FY22 top-line growth looked strong which was driven by both volume increase
and pricing, the same did not trickle down to operating level. EBITDA remained largely
flattish at ~Rs9.1bn during FY20-22.

We believe that FY23E is an inflection point for the company as multiple projects which are
under implementation are expected to be commissioned one after the other. These new
projects provide growth visibility. Also, alleviating crude prices and RM prices thereof shall
help in regaining margins. We expect Atul’s financial performance to improve in FY23E,
however major improvement is expected from FY24E onwards.
Exhibit 240: Profitability to surge from FY24E (Rs bn) Exhibit 241: Return ratios to improve from FY24E
Operating revenue PAT ROE ROCE
22.7
80.9
68.6 20.7
58.5 22.3 18.8
18.0
50.8 17.5
16.6
40.4 40.9 15.6
37.3 18.3 18.3 14.6
33.0 13.1
25.9 28.3 17.3 13.6
16.8 16.3
14.2 15.2
8.4 10.3
3.2 4.3 6.7 6.6 6.0 6.4 13.2
2.7 2.8 13.0
During the past couple of years, Atul’s return ratios too remained suppressed in line with
muted financial performance which shall start improving from FY24E with improvement in
operating performance. Overall, the increased capex intensity shall continue to aid overall
financial metrics. Atul has a strong, cash rich balance sheet so the company has ability to
fund any major investments beyond the current announced ones.

Financial Analysis
During FY19-22, Atul reported revenue/EBITDA/PAT CAGR of 8.0%/5.9%/11.8%. EBITDA
margins declined from 19.0% in FY19 to 17.9% in FY22. During FY22, the company reported
robust 36.2% yoy increase in revenues supported by high product prices in turn supported
by high RM prices and also due to weak Q1FY21 (Covid impacted quarter). Further, FY22
EBITDA margins were impacted severely due higher RM/freight/energy costs which the
company was not able to pass on completely. EBITDA margins thus declined 670bps yoy at
17.9% (24.6%).
Operating revenue PAT EBITDA (Rs bn) EBITDA Margin (%)
50.8
24.6
22.0
40.4 40.9
37.3 18.0 19.0 17.9
33.0 17.7
28.3 15.3
25.9
9.0 9.2 9.1

7.7
6.7 4.6 5.1 5.1
6.6 6.0
2.7 3.2 2.8 4.3
Despite facing Covid challenges and cost inflation, the company was able to maintain its
operating profit at Rs9.1bn (Rs9.2bn) in FY22. However, yoy PAT declined 7.9% to Rs6.0bn
(Rs6.6bn) due to higher capitalisation of assets leading to yoy increase in depreciation and
one-time non-recurring dividend of Rs550mn received in FY21.
Exhibit 244: Domestic/ Exports mix (Rs bn)
Domestic Exports
25.6
20.6 20.5
17.7
15.7 15.1
13.7
25.3
19.8 20.4 19.6
13.9 14.3 15.4
Atul’s domestic/exports mix has been almost equal over the past few years. However,
exports were impacted in FY21 due to Covid challenge, which normalised in FY22 with
exports contributing 50% of overall revenues. Exports surged 44.6% yoy in FY22 to Rs25.6bn
(Rs17.7bn).
Asia remains the largest exports market for Atul followed by the US and Europe. During
FY22, Asia accounted for 40% of total exports, while the US and Europe accounted for 26%
and 24% respectively. Overall, exports to the US and Europe account for over 50%. Due to
ongoing challenges in Europe and inflationary pressure in the US, the exports to these
geographies may get impacted.

Exhibit 245: Asia key exports market (%) Exhibit 246: Region wise revenue split (FY22)
India Asia (excluding India)
Europe North America Europe
Asia 12%
South America Africa North
(excluding
America
India)
13%
5- 4- 20%
1
2
4 2 2 4-
3 4-
2 3-
2
9
3-
2
14 10 12 11 11 13 South
15 12 12 11 12
11 14 America
20 19 21 20 3%
18 21 18
50 47 50 50 52 54 50 Africa
2%
India
FY16 FY17 FY18 FY19 FY20 FY21 FY22 50%
Traditionally, Atul has been conservative in its investments which changed from FY22. The
company invested Rs5.9bn in FY22 while the earlier run rate was Rs2.5-3.5bn.
Exhibit 247: Capex momentum started from FY22
Gross block Capex 23.4
19.4
15.5
14.1
12.7
11.6
8.2
5.9
3.7 3.2
3.7 2.1
2.0 1.4


During FY22, life science chemicals segment revenues increased 20.4% yoy and
performance & other chemicals segment revenues increased 52.4% yoy. Growth was
primarily driven by RM and product price inflation while volume growth was relatively
lower.
Life Science Chem. Performance and Oth. Chem. Others
0.7
0.3 0.4
0.5
0.6 37.6
0.5
0.0 26.6 28.0
24.7
21.5
18.6 20.4
13.5 12.5 12.2 14.7

8.9 9.1 11.3

Life Science Chemicals

During FY22, life science chemicals revenues increased 20.4% yoy at Rs14.7bn (Rs12.2bn)
and accounted for 27.7% of total revenues. EBIT margins declined from 18.1% in FY21 to
12.2% in FY22 due to inability to pass on cost inflation completely. EBITDA margins declined
yoy from 21.3% to 15.3%.
Exhibit 249: Life science chemicals performance

Revenues % EBITDA % EBIT
21.7 21.0 21.3

18.9 19.3
19.2 15.3
14.4 18.1
17.8
16.3 16.9
11.7 12.2
1.9 2.6 2.6 2.6 2.2

1.7 1.6

Crop protection (Herbicides, Insecticides, Fungicides, Others)

Atul’s crop protection segment reported 50% yoy revenue growth to Rs9.2bn (Rs6.2bn), of
which 17% was driven by volumes and rest through pricing. Domestic sales increased 27%
yoy while exports sales surged 70% yoy. The company completed three projects during the
year and two are under implementation.
The product basket contains 34 products and 70 formulations. Some of the key products
are 2,4-D, Indoxacarb, Isoprothiolane, and Sulfonylurea.
Pharmaceuticals and aromatics – I (API intermediates, APIs, others)
The segment reported 2% yoy increase in sales to Rs5.1bn (Rs5.0bn). Growth in domestic
and exports was similar at 2% each. Atul Bioscience (subsidiary) reported 12% decline in
sales at Rs1.3bn (Rs1.4bn). Atul completed one project during FY22.
Pharma product basket comprises of 85 products catering to multiple therapeutic areas
such as antidepressant, antidiabetic, anti-infective, antifungal, antiretroviral, and
cardiovascular. Some of the APIs are dapsone and acyclovir while carbamates,
chloroformates, and carbamoyl chloride derivatives are some of the key intermediates.
Performance and other chemicals
During FY22, Performance & other chemicals segment revenues surged 52.4% yoy to
Rs37.6bn (Rs24.7bn), accounting for 71.0% of total revenues. EBIT margins declined sharply
from 24.1% in FY21 to 15.3% in FY22 due to cost inflation which the company was not able
to pass on. EBITDA margins declined 910bps yoy from 27.7% to 18.6%.

Exhibit 250: Performance & other chemicals segment performance

Revenues % EBITDA % EBIT
27.7
24.6
20.5
18.2 24.1 18.6
16.9 21.5
15.7
17.4
14.9 15.3
13.4 13.5
6.9 6.8 7.0
5.4
2.9 3.7 3.6
Aromatics – II (intermediates, perfumery, others)

The segment reported 40% yoy increase in revenues at Rs7.9bn (Rs5.6bn). Volume growth
accounted for 9% while the rest increase was due to increased pricing. Domestic sales
jumped 19% yoy while exports jumped 52% yoy.
The products under this segment cater to fragrance and personal care industries. Some of
the key products are para-Cresol, para-Anisicaldehyde, and para-Cresidine.
Bulk chemicals and intermediates – (bulk chemicals, adhesion promoters, others)
During FY22, revenues increased 9% yoy at Rs3.1bn (Rs2.9bn), which was driven completely
through volumes. Domestic sales rose 17% yoy while exports remained flattish.
Bulk chemicals are primarily consumed captively. Intermediates cater to cosmetic, dyestuff,
pharmaceutical, and tyre industries. This segment consists of 23 products while resorcinol,
resorcinol-formaldehyde resin, and 1,3-cyclohexanedione are some of the key products.
Colours (dyestuffs, pigments, dye intermediates, textile chemicals, others)
During FY22, revenues increased by 36% yoy to Rs8.0bn (Rs5.9bn) of which volume growth
was 25% while the rest was due to increased pricing. Domestic sales rose 45% yoy while
exports jumped 27% yoy. High performance pigment demand was driven by exterior paints
in Europe and Asia while vat and sulphur dyes demand were driven by work wear and denim
segments.
Polymers (epoxy resins, curing agents, reactive diluents, sulfones, protective paints and
adhesives based on epoxy, synthetic rubber, polyurethane, cyanoacrylate, PVC, and PVA)
During FY22, revenues surged 76% yoy to Rs15.5bn (Rs8.8bn), with volume growth of 29%
yoy and rest due to favourable pricing. Domestic sales rose 58% yoy while exports surged
113% yoy.
The Polymers manufactured by Atul find applications across various industries including
aerospace, auto, composites, construction, defence, electrical and electronics, footwear,
paints & coatings, paper, sport & leisure, and wind energy. Under polymers segments, the
company manufactures 82 synthetic products and 500 formulations.

Cash flow analysis

Atul has generated positive FCF in eight out of ten years (excl. FY16, FY22), signifying
balanced capital allocation. OCF has been growing consistently with company’s growth. The
company has managed its WC effectively with net reduction over the period.
Exhibit 251: Consistently increasing cash flow from operations
10,000
6,000
Rsm
2,000
(2,000)
(6,000)

Exhibit 252: After peaking in FY17 to 97 days, WC alleviated and has stabilised at around 80 days
150
120
92 97
85 84 87
78 77 80
90 72 72
days
60
30
0
Exhibit 253: EBITDA to OCF conversion of 65% over 10 years Exhibit 254: Positive OCF to FCF conversion except two years
120% 100%
100%
50%
80%
0%
60% FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
-50%
40%
-100%
20%
0% -150%
-200% FCF/ OCF (%) Aggregate
OCF/EBITDA (%) Aggregate
Pre-tax RoCE has been consistently above 20% averaging 25% during FY13-22 while RoE,
though lumpy has averaged 19%. The stock has delivered 48% CAGR returns over FY12-22,
owing to EBITDA growth higher than revenues, PBT growth higher than EBITDA, consistently
positive FCF, balanced capital allocation, and healthy return ratios

Exhibit 255: Consistent deleveraging over the years; 20%+ RoCE (pre-tax) over the period
Net Debt/Equity 0.4 0.3 0.2 0.2 0.1 (0.0) (0.0) 0.0 (0.1) 0.0 0.11
Net Debt/EBITDA 1.2 0.8 0.5 0.6 0.2 (0.1) (0.0) 0.1 (0.3) 0.1 0.31
RoCE pre-tax 20.5% 29.0% 27.6% 26.9% 23.2% 19.1% 27.0% 28.0% 24.4% 18.9% 24.5%
RoCE 13.9% 20.7% 19.2% 18.3% 16.8% 13.0% 17.3% 22.3% 18.3% 14.2% 17.4%
RoIC (pre-tax) 17.9% 23.2% 25.8% 19.6% 18.4% 16.4% 22.2% 22.7% 20.6% 15.6% 20.2%
RoE 16.2% 25.7% 24.2% 20.7% 18.0% 13.1% 17.5% 22.7% 18.8% 14.6% 19.2%
Exhibit 256: DuPont Analysis – Recent RoEs impacted by declining asset turnover, yet partially supported by expanded
margins
PAT/PBT 0.68 0.71 0.69 0.68 0.72 0.68 0.64 0.79 0.75 0.75 0.71
PBT/EBITDA 0.73 0.84 0.81 0.88 0.88 0.82 0.89 0.94 0.96 0.89 0.86
EBITDA/Revenue 0.12 0.15 0.15 0.18 0.18 0.15 0.19 0.22 0.25 0.18 0.18
RoE 16.2% 25.7% 24.2% 20.7% 18.0% 13.1% 17.5% 22.7% 18.8% 14.6% 19.2%
Exhibit 257: Price movement vs. Financials – Stock returns led by expanded margin profile, high OCF to FCF conversion
75% 66%
49% 48%
50%
34%
19% 23% 19%
25% 15% 18% 16%
11%
4%
0%
Gross Margin*
EBITDA Margin*
FCF/Sales*
NWC (Ex-cash) as a
PBT CAGR^
RoE (Avrg)
Stock return
PBT Margin*
OCF/EBITDA*
FCF/OCF*
Revenue CAGR^
EBITDA CAGR^
% of revenue
Exhibit 258: Effective FCF utilization

FCF (a) 527 257 958 (31) 1,582 2,140 1,977 5,228 4,587 (3,571)
FCF yield 6% 2% 3% NA 3% 3% 2% 4% 3% NA
Dividend + Buyback (b) 155 207 260 307 355 3,789 410 1,504 617 590
Distribution of FCF (b/a) 29% 80% 27% (1002%) 22% 177% 21% 29% 13% (17%)

Valuations
Atuls’ FY20-22 financial performance was marred by Covid related challenges. It reported
FY20-22 revenue/EBITDA/PAT CAGR of 11.4%/0.5%/(4.8)%; although EBITDA remained
flattish, bottom-line was impacted due to higher depreciation in FY22 owing to rise in capex.
Traditionally, Atul has been conservative in its investments despite a cash rich balance
sheet. Impending opportunities probably forced the management to become aggressive,
thus capex intensity rose to Rs5.9bn in FY22 and current projects under execution stand at
~Rs17bn. The aggressive capex intensity signifies the perceptible change in management
philosophy. We believe Atul to remain a compounding story over the next decade.
FY20-22 FY22-25E
CAGR% CAGR%
Revenues 40,931 37,315 50,809 58,545 68,562 80,861 11.4 16.8
EBITDA 9,020 9,171 9,114 9,864 13,186 16,212 0.5 21.2
EBITDA % 22.0 24.6 17.9 16.8 19.2 20.0
PAT 6,665 6,558 6,043 6,392 8,368 10,282 (4.8) 19.4
EPS 225.8 222.2 204.8 216.6 283.6 348.4 (4.8) 19.4
We like Atul Ltd. (Atul) due to (a) rising capex momentum, (b) huge land availability, (c)
debt-free balance sheet, and (d) strong R&D skills and adherence to EHS policies. We have
valued the company at 30x avg. FY24E-25E EPS of Rs316. We initiate coverage with a BUY
Risks
Delay in project implementation
For the very first time, Atul has undertaken significant capex since FY22 and currently has
projects worth ~Rs17bn under implementation. Our estimates consider revenue potential
from these upcoming projects and any delay in execution may impact our revenue
estimates.
Demand slowdown
Since Covid, the company has experienced multiple challenges which impacted the financial
performance. Initially, demand slowdown hit the performance followed by RM cost inflation
coupled with incessant rise in logistics/energy costs. Performance is coming back on track
from Q1FY23 and any setbacks due to demand related challenges particularly from the
exports market can dent the overall performance.

Story in charts
Operating revenue PAT EBITDA (Rs bn) EBITDA Margin (%)
80.9
24.6
68.6 22.0
58.5 19.0 19.2 20.0
17.7 18.0 17.9 16.8
50.8
15.3 16.2
40.4 40.9 37.3 13.2
33.0
25.9 28.3 9.9
9.0 9.2 9.1
7.7
6.7 8.4 10.3 4.6 5.1 5.1
3.2 4.3 6.6 6.0 6.4
2.7 2.8
Exhibit 262: Geography wise revenue split (Rs bn) Exhibit 263: Balanced domestic and exports mix
25.6 49.6 52.3 49.6 51.0 50.1 47.4 50.3

20.6 20.5
17.7
15.7 15.1
13.7
25.3 50.4 47.7 50.4 49.0 49.9 52.6 49.7
19.8 20.4 19.6
13.9 14.3 15.4
Exhibit 264: Asia key exports market (%) Exhibit 265: Region wise revenue split (FY22)
India Asia (excluding India)
Europe North America Europe
Asia 12%
South America Africa North
(excluding
America
India)
12 2- 2-
4 -
3 24- 2-
3 3-
2 13%
4 5 4 20%
14 10 12 11 11 9 13
12 12 11 12 South
11 15 14
21 America
18 21 18 20 19 20 3%
50 47 50 50 52 54 50 Africa
2%
India
FY16 FY17 FY18 FY19 FY20 FY21 FY22 50%
Exhibit 266: Aggressive capex in FY22-25E (Rs bn) Exhibit 267: Return ratios (%)
Gross block Capex 50.4 ROE ROCE
22.7
40.4 20.7
22.3 18.8
31.4 18.0
17.5
16.6
23.4 15.6
19.4 18.3 18.3
17.3 14.6
14.1 15.5 16.8
13.1 13.6 16.3
11.6 12.7
8.2 15.2
5.9 8.0 9.0 10.0 14.2
2.1 3.7 3.2 13.0 13.2
3.7 2.0 1.4

Exhibit 268: Improving working capital trend

Debtor Days Inventory Days Creditor Days
116 118
108 103
94
84 80 83
66
66
69 71 66
62 62 64 63 62
54 52
Operational Charts
Exhibit 269: Segmental revenue split (%) Exhibit 270: Chemicals segment performance
Life Science Chem. Performance and Oth. Chem. Others Revenues 27.7 % EBITDA
0.9 24.6
0.8
0.8 20.5 20.5
0.7 19.1 19.8
18.2 18.6
16.9
15.7
0.3 0.4 46.5
0.5 43.4
40.6
0.6 37.6
0.0 0.5 9.6
26.6 28.0 24.7 7.7 8.6
21.5 6.9 6.8 7.0
18.6 20.4 5.4
2.9 3.7 3.6
13.5 14.7 15.7 16.8 17.9
8.9 9.1 11.3 12.5 12.2
Exhibit 271: Life Sciences chemicals segment performance

Revenues % EBITDA
21.7 21.0 21.3

18.9 19.3 19.6
18.0 18.8
14.4 15.3
2.6 2.6 2.6 2.8 3.2 3.5

1.9 1.7 1.6 2.2

Quarterly Trend
Exhibit 272: Quarterly Trend
Revenues 10,021 9,529 11,159 10,802 12,500 13,803 13,704 14,769 14,873 19.0 0.7
Q-o-Q gr. (%) 51.7 (4.9) 17.1 (3.2) 15.7 10.4 (0.7) 7.8 0.7
Raw Mat. Cons. 4,137 3,931 4,819 4,765 6,154 6,397 6,610 7,006 7,133 15.9 1.8
% of net sales 41.3 41.3 43.2 44.1 49.2 46.3 48.2 47.4 48.0
Purchase of prod. 448 323 450 418 533 418 590 598 733 37.6 22.5
% of net sales 4.5 3.4 4.0 3.9 4.3 3.0 4.3 4.0 4.9
Power, fuel, and water 847 808 904 992 1,110 1,678 1,322 1,602 1,800 62.2 12.3
% of net sales 20.5 20.5 18.8 20.8 18.0 26.2 20.0 22.9 25.2
Employee Costs 768 794 802 796 844 854 932 907 957 13.5 5.5
% of net sales 7.7 8.3 7.2 7.4 6.7 6.2 6.8 6.1 6.4
Others 1,209 1,243 1,641 1,469 1,673 1,941 2,198 2,325 2,047 22.4 (11.9)
% of net sales 12.1 13.0 14.7 13.6 13.4 14.1 16.0 15.7 13.8
EBITDA 2,612 2,430 2,543 2,361 2,187 2,515 2,052 2,330 2,203 0.7 (5.4)
Q-o-Q growth (%) 64.6 (7.0) 4.7 (7.2) (7.4) 15.0 (18.4) 13.5 (5.4)
EBITDA Margin (%) 26.1 25.5 22.8 21.9 17.5 18.2 15.0 15.8 14.8
Dep. & Amor. 332 334 366 433 440 454 441 473 491 11.6 3.8
EBIT 2,280 2,096 2,177 1,929 1,747 2,061 1,612 1,857 1,712 (2.0) (7.8)
Interest exp. 22 22 24 21 18 19 34 16 19 8.4 23.6
Share of profit of JV 24 24 21 19 17 27 18 11 13 (20.4) 17.7
Other Income 65 373 186 296 211 31 222 359 319 51.1 (11.4)
EBT 2,347 2,471 2,361 2,224 1,957 2,100 1,818 2,212 2,025 3.5 (8.5)
Provision for tax 596 567 595 572 495 530 452 577 544 9.8 (5.7)
Eff. tax rate (%) 25.4 23.0 25.2 25.7 25.3 25.3 24.9 26.1 26.9
Net Profit 1,751 1,904 1,767 1,652 1,461 1,569 1,366 1,635 1,481 1.3 (9.4)
Non-controlling interest 7 18 16 -8 -5 15 3 -11 -28
PAT 1,744 1,886 1,751 1,659 1,466 1,554 1,363 1,645 1,509 2.9 (8.3)
Q-o-Q gr. (%) 48.4 8.7 (7.2) (6.5) (11.5) 7.4 (13.0) 19.7 (9.4)
PAT Margin (%) 17.4 19.2 15.6 14.9 11.5 11.3 9.8 10.8 9.7
EPS 58.8 63.6 59.2 56.1 49.6 52.5 46.0 55.8 51.1 3.2 (8.3)
Segment revenues (Rs mn)

Life Science Chemicals 3,475 2,861 3,119 3,525 3,477 3,976 3,673 4,847 5,742 65.1 18.4
Performance and Oth. Chem. 6,896 6,946 8,172 7,535 9,267 10,264 10,526 10,570 9,913 7.0 (6.2)
Others 108 141 149 147 197 209 146 113 94 (52.2) (16.2)
Total 10,479 9,948 11,440 11,207 12,941 14,449 14,346 15,529 15,749 21.7 1.4
Intersegmental 458 419 281 405 441 646 641 761 876 98.6 15.2
Net Sales 10,021 9,529 11,159 10,802 12,500 13,803 13,704 14,769 14,873 19.0 0.7
EBIT
Life Science Chemicals 671 508 506 493 329 448 519 795 1,418 331.1 78.2
% EBIT 19.3 17.7 16.2 14.0 9.5 11.3 14.1 16.4 24.7
Performance and Oth. Chem. 1,594 1,660 1,832 1,563 1,429 1,491 1,276 1,302 730 (48.9) (43.9)
% EBIT 23.1 23.9 22.4 20.7 15.4 14.5 12.1 12.3 7.4
Others 48 25 45 35 66 103 41 -0 -24
% EBIT 44.7 17.6 30.3 23.9 33.2 49.1 27.9 (0.3) (25.7)
Total EBIT 2,313 2,193 2,384 2,091 1,823 2,042 1,836 2,097 2,124 16.5 1.2
% EBIT 22.1 22.0 20.8 18.7 14.1 14.1 12.8 13.5 13.5

P&L Balance sheet

Revenues 37,315 50,809 58,545 68,562 80,862 Equity share capital 296 296 295 295 295
Depreciation & Amortisation 1,363 1,767 2,116 2,874 3,525 Non Current Liabilities 406 433 433 433 433
Other income 1,030 760 874 918 1,009 Gross block 19,444 23,360 31,360 40,360 50,360
Taxes 2,217 2,050 2,167 2,803 3,350 Net block 13,566 15,760 21,690 27,865 34,339
Minority/Associates (43) (5) (40) (40) (40) Non Current Assets 821 1,577 1,577 1,577 1,577
Recurring PAT 6,558 6,043 6,392 8,368 10,282 Investments 5,997 7,637 7,637 7,637 7,637
Cash & Cash Equivalents 3,482 689 430 89 213
Other current assets 8,884 7,669 7,669 7,669 7,669
Revenue (8.8) 36.2 15.2 17.1 17.9 Other current liab. 2,017 2,397 2,397 2,397 2,397
EBITDA 1.7 (0.6) 8.2 33.7 22.9
Provisions 378 468 468 468 468
Adj. EPS (1.6) (7.9) 5.8 30.9 22.9
Net current assets 17,614 17,677 17,447 18,714 21,318
Gross 54.6 49.1 49.0 48.5 48.5
EBITDA 24.6 17.9 16.8 19.2 20.0 Cashflow
ROE 18.8 14.6 13.6 15.6 16.6 Net Interest 94 92 97 90 90
ROCE 18.3 14.2 13.2 15.2 16.3 Net Change – WC 54 (4,726) (29) (1,609) (2,480)
Inventory 118 103 83 54 52 Investments (2,180) 261 0 0 0
Creditors 112 84 64 47 47 Others 1,030 760 874 918 1,009
Solvency (x) FCF 3,303 (2,265) 606 753 1,448
Net debt-equity (0.1) 0.0 0.0 0.0 0.0 Issue of share capital (1) 0 (1) 0 0
Interest coverage ratio 98.1 99.4 101.8 146.6 180.2 Increase/(decrease) in debt 48 367 0 0 0
Net debt/EBITDA (0.3) 0.1 0.1 0.1 0.1 Dividend paid 0 (740) (767) (1,004) (1,234)
Adjusted EPS 222.2 204.8 216.6 283.6 348.4 Others (128) (62) 0 0 0
BVPS 1,296.7 1,500.8 1,691.4 1,940.9 2,247.6 Net cash from financing (175) (527) (865) (1,094) (1,324)
CEPS 267.5 263.7 288.3 380.9 467.9 Net change in Cash 3,128 (2,793) (259) (341) 124
Dividend payout (%) 0.0 12.3 12.0 12.0 12.0
Valuation (x)
P/E 36.9 40.1 37.9 28.9 23.5
P/BV 6.3 5.5 4.8 4.2 3.6
EV/EBITDA 26.1 26.6 24.6 18.5 15.0
Dividend yield (%) 0.0 0.3 0.3 0.4 0.5

Appendix
Technology absorption and R&D
Atul has been significantly investing in specific technologies towards improving social and
environmental impacts. Atul has in-house facilities to recycle its waste and is continuously
striving to maximize it. At present, it is recycling ~7% of its waste.
Exhibit 273: Allocation of specific R&D and capex towards social and environmental aspects
Type 2021-2022 2020-2021 Improvements
Increase in yield in six products
R&D 15% 11% Decrease in consumption of solvents
Decrease in consumption of water
Conversion of two of the four treatment facilities at Atul site to zero liquid discharge
Collection and scrubbing of hydrochloric acid
Capex 26% 19%
Treatment of boiler blow-down by nano filtration
Installation of dust suppression system in boiler

Mr Sunil Lalbhai is a Managing Director since June 1984 and the Chairman of the Board of the company
Chairman & Managing
Sunil Lalbhai since August 2007. Mr Lalbhai holds a postgraduate degree in Chemistry from the University of
Director
Massachusetts and a postgraduate degree in Economic Policy and Planning from Northeastern Univ.
Mr Samveg Lalbhai is the Director of the company since January 2000 and a Managing Director of the
Samveg Lalbhai Managing Director
company since December 2000. Mr Lalbhai holds a graduate degree in Commerce from Gujarat Univ.
Mr Rajendra Shah is the Director of the company since May 1983. He is a Senior Partner of Crawford
Rajendra Shah Director Bayley & Co, a firm of Solicitors and Advocates. Mr Shah holds a degree in Law from the University of
Mumbai and has passed Solicitor exam from the Honourable High Court at Mumbai.
Mr Bansi Mehta is the Director of the company since April 1992. He is the Chief Mentor in Bansi S Mehta
Bansi Mehta Director & Co since 2009. Mr Mehta holds a graduate degree in Commerce from the University of Mumbai and is
a Fellow Member of the ICAI.
Mr Susim Datta is the Director of the company since October 2002. He was the Chairman of Hindustan
Susim Datta Director Unilever Ltd in India and Nepal from 1990 to 1996. Mr Datta holds a postgraduate degree in Science and
Technology from the University of Calcutta and is a Chartered Engineer.
Mr Bharathy Mohanan joined the Company in August 1992 and is a Whole-time Director since January
Whole Time Director
Bharathy Mohanan 2009. He is currently President, Utilities and Services and the Occupier of the company. Mr Mohanan
and President U&S
holds a graduate degree in Engineering (Honours) from the University of Calicut.
Mr Srinivasa Rangan is the Director of the company since July 2010. He is an Executive Director of Housing
Srinivas Rangan Director Development Finance Corporation Ltd. Mr Rangan holds a graduate degree in Commerce from the
University of Delhi and is an Associate Member of the ICAI and the ICMAI.
Mr Mukund Chitale is the Director of the company since October 2014. He is a founder of the Chartered
Mukund Chitale Director Accountancy firm, Mukund M Chitale & Co. Mr Chitale holds a graduate degree in Commerce from the
University of Mumbai and is a Fellow Member of the ICAI.
Mr Gopi Kannan Thirukonda joined the company in October 1993 and is a Whole-time Director since
Whole Time Director October 2014. He is currently the Chief Financial Officer. Mr Gopi Kannan holds a graduate degree in
Gopi Kannan Thirukonda
and CFO Science from the University of Madras and a postgraduate diploma in management from IIMA. He is a
Fellow Member of the ICAI, the ICMAI and the ICSI.
Ms Shubhalakshmi Panse is the Director of the Board since March 2015. She was the Chairperson and
Shubhalakshmi Panse Director Managing Director of Allahabad Bank Ltd. Ms Panse holds a postgraduate degree in Science from Pune
University and a postgraduate degree in Business Administration from Drexel University.
Mr Baldev Arora is a Director of the Board since April 2015. He was the Chairman of Cyanamid Agro Ltd
Baldev Arora Director and Chairman and Managing Director of Wyeth Lederle Ltd. Mr Arora holds a graduate degree in
Mechanical Engineering from the University of Punjab.

Initiating Coverage
India I Chemicals
29 November, 2022
Deepak Nitrite ADD

Price: Rs2,109
Journey from commodity to specialty Target Price: Rs2,325
We prefer Deepak Nitrite (Deepak) given (a) import substitution, (b) substantial Market Data
Rs15bn capex over FY23-24E, (c) debt-free balance sheet, and (d) entry into new Bloomberg: DN IN
chemistry platforms. Deepak played the ‘Import substitution’ theme through 52 week H/L: 2,690/1,681
Phenolics which was a turning point, resulting into a significant surge in the financial Market cap: Rs287.6bn
performance of the company since FY19. With Rs15bn capex lined up for FY23-24E, the Shares Outstanding: 136.4mn
company is transitioning itself from “commodity” driven to “specialty”. The company
Free float: 0.0%
is also exploring new platforms such as photochlorination and fluorination through its
Avg. daily vol. 3mth: 834,120
subsidiary Deepak Clean Tech. It has cited interest in import substitute polycarbonate, Source: Bloomberg
a phenol/ acetone derivative. We believe, Deepak’s transition from a phenol-acetone
DN relative to Nifty Midap 100
player is currently underway. We estimate FY22-25E Revenue/EBITDA/PAT CAGR of
~14%/13%/14%. We initiate coverage on Deepak Nitrite with an ADD rating and TP of 140
NIFTY Midcap 100
Rs2,325 (10% upside) valuing by SOTP methodology. 120
100
Tapping the import substitution market through forward integration
80
Deepak entered the import substitution theme through its entry into phenolics segment
60 Deepak Nitrite
in 2018. The bet has successfully paid off and phenolics business has become a cash cow
40
for the company. Deepak is further embarking on the import substitution theme,
Nov-2 1 Feb-22 May-22 Aug-22 Nov-2 2
through forward integration into phenol-acetone derivatives by investing Rs7bn. These Source: Bloomberg
projects are expected to be commissioned over the next 4-5 quarters in phased manner.
Foray into new photochlorination/fluorination platforms
Sep-22 Jun-22 Mar-22 Dec-21
Deepak’s foray into new platforms is further reinforcing its position in specialty
Promoter 45.7 45.7 45.7 45.7
chemicals. Its photochlorination plant is expected to come onstream by
FIIs 7.1 9.1 8.8 8.8
Q4FY23E/Q1FY24E. The company is expected to utilise its expertise in nitration,
DIIs 11.6 10.6 10.0 10.7
reduction and diazotization for the development of products under the new platform.
Public/other 35.6 34.6 35.6 34.8
Exploring Polycarbonate (PC) forward integration Source: BSE
During Q1FY23 concall, Deepak indicated that it is exploring PC opportunity. PC is
manufactured from Bisphenol-A, which is produced from phenol and acetone. So, PC
manufacturing is naturally a forward integration. Management cited potential
investment of Rs65-70bn for a 200,000MT plant. Currently, PC is imported in India and
during the past four years imports averaged at ~190,000MT.
Due to significant Revenue/EBITDA contribution of 62%/57% (FY22), Deepak is construed
as a commodity chemicals company. We estimate, by FY25E the mix to change to
54%/50% despite 20% additional capacity expansion in phenolics. Deepak is debt-free
and after a hiatus of low capex post commissioning of phenolics facility, is now
embarking on a substantial capex drive which shall aid growth. Upcoming investments
in downstream phenolics derivatives, and new platforms shall entail rising contribution
from specialty while commodity to remain a cash cow for funding future expansions. The
stock is available at 21.2x/18.1x FY24E/FY25E EPS of Rs99.6/Rs116.5. We initiate with an
ADD rating and TP of Rs2,325
Risks – Correction in Phenol-Acetone spreads, project execution delays
Revenues 43,598 68,022 82,138 91,129 100,093
EBITDA 12,470 16,036 13,626 19,714 22,759
Chemicals
+91-022-4215 9645
EPS growth (%) 27.0 37.5 (16.3) 52.1 16.9
PE (x) 37.1 27.0 32.2 21.2 18.1
EV/EBITDA (x) 23.5 18.1 21.2 14.4 12.2
PBV (x) 12.3 8.6 6.9 5.3 4.2
Jay Bharat Trivedi
RoE (%) 39.6 37.5 23.8 28.3 25.7 Research Associate, Chemicals
RoCE (%) 30.4 33.5 22.6 27.5 25.4 +91-022-4215 9201
Deepak Nitrite 29 November, 2022
Thesis Snapshot
Centrum Consensus Variance Centrum Consensus Variance The stock is available at 21.2x/18.1x FY24E/FY25E EPS of Rs99.6/Rs116.5.
YE Mar (Rs bn)
FY24E FY24E (%) FY25E FY25E (%) We estimate FY22-25E Revenue/EBITDA/PAT CAGR of ~14% 13% 14%. We
Revenue 82,138 78,662 4.4 91,129 87,997 3.6 initiate on Deepak Nitrite with an ADD rating and TP of Rs2,325 (10%
EBITDA 13,626 14,823 (8.1) 19,715 18,804 4.8 upside).
PBT 11,989 13,342 (10.1) 17,882 16,795 6.5
SOTP 1HFY25E EBITDA EV/ EBITDA (x) Value (Rs mn)
PAT 8,932 9,689 (7.8) 13,590 12,456 9.1
Advanced Intermediates 9,222 20 184,435
Phenolics 11,876 10 118,763
Deepak Nitrite vs. NIFTY Midcap 100 New businesses 755 20 15,108
Net Debt 1,130
1m 6m 1 year
Implied value (Rs mn) 317,177
DN IN (6.4) 14.2 (2.4)
No. of shares 136
NIFTY midcap 100 2.0 17.3 2.1
Target price 2,325
Key assumptions P/E mean and standard deviation

YE Mar FY23E FY24E FY25E 45
Advanced Intermed. growth (%) 14.6 16.1 16.2
35
Advanced Intermed. EBITDA margin (%) 22.0 23.5 25.0
Phenol sales vol. (MT) 2,60,000 3,00,000 3,15,000
25
15
5
May-18
May-19
May-20
May-21
May-22
Nov-17
Nov-18
Nov-19
Nov-20
Nov-21
Nov-22
P/E Mean
30
20
10
0
May-18
May-19
May-20
May-21
May-22
Nov-17
Nov-18
Nov-19
Nov-20
Nov-21
(10) Nov-22
EV/EBITDA Mean
Peer comparison
Company
Atul Ltd. 242.1 16.8 21.2 19.4 37.9 28.9 23.5 24.6 18.4 15.0 14.6 14.2 0.3
Deepak Nitrite 287.6 13.7 12.4 14.2 32.1 21.1 18.0 21.1 14.3 12.1 37.5 33.5 0.3
SRF 675.5 17.7 18.2 18.2 31.2 26.0 21.5 19.7 16.5 13.7 24.5 18.0 0.3
Vinati Organics 215.0 28.8 25.6 26.6 48.4 38.8 30.7 37.1 30.4 24.7 20.6 20.5 0.0

Company overview
Deepak Nitrite, headquartered in Vadodara, Gujarat is one of the leading chemical
intermediates companies in India. Started as a manufacturer of sodium nitrate and nitrite
about five decades ago, the company has diversified into multiple segments i.e., basic
intermediates, fine & specialty chemicals, performance products, and phenolics. Recently,
the company consolidated its basic intermediates, fine & specialty chemicals, and
performance products segments into advanced intermediates and is now reporting its
financials under advanced intermediates and phenolics segments.
Deepak’s diverse portfolio of chemical intermediates cater to a wide range of user industries
across India and abroad including agrochemicals, laminates, dyes, pigments, auto, paper,
pharmaceuticals, and textiles among others. The company sells over 30+ products finding
over 56+ applications. The manufacturing facilities are located across three states and five
locations/ six sites and R&D facility in Nandesari, Gujarat.
Exhibit 275: Manufacturing footprint
Hyderabad, Dahej, Gujarat - Dahej, Gujarat -
Location Nandesari, Gujarat Taloja, Maharashtra Roha, Maharashtra
Telangana Deepak Nitrite Deepak Phenolics
Basic chemicals, fine Synthetic organic
& specialty chemicals, fine & Intermediates for
Basic chemicals,
chemicals specialty chemicals agrochemicals, dyes, Performance Phenol, acetone, and
Segments performance
First and flagship Strategically and specialty products IPA
products
manufacturing connected to Nhava chemicals
facility Sheva port
Ammonia oxidation, Alkylation, Oxidative Alkylation, Oxidative
alkali fusion, bromination, bromination, Hydrogenation,
Key chemistries sulphonation, Hydrogenation reductive reductive Sulphonation,
continuous nitration, alkylation, alkylation, Oxidation
condensation diazotization diazotization
Deepak’s legacy business, till FY22, was divided into three segments which has been
reorganized into a single reportable segment, advanced intermediates from Q1FY23.
Deepak has multiple new products under development which are based on its inherent
chemistry skills and forward integration/adjacencies to the existing products.
Exhibit 276: Product value chain

All the manufacturing units of the company are compliant to ISO 9001 (quality), ISO 14001
(environmental), and ISO 45000 (health and safety) standards. Deepak has also conducted
Together for Sustainability (TfS) Audit at Roha, Taloja, and Nandesari units to improve its
sustainability performance. Its plants are authorized to use Responsible Care logo.
Basic Intermediates (BI)
By nature, these are bulk/commodity products and cater to multiple user industries.
Deepak, due to its legacy has achieved cost leadership which stands as a competitive
advantage for the company. During FY22, BI segment revenues surged 66% yoy and
accounted for 18.2% of total revenues. The segment reported healthy 26.8% EBITDA and
24.8% EBIT margins.
Exhibit 277: BI products, applications
Overview Products Application diversity Value driver
Colourants, Petrochemicals, Rubber,
Sodium Nitrite, Sodium Nitrate, Nitro
Standard products manufactured in Agrochemicals, Pharmaceuticals, Cost leadership
Toluidines, Fuel Additives, Nitrosyl
bulk, high volume Water Treatment, Glass Industries, Large scale production
Sulphuric Acid
Industrial Explosives, Fuel Additives
Fine & specialty chemicals (FSC)

Deepak manufactures customized products under its FSC segment. The company has in-
house technical and process expertise to manufacture these products as per customer
specifications. Few key attributes for these products are quality, deep linkages, reliable and
efficient supply chain, and conformity with worldwide standards. During FY22, FSC segment
revenues increased 10.0% yoy and accounted for 12.2% of total revenues. The segment
reported robust 33.0% EBITDA and 30.4% EBIT margins.
Exhibit 278: FSC products, applications
Technical skills and technology
competence to handle complex
Specialised products customised to Xylidines, Oximes, Cumidines, Agrochemicals, Colours & Pigments,
reactions
the client’s specification Speciality Agrochemicals Paper, Personal Care, Pharmaceuticals
Ability to meet clients’ specific needs
Niche area with limited competition
Performance products (PP)

Deepak entered into this segment through acquisition of Vasant Chemicals’ DASDA division
in 2007. The company is completely integrated to manufacture OBA from toluene to PNT to
DASDA to OBA. Due to integrated value chain, Deepak enjoys margin advantage against the
competitors. During FY22, PP segment revenues surged 74% yoy and accounted for 6.9% of
total revenues. The segment reported healthy 22.0% EBITDA and 18.6% EBIT margins.
Strong recovery in user segments led to performance coming back to normalcy.
Exhibit 279: PP products, applications
Ability to manufacture products with
Products with stringent requirements Paper, Detergents, Textiles, Coating stringent performance and technical
Optical Brightening Agent (OBA),
in terms of performance in Applications in Printing and requirements
DASDA
manufacturing process Photographic, Paper Leading fully integrated manufacturer
of OBA
Phenolics
Phenolics remained the largest contributor to Deepak’s revenues in FY22, contributing
61.9% of total revenues. During FY22, phenolics segment revenues surged 68% yoy
primarily on account of higher feedstock prices in turn reflecting into higher product prices.
Higher capacity utilisation from 110% to 117% aided volume growth, coupled with value
addition from IPA capacity expansion from 30,000MT to 60,000MT. Increased phenol-
acetone/benzene-propylene spreads aided EBITDA which expanded 35% yoy with EBITDA
margins of 22.7%.

Exhibit 280: Phenolics products, applications

Lowest thermal footprint among
similar plants
Laminate & Plywood, worldwide
Phenol, Acetone, Cumene, Isopropyl
High volume import substitutes Pharmaceuticals, Adhesives, Among the most reliable players in
Alcohol
Sanitisers, Rubber, Chemicals, Paints the
domestic market
Strategic import substitutes
Deepak caters to a wide range of 1,000+ domestic as well as global customers which are
located across 45+ countries.
Exhibit 281: Key customers

Research and development (R&D)

Deepak’s centralized research facility is DSIR recognized and is located at Nandesari,
Gujarat. The company has a team of 70+ personnel including 13 PhDs. Apart from its core
chemistry skills, the company has been working on new technology platforms which shall
be commercialised in coming years. It is working on fluorination, photo chlorination, high
pressure oxidation reaction for adipic acid formation, and gas solid reaction for salicylic acid
formation. The company also working at lab level for conversion of batch mode reactions
to continuous reactions for better yield and quality.
Exhibit 282: R&D – Key objectives

Exhibit 283: Deepak Nitrite – Growth Journey
•Incorporation of Deepak Nitrate Limited

1970
•Listed on BSE with landmark over-subscription

1970
•Commissioned Sodium Nitrate & Nitrite Plant at Vadodara, Gujarat

1972
•Acquisition of Sahyadri Dyestuffs & Chemicals unit from Mafatlal Industries

1984
•Commissioned Nitro Aromatic Plant at Nandesari

1992
•Commissioned Hydrogenation Plant at Taloja

1995
•Acquisition of management and control of Aryan Pesticides Limited

2003
•Acquisition of DASDA Division from Vasant Chemicals at Telangana

2007
•Foray into Fuel Additives business

2010
•Accredited with Responsible care a global benchmark of environment, safety and health management
2012
•Brownfield expansion for manufacturing SodiumNitrite & Nitrate at Nandesari Turnover crosses INR 1,000 crore
2013
•Commissioned a world-class facility to manufacture Optical Brightening Agents (OBA)

2014

Playing the import substitution theme – Done with Phenol
Deepak played the import substitution theme through its massive investment of ~Rs14bn
in the phenolics project. Production commenced from November 2018 and within the next
couple of quarters, it attained 100% utilisation. Since then, the plant has been running at
more than 100% utilisation with Q2FY23 utilisation at 125%+ on the nameplate capacity of
200,000MT. Resultantly, Deepak became debt free (net) by FY22 due to the strong cash
flows generated from the phenolics segment.
Exhibit 284: Phenol import volumes and pricing trend
Volume (000's MT) US$/ MT
300 1,662 1,800
1,581
1,483 1,498 1,600
250 1,319 1,349 1,366
1,400
200 966 1,200
1,090
1,000
150 933
910 800
100 692 600
400
50
200
146
122
172
213
200
248
281
285
226
139
171
204
0 0
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Source: Ministry of Commerce, Centrum Broking
It can be seen in the graph above that post commissioning of Deepak Phenolics capacity in
FY19, the import volumes went down substantially. Deepak is already operating the
phenolics capacity at ~250,000MT while debottlenecking it to 300,000MT is currently
underway and is expected to be completed by end-FY23E. With incremental domestic
phenol capacity addition, the imports are likely to go down further.
Exhibit 285: Phenolics revenues and EBITDA (Rs bn)
Revenues (Rs bn) EBITDA
55.7 57.4
52.2
42.9
Deepak Phenolics
Commercialisation
25.6
20.0
11.7 12.0
9.1 9.7
7.2 7.4
2.0 1.2 2.5
0.00.0 0.00.0
(0.1)
We expect phenolics segment to exert pressure in FY23E due to demand challenges in the
Europe and the US which are likely to put pressure on spreads. However, demand recovery
and debottlenecked capacity to benefit Deepak’s financial performance in FY24E. Phenolics
business to remain a cash cow for the company to fund its future expansions.

Next import substitution – Phenol/ acetone downstream

derivatives
Deepak went into acetone downstream with IPA capacity of 30,000MT. During FY22, it
further expanded its IPA capacity from 30,000MT to 60,000MT. With phenolics
debottlenecking to 300,000MT, total acetone availability is expected to go to 180,000MT.
IPA to consume 60,000MT acetone currently.
Deepak has planned Rs4bn investment in downstream derivatives of phenol/acetone.
Starting with MIBK 40,000MT and MIBC 8,000MT, the company is planning to expand into
other solvents which shall consume acetone. Project commissioning is expected sometimes
in Q2/Q3FY24E. Management remains optimistic on domestic growth across solvents which
are growing at 5-10%. These solvents find applications primarily in pharma and
agrochemicals, and in coatings segment.
Exhibit 286: MIBK import pricing and volume trend
Volume (MT) USD/MT
40,000 2,268 2,500
2,111
35,000 1,988
1,864 1,874
2,000
30,000 1,663
25,000 1,397 1,500

1,411
20,000 1,234 1,260
15,000 1,154 1,000

858
10,000
500
16,399
19,209
17,668
18,318
23,243
27,576
22,487
34,684
33,932
29,977
30,744
37,198
5,000
0 0
Over the past five years MIBK import volumes have averaged at 30,000MT+. In FY22, yoy
average realisation surged significantly to USD2,268/MT vs USD1,411/MT. Considering
USD1,600-1,700/MT avg. realisations, we estimate revenue potential of ~Rs5.0-5.5bn for
MIBK and MIBC together. At 25% EBITDA margins, the EBITDA potential at full utilisation
stands at Rs1.2-1.4bn.
Polycarbonate – Can lead to forward integration

Deepak Nitrite, during its Q1FY23 concall, indicated that it is exploring PC opportunity. The
company is already undergoing value addition through its entry into downstream solvents
of phenol/acetone. Polycarbonate would also lead to forward integration as the starting
material for polycarbonate is phenol and acetone. During past 4 years, PC imports averaged
at ~190,000MT while FY22 imports stood at ~212,000MT. PC finds applications across
various segments such as consumer appliances, auto, building and construction, medical,
etc.

Exhibit 287: Polycarbonate import pricing and volume trend

Volume (000's MT) US$/ MT
250 3,500
2,922 2,931 3,011
2,773 3,000
2,632
200 2,466 2,493 2,500 2,116
2,293 2,200 2,500
150 2,000
2,025
100 1,500
1,000
50
500
123
105
116
123
125
139
138
159
190
176
179
212
0 0
Phenol plus acetone gives Bisphenol-A and Bisphenol-A is further reacted with carbonyl
chloride to manufacture polycarbonate.
Exhibit 288: Bisphenol-A manufacturing process
Source: https://plasticsbusinessmag.com/
New platforms for further making inroads in specialty

Deepak’s R&D is backed by its core technologies in areas such as nitration, reduction, and
diazotization. The company is building new technology platforms such as fluorination and
photochlorination to cater to the pharma and agrochemical intermediates segments. With
an initial investment of ~Rs3bn, its photochlorination plant is expected to come onstream
by Q4FY23E/Q1FY24E. Enhancement in technology platforms and products thereof would
further strengthen Deepak’s position in specialty chemicals.
Considering 1.5x asset turns for the initial investment, the peak revenue potential is
estimated at Rs4.5bn. Considering 25% EBITDA margins, the peak EBITDA potential is
estimated at Rs1.1bn.

Financial analysis
During FY19-22 Deepak Nitrite reported Revenue/EBITDA/PAT CAGR of
36.1%/57.1%/83.1%. Significant improvement in financial performance can be attributed to
commissioning of Deepak Phenolics project in FY19 and subsequently capacity utilisation
reaching to 90% in FY20 and 117% in FY22. EBITDA margins too increased from 15.3% in
FY19 to 23.6% in FY22 supported by both, expansion in phenolics and advanced
intermediates margins.
68.0 28.6
24.3 23.6
42.3 43.6
15.3 16.0
27.0 12.1 11.9 12.5
9.9 10.3
13.7 13.7 16.5
10.7 4.1
6.1 7.8
0.6 1.0 0.8 1.7 1.7 1.4 2.0
During FY22 revenues increased 56.0% yoy to Rs68.0bn (Rs43.6bn) benefitted from higher
phenolics realisations. EBITDA surged 28.6% yoy to Rs16.0bn (Rs12.5bn). EBITDA margins
declined due to lower margins on advanced intermediates impacted by RM cost inflation,
energy inflation, and increased logistics costs. Phenolics EBITDA margins look depressed due
to higher product prices impacted by higher input costs of benzene and propylene. PAT for
FY22 stood at Rs.4.9bn against Rs.3.5bn in FY21.
Exhibit 291: Domestic/Export mix
Domestic Exports
15.3
10.7 12.7
52.7
5.9
5.1 31.6 30.9

5.1 4.7 21.1
8.6 9.8 11.6

During FY22, exports contributed 22.5% of total revenues of Deepak Nitrite. Considering
100% domestic sales of phenolics segment and exports of only advanced intermediates
segment, exports contribution from advanced intermediates in FY22 stood at 58%. Exports
contribution has increased substantially over the years from 38% in FY16 to 58% in FY22.
Exports contribution is not expected to move up materially going forward due to continued
focus on import substitutes.

Exhibit 292: Europe – Largest exports destination Exhibit 293: Region wise revenue split (FY22)
India Europe US Asia Others
3.0 Europe
7.1 4.6 8.1
9.2 10.4 10.8 10%
3.1 4.0
8.6 6.1 4.9 1.8 4.4
12.5 9.9
17.5 14.0 11.4 13.4
17.9 US
4%
India
78.0 74.7 77.5 78%
67.6 69.5 70.6
62.8 Asia
8%

Post commissioning of the phenolics project, Deepak Nitrite’s capex intensity remained
subdued till FY22. Capex was primarily done towards IPA capacity augmentation and
debottlenecking of Deepak Nitrite’s capacities based on customer demand. However, from
FY23E onwards the capex momentum is expected to pick up with investments across
phenol/acetone downstream products as well as new platforms.
Exhibit 294: Capex and gross block trend (Rs bn)
Gross block Capital expenditure

25.2
22.5
20.7
18.5
8.8
5.9 6.5
3.0 4.0
2.4 2.1 1.9
0.9 6.2

During Q1FY22, Deepak Nitrite merged its three segments i.e. basic intermediates, fine &
specialty chemicals, and performance products into a single segment, advanced
intermediates. For comparison purpose, we have clubbed these segments for historical
analysis.
During FY22, phenolics segment revenues increased 67.6% yoy to Rs42.9bn (Rs25.6bn) and
advance intermediates revenues grew 44.0% yoy to Rs26.4bn (Rs18.3bn). Growth was
driven from both increased prices due to RM inflation and higher volumes.

Exhibit 295: Segmental revenue break-up (Rs bn)

Advanced Intermediates Phenolics
42.9
20.0 25.6
9.1
2.0
0.0 0.0
15.1 18.3
13.4 13.4 22.9 18.3 26.4
Advanced intermediates segment

In FY22, advanced intermediates segment revenues grew 44.0% yoy from Rs18.3bn to
Rs26.4bn. EBITDA margins slipped yoy from 33.4% to 27.9% due to inability to pass on RM
cost inflation, energy inflation, higher logistics costs.
Exhibit 296: Advance intermediates segment performance
Revenues (Rs bn) EBITDA (%)
38.2
33.4
27.9
22.0
17.3
15.1 14.6
26.4
22.9
18.3 18.3
13.4 13.4 15.1

We have analysed historical performance of the erstwhile three segments which from FY23
onwards would be reported as a single segment.

Basic Intermediates
In FY22, basic intermediates accounted for 18.2% and 47.8% of total and advanced
intermediates revenues, respectively. During FY22, revenues surged 65.9% yoy to Rs12.6bn
(Rs7.6bn). EBITDA margins declined 240bps yoy to 26.8% (29.3%) while EBITDA rose 52.2%
yoy to Rs3.4bn (Rs2.2bn). Performance was impacted due to temporary disruption in RM
availability.
Exhibit 297: Basic intermediates segment performance
Revenue (Rs bn) EBITDA %

29.3
26.8
25.8
18.4
16.5
14.9
13.4
12.6
8.9 9.4
6.7 7.0 7.5 7.6
Fine & specialty chemicals

During FY22, fine & specialty chemicals revenues increased 10.4% yoy to Rs8.5bn from
Rs7.7bn. The segment witnessed sharpest yoy margins decline from 45.7% to 33.0%,
consequently declining EBITDA by 20.3% yoy to Rs2.8bn (Rs3.5bn). Performance was
impacted due to multiple headwinds including elevated RM costs, logistics disruptions, and
higher utilises costs. Additionally, performance was also impacted due to the nature of
contracts where cost inflation is passed on with a lag.
Exhibit 298: Fine & Specialty chemicals segment performance

45.7
33.4 33.0
26.8 27.8
25.3 26.1
7.7 8.5
4.6 5.4 5.9
3.9 3.7

Performance products
Only two products are manufactured under the performance product segment i.e. DASDA
and OBA. In FY22, due to strong recovery in user segments, revenues from the segment
jumped 74.0% yoy to Rs5.3bn (Rs3.0bn) supported by volume growth of 26% yoy. Better
DASDA demand led to better realisations which aided EBITDA margin expansion of 950bps
yoy to 22.0% (12.6%) and more than tripling its EBITDA to Rs1.2bn from Rs0.4bn.
Exhibit 299: Performance products segment performance

57.0
24.6
22.0
12.6
7.7
4.0 5.3
2.7 2.7 2.6 3.0 3.0
3.0

(1.3)
Phenolics segment
In FY22, phenolics accounted for the largest revenue and EBITDA contribution at 61.9% and
56.5% respectively. Revenues in FY22 rose 67.6% yoy to Rs42.9bn (Rs25.6bn). Capacity
utilisation too jumped from 110% yoy to 117%. Gross profit expanded 31.5% yoy to
Rs14.0bn (Rs10.7bn) while EBITDA increased 35.3% yoy to Rs9.7bn (Rs7.2bn). EBITDA
margins, however declined 540bps yoy due to higher feedstock prices i.e. benzene and
propylene.
Exhibit 300: Phenolics segment business performance
57.0
54.3
Commercialisation
48.3
42.9
25.6
20.0
28.1
9.1 22.7 22.1 21.8
19.0
0.0 0.0 2.0 13.3 12.5
0.0 0.0
(2.9)

Cash flow analysis

Deepak’s cash flows rose consistently, accelerating from FY19 due to commissioning of its
large phenolics project. Overall working capital improved too with NWC stabilising at ~50
days. FCF was impacted due to phenolics capex which started from 2014. Negative FCF from
FY15 was also due to commencement of phenolics capex.
Exhibit 301: Consistently improving cash flows
10,000
8,000
6,000
Rsm
4,000
2,000
0
(2,000)
Exhibit 302: Improved WC, NWC stabilised at ~50 days in recent past
120
90 78 79 77
51 55 51
48 49
days
60 42
30
32
0
Exhibit 303: EBITDA to OCF conversion of 42% over 10 years Exhibit 304: FCF impacted due to high capex on phenolics
100% 1000%
80% 750%
500%
60%
250%
40% 0%
-250%
20%
-500%
0% -750%
-20%
Post commissioning of phenolics project, Deepak utilised cash flows to repay debt, thus
deleveraging the balance sheet, which also aided improvement in return ratios. Deepak’s
62% stock return CAGR over FY13-22 was led by strong 46% PBT CAGR and avg. 24% ROE.

Exhibit 305: Leverage went down, stark improvement in return ratios with phenolics commissioning
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY13-22 avg
Net Debt/Equity 0.6 1.1 1.5 1.3 0.9 0.8 0.9 1.0 0.6 0.2 0.1 0.85
Net Debt/EBITDA 2.7 4.2 4.0 3.4 2.5 4.3 4.2 2.7 1.0 0.4 0.2 2.68
RoCE pre-tax 17.1% 11.7% 12.7% 13.3% 15.0% 8.9% 10.0% 17.6% 38.4% 40.8% 45.1% 21.3%
RoCE 12.5% 8.4% 8.3% 10.5% 10.6% 6.4% 7.1% 11.4% 29.1% 30.4% 33.5% 15.6%
RoIC pre-tax 9.3% 8.7% 11.9% 12.4% 13.9% 7.6% 9.1% 16.4% 35.8% 38.7% 38.0% 19.2%
RoE 18.3% 14.2% 13.0% 16.2% 15.4% 16.2% 9.7% 17.4% 46.2% 39.6% 37.5% 22.2%
Exhibit 306: DuPont Analysis – Improved asset turns, EBITDA margin expansion led to high RoE
PAT/PBT 0.72 0.66 0.79 0.71 0.72 0.71 0.65 0.76 0.74 0.74 0.72
PBT/EBITDA 0.73 0.51 0.48 0.53 0.99 0.56 0.65 0.79 0.84 0.89 0.70
EBITDA/Revenue 0.07 0.09 0.10 0.12 0.10 0.12 0.15 0.24 0.29 0.24 0.15
RoE 14.2% 13.0% 16.2% 15.4% 16.2% 9.7% 17.4% 46.2% 39.6% 37.5% 22.2%
Exhibit 307: Price movement vs. Financials – Stock returns led by strong P&L growth, robust return ratios
75% 62%
46%
50% 39% 41% 39%
24% 20% 24%
25% 16% 16%
-28%
0%
-2%
-25%
EBITDA Margin*
Gross Margin*
PBT CAGR^
FCF/Sales*
NWC (Ex-cash) as a
PBT Margin*
OCF/EBITDA*
FCF/OCF*
RoE (Avrg)
Stock return
Revenue CAGR^
EBITDA CAGR^
% of revenue
-50%
Source: Company Data, Centrum Broking; ^: FY13-22 CAGR; *: aggregate, Note: FY13-22 CAGR, excluded FY12 due to substantial income from carbon credits
Exhibit 308: Negative FCF during capex phase

FCF (a) (1,464) (1,130) 19 806 (2,472) (4,387) (1,825) (682) 2,295 3,284
FCF yield NA NA 0% 11% NA NA NA NA 2% 1%
Dividend + Buyback (b) (73) (97) (122) (125) (167) (188) (213) (1,060) (4) (750)
Distribution of FCF (b/a) 5% 9% -653% -16% 7% 4% 12% 155% 0% -23%

Valuations
Deepak’s rising utilisation of Phenolics plant coupled with healthy demand across other
segments led to strong operational performance over FY20-22 with revenue/EBITDA/PAT
CAGR of 26.8%/25.0%/32.1%. EBITDA margins receded a bit due to rising contribution from
phenolics segment. Surge in bottom-line, and higher than EBITDA growth was supported
from reduction is interest outgo due to deleveraging.
Deepak has initiated capex of ~Rs15bn over FY23-24E which shall help in increasing Phenol
capacity, capacities across other business segments, and phenol/acetone derivatives. Some
capex is also dedicated for commercializing new technology platforms, which shall foster
future growth. FY23E is expected to be a transition year due to demand issues in phenol
impacting spreads. Nonetheless, new capex shall start contributing meaningfully from
FY24E onwards thus gaining growth momentum. We expect revenue/EBITDA/PAT CAGR of
~14%/13%/14% over FY22-25E. We have not considered any investments on PC value chain.
Even if this investment goes through, it shall start contributing the financials from FY26E
onwards.
FY20-22 FY22-25E
CAGR% CAGR%
Revenues 42,297 43,598 68,022 82,138 91,129 1,00,093 26.8 13.7
EBITDA 10,258 12,470 16,036 13,626 19,715 22,761 25.0 12.4
EBITDA % 24.3 28.6 23.6 16.6 21.6 22.7
PAT 6,110 7,758 10,666 8,932 13,590 15,892 32.1 14.2
EPS 44.8 56.9 78.2 65.5 99.6 116.5 32.1 14.2
We like Deepak due to (a) import substitution, (b) substantial Rs15bn capex over FY23-24E,
(c) debt-free balance sheet, and (d) entry into new chemistry platforms. We believe that
new projects commissioning shall reduce phenol contribution in overall financials with
move towards specialty. We have valued the company using SOTP methodology. We initiate
with an ADD rating and TP of Rs2,325 (10% upside).
SOTP valuation 1HFY25E EBITDA EV/ EBITDA (x) Value (Rs mn)
Advanced Intermediates 9,222 20 184,435
Phenolics 11,876 10 118,763
New businesses 755 20 15,108
Net Debt 1,130
No. of shares 136
Target price 2,325

Risks
Contraction in phenol/acetone spreads
Benzene/propylene are RMs for phenol manufacturing and acetone is a by-product.
Phenol/acetone spreads are dependent on phenol demand and are generally unimpacted
due to vagaries in benzene/propylene prices, which sway due to crude prices. Spreads
averaged at ~USD660/MT during past 10-year period and 5-year period. Due to ongoing
challenges in Europe and the US, phenol demand is likely to get impacted, which in turn will
impact spreads.
Exhibit 311: Phenol/Acetone – Benzene/Propylene spreads
1600
1400
1200
1000
(USD/ MT)
800
600
400
200
0
Project execution delays

Post commissioning of phenolics project, Deepak is undergoing substantial capex of Rs15bn
over FY23-24E. Any delays in execution can hamper growth prospects of the company.

Story in Charts
Exhibit 312: Revenue and PAT trend (Rs bn) Exhibit 313: Increased EBITDA margins (%) to sustain
100.1 28.6
91.1
82.1 24.3 23.6
21.6 22.7
68.0 22.8
15.3 16.6 19.7
16.0
42.3 43.6 12.1 11.9 12.5 13.6
9.9 10.3
27.0
13.7 13.7 16.5 13.6 15.9 4.1
7.8 10.7 8.9 1.7 1.4 2.0
6.1
0.6 1.0 0.8 1.7
15.3 22.0 25.3 29.2 22.5

37.2 32.4 30.5
10.7 12.7
52.7 78.0 74.7 70.8 77.5

5.9 62.8 67.6 69.5
5.1 31.6 30.9
5.1 4.7 21.1
8.6 9.8 11.6
Exhibit 316: Region wise revenue mix (%) Exhibit 317: Region wise revenue split (FY22)
India Europe US Asia Others
4.6 Europe
3.0 7.1 9.2 10.4 10.8 8.1
3.1 10%
6.1 4.9 1.8 4.4 4.0
8.6 12.5
17.5 11.4 13.4 9.9
17.9 14.0 US
4%
India
78%
78.0 74.7 70.6 77.5
62.8 67.6 69.5 Asia
8%

Exhibit 318: Capex trend (Rs bn) Exhibit 319: Return ratios (%)
Gross block Capital expenditure ROE ROCE
46.2
49.7 39.6 37.5
39.7
28.3
32.2 25.7
33.5 23.8
25.2
22.5 15.4 16.2
17.4 29.1 30.4 27.5
18.5 20.7 25.4
9.7 22.6
8.8 7.5
5.9 6.5 7.0 10.0
6.2 4.0 10.6 6.4 11.4
0.9 3.0 2.4 2.1 1.9 7.1

Exhibit 320: Cash rich balance sheet Exhibit 321: Working capital days trend
Debt/Equity Debtor Days Inventory Days Creditor Days
1.0 124
0.9 0.9
0.8 107
0.6
75
64 65
0.2 54 87 55 57
0.1 0.0 82 42 43
(0.1) 62 63
(0.2) 62 55 57
50 46
43
Operational Charts
Exhibit 322: Segmental revenue mix Exhibit 323: Advanced intermediates segment performance
Advanced Intermediates Phenolics Revenues (Rs bn) EBITDA (%)
38.2
33.4 23.5
25.0
27.9 22.0
57.4 22.0
55.7
52.2 17.3
15.1 14.6 40.8
42.9 35.1
30.2
20.0 25.6 22.9 26.4
2.0 9.1 15.1 18.3 18.3
0.0 0.0 13.4 13.4
22.9
18.3
26.4
30.2
35.1
40.8
15.1
18.3
13.4
13.4
Exhibit 324: Phenolics segment performance

Deepak Phenolics
Commercialisation 57.4
52.2 55.7
42.9
25.6
20.0
9.1
28.1
2.0 22.7 21.0 21.0
0.0 0.0 13.3 12.5 14.2
0.0 0.0
(2.9)

Quarterly Trend
Revenues 9,873 12,347 14,632 15,262 16,814 17,223 18,724 20,580 19,617 16.7 (4.7)
Q-o-Q gr. (%) 46.4 25.1 18.5 4.3 10.2 2.4 8.7 9.9 (4.7)
Raw Mat. Cons. 4,870 6,763 7,672 8,197 10,528 10,851 11,568 13,608 13,700 30.1 0.7
% of net sales 49.3 54.8 52.4 53.7 62.6 63.0 61.8 66.1 69.8
Purchase of prod. 0 0 0 0 0 0 0 0 0
% of net sales 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Power, fuel, and water 670 728 828 890 1,016 1,191 1,289 1,333 1,452 43.0 9.0
% of net sales 13.8 10.8 10.8 10.9 9.6 11.0 11.1 9.8 10.6
Employee Costs 602 669 582 690 683 655 714 812 785 15.0 (3.3)
% of net sales 6.1 5.4 4.0 4.5 4.1 3.8 3.8 3.9 4.0
Others 973 837 1,004 971 722 1,007 1,049 1,267 971 34.5 (23.4)
% of net sales 9.9 6.8 6.9 6.4 4.3 5.8 5.6 6.2 4.9
EBITDA 2,760 3,350 4,547 4,515 3,865 3,519 4,103 3,560 2,709 (29.9) (23.9)
Q-o-Q growth (%) 51.9 21.4 35.7 (0.7) (14.4) (9.0) 16.6 (13.2) (23.9)
EBITDA Margin (%) 27.9 27.1 31.1 29.6 23.0 20.4 21.9 17.3 13.8
Dep. & Amor. 312 339 565 436 441 455 446 419 424 (3.7) 1.2
EBIT 2,447 3,011 3,982 4,079 3,425 3,064 3,657 3,141 2,285 (33.3) (27.3)
Interest exp. 196 157 142 109 92 68 71 86 59 (36.1) (31.3)
Other Income 37 49 59 83 84 258 35 96 120 42.8 25.3
EBT 2,288 2,903 3,899 4,053 3,417 3,253 3,622 3,151 2,346 (31.3) (25.6)
Provision for tax 587 737 998 1,026 873 829 950 805 601 (31.2) (25.3)
Eff. tax rate (%) 25.6 25.4 25.6 25.3 25.6 25.5 26.2 25.5 25.6
Net Profit 1,702 2,166 2,901 3,026 2,543 2,425 2,672 2,346 1,745 (31.4) (25.6)
Q-o-Q gr. (%) 72.0 27.2 34.0 4.3 (16.0) (4.7) 10.2 (12.2) (25.6) 60.7
PAT Margin (%) 17.2 17.5 19.7 19.7 15.1 13.9 14.2 11.3 8.8
Segments revenue (Rs mn)

Basic Chemicals 1,755 1,962 2,452 2,489 2,675 3,458 3,988 0 0 0 0
Fine & Speciality Chemicals 2,099 2,109 2,060 2,069 1,974 2,067 2,352 0 0 0 0
Performance Products 670 902 867 933 1,048 1,699 1,613 0 0 0 0
Advanced Intermediates 4,524 4,973 5,378 5,491 5,698 7,224 7,953 7,300 6,853 156.2 (6.1)
Phenolics 5,454 7,469 9,375 9,990 11,370 10,331 11,221 13,349 12,841 12.9 (3.8)
Total 9,978 12,443 14,754 15,481 17,068 17,555 19,174 20,649 19,694 15.4 (4.6)
EBIT
Basic Chemicals 409 469 707 851 625 687 966 0 0 0 0
% EBIT 23.3 23.9 28.8 34.2 23.4 19.9 24.2 0.0 0.0
Fine & Speciality Chemicals 1,006 910 797 674 603 533 765 0 0
% EBIT 47.9 43.1 38.7 32.6 30.6 25.8 32.5 0.0 0.0
Performance Products 47 81 31 21 92 467 389 0 0
% EBIT 6.9 9.0 3.5 2.3 8.8 27.5 24.1 0.0 0.0
Advanced Intermediates 1,461 1,460 1,535 1,546 1,320 1,687 2,119 1,327 1,384 4.8 4.3
% EBIT 32.3 29.4 28.5 28.2 23.2 23.3 26.6 18.2 20.2
Phenolics 1,229 1,738 2,668 2,873 2,204 1,836 1,759 1,877 1,027 (53.4) (45.3)
% EBIT 22.5 23.3 28.5 28.8 19.4 17.8 15.7 14.1 8.0
Total EBIT 2,690 3,198 4,203 4,419 3,524 3,523 3,878 3,204 2,410 (31.6) (24.8)
% EBIT 27.0 25.7 28.5 28.5 20.6 20.1 20.2 15.5 12.2

P&L Balance sheet

Taxes 2,659 3,678 3,057 4,292 4,747 Net block 18,357 19,327 24,463 29,808 37,127
Cash & Cash Equivalents 334 418 877 5,893 11,838
EBITDA 21.6 28.6 (15.0) 44.7 15.4 Provisions 104 77 77 77 77
Adj. EPS 27.0 37.5 (16.3) 52.1 16.9 Net current assets 9,018 16,510 18,640 25,154 32,594
Gross 48.1 39.5 33.0 38.7 40.5
EBITDA 28.6 23.6 16.6 21.6 22.7 Cashflow
ROE 39.6 37.5 23.8 28.3 25.7 Net Interest 742 340 161 101 101
ROCE 30.4 33.5 22.6 27.5 25.4 Net Change – WC (503) (4,858) (1,671) (1,498) (1,494)
Inventory 63 43 46 55 57 Investments (1,869) (2,497) 0 0 0
Solvency (x) FCF 5,730 3,866 2,245 6,817 7,158
Net debt-equity 0.2 0.1 0.0 (0.1) (0.2) Issue of share capital 0 0 0 0 0
Interest coverage ratio 16.8 47.1 84.9 196.1 226.4 Increase/(decrease) in debt (5,007) (2,265) (1,000) (750) 0
Net debt/EBITDA 0.4 0.2 0.1 (0.2) (0.5) Dividend paid 0 (750) (625) (951) (1,112)
Adjusted EPS 56.9 78.2 65.5 99.6 116.5 Others (206) (617) 0 0 0
BVPS 172.0 244.8 305.7 398.3 506.7 Net cash from financing (5,955) (3,972) (1,786) (1,802) (1,213)
CEPS 68.1 91.2 79.6 115.9 136.7 Net change in Cash (225) (106) 459 5,015 5,945
Dividend payout (%) 0.0 7.0 7.0 7.0 7.0
Valuation (x)
P/E 37.1 27.0 32.2 21.2 18.1
P/BV 12.3 8.6 6.9 5.3 4.2
EV/EBITDA 23.5 18.1 21.2 14.4 12.2
Dividend yield (%) 0.0 0.3 0.2 0.3 0.4

Appendix
R&D and technology
Over the years, Deepak’s focus has been clearly towards developing and implementing
technology for manufacturing import substitute products. After successfully implementing
its phenol acetone plant at Dahej, Deepak continues to invest towards product innovation
and improvising process engineering capabilities.
Deepak has successfully demonstrated Batch Process yield improvement and is running
commercially for better sustainability in the market
Technological advancements towards process improvement reduced cost
Key strategic measures are taken towards evaluating alternative routes to make
cheaper and cleaner technologies
Deepak is making efforts to convert existing batch process into continuous process to
pave way towards further sustainability
Continuous chemical processes developed shall aid to reduce RM consumption norms
and unproductive by-products formation
Product Category Overview Products Application Description
Colourants, Petrochemicals,
These chemicals are essential Sodium Nitrite, Sodium Rubber, Agrochemicals,
Largest producer of sodium
to all materials. These are Nitrate, Nitro Toluidines, Fuel Pharmaceuticals, Water
Basic Intermediaries nitrite and sodium nitrate in
standard products which are Additives, Nitrosyl Sulphuric Treatment, Glass Industries,
India.
manufactured in bulk. Acid Industrial Explosives and Fuel
Additives
Among top three global
These are specialised products Agrochemicals, Colours &
Xylidines, Oximes, Cumidines, players for products like
Fine & Specialty chemicals customized to the clients’ Pigments, Paper, Personal
Speciality Agrochemicals xylidnes and oximes.
specifications. Care, Pharmaceuticals etc.
These are products with Paper, Detergents, Textiles,
stringent requirements in Optical Brightening Agent Coating Applications
terms of performance in (OBA), DASDA in Printing and Photographic
manufacturing process. Paper
Laminate & Plywood,
Automotive,
These are high volume import Phenol, Acetone, Isopropyl Construction, Largest producer of phenol
Phenolics
substitutes. Alcohol Pharmaceuticals, Adhesives, and acetone in India.
Sanitisers, Rubber, Chemicals,
Paints, etc.


Mr. D.C. Mehta’s business acumen, leadership skills and dynamism have enabled Deepak Nitrite
to take swift strides forward and achieve many milestones in the last 40 years. An active
D.C. Mehta Chairman & Managing Director
participant at industry forums, he has been the Chairman of the National megh Chemicals
Committee at FICCI. He is a science graduate from the University of Bombay.
Mr. Maulik D. Mehta, aged 37 years, holds Bachelors of Business Administration from University
of Liverpool, UK.
Maulik Mehta CEO & Executive Director He has also done Masters in Industrial and Organizational Psychology from Columbia University,
USA. He has also done his MBA from Harvard University, Boston, USA. Maulik has around 10
years of experience in the areas of Business Development.
Shri Sanjay Upadhyay is a qualified Cost Accountant and a Company Secretary. He has
completed an Advanced Management Programme from Wharton, USA.
Shri Sanjay Upadhyay has over 40 years’ experience in the areas of Finance, Treasury, Taxation,
Sanjay Upadhyay Director – Finance & Group CFO
Commercial, Secretarial and Corporate Restructuring. He oversees risk Management,
Governance, Investor Relation and IT functions. Apart from these, he also has expertise in
growth strategy, acquisitions, restructuring etc.
Mr. A.C. Mehta has been actively associated with the organisation since 1984.
A. C. Mehta Non-Executive Director He is a science graduate with Honours and a post graduate in Chemical Engineering from the
University of Texas, USA.
In a career spanning over 41 years in fields like Project Management, Operations, Corporate
Planning, Quality Management, Mr. Anand has held various important positions at Indian
Petrochemicals Corporation Ltd. and retired as its Whole-time Director and Board Member in
S.K. Anand Non-Independent Director
2008.
He is a Bachelor of Engineering (Chemical) from Delhi University and has done a Petrochemical
Course at IIP, Dehradun. He has also done an advanced management course at IIM, Ahmedabad.
Shri Meghav Mehta is a Mechanical Engineer from the Rochester Institute of Technology (New
York, USA) with a specialization in Material Science Technology and Alternative Energy.
He joined Deepak Group in 2009, where he successfully initiated and completed multi-million-
Meghav Mehta Director
dollar EPCm projects.
Shri Meghav Mehta is Executive Director at Deepak Phenolics Limited, a wholly owned
subsidiary of the Company, since 2nd May, 2019.

Initiating Coverage
India I Chemicals
29 November, 2022
Galaxy Surfactants REDUCE

Price: Rs2,826
FMCG proxy moving further to ‘Green Chemistry’ Target Price: Rs2,749
Forecast return: -3%
We like Galaxy Surfactants (Galaxy) due to (a) expansion into green products, (b) RM Market Data
risk management mechanism, and (c) professional stewardship. Galaxy’s decade long Bloomberg: GALSURF IN
journey towards building sustainable products portfolio has yielded new products 52 week H/L: 3,448/2,561
under its mild surfactants and preservatives categories. These products have already Market cap: Rs100.2bn
made inroads across various geographies and Galaxy is well equipped to serve the Shares Outstanding: 35.5mn
changing market trends towards green chemistry and vegan products through its
Free float: 29.1%
newly commissioned capacities at Jhagadia and Tarapur. Although, volume growth has
remained a challenge in recent years, EBITDA/MT has consistently moved up from Source: Bloomberg
Rs10,100/MT in FY12 to Rs17,600/MT in FY22. We believe, Galaxy’s FY23E
GALSURF relative to Nifty Midcap 100
outperformance to taper off in FY24E with normalization of EBITDA/MT reflecting in
120 NIFTY Midcap 100
PAT degrowth. We estimate FY22-25E Revenue/EBITDA/PAT CAGR of ~6%/9%/9%. We
initiate on Galaxy with a REDUCE rating and TP of Rs2,749 (3% downside) valuing the 110
company at 30x FY24-25E avg. EPS of Rs91.6 100
Catering to changing needs of green products 90 Galaxy Surfactants

Since the commercialisation of Galsoft GLI 21, an ultra-mild sulfate-free cleanser made
80
by using patented technology in FY19, Galaxy has introduced multiple products in the Nov-2 1 Jan-22 Mar-22 May-22 Jul-22 Sep-22 Nov-2 2
mild surfactants and preservatives categories. By virtue, these are low volume, high Source: Bloomberg
value products with strong acceptability in the developed markets due to their emphasis
on non-toxic/ sustainable/ green products. Progressively, product slate change will move
up Specialty Care Products contribution from ~35% to 45-50% over the next 5-10 years
Promoter 70.9 70.9 70.9 70.9
Consistently improving EBITDA/ MT despite RM volatility FIIs 2.8 2.0 1.9 2.1
Despite RM volatility concerning Galaxy’s key RMs, fatty alcohols/ fatty acids which are DIIs 12.2 13.0 13.1 12.8
derived from Palm Kernel Oil, the company has been able to improve its EBITDA/ MT Public/other 14.1 14.0 14.0 14.2
over the years backed by its strong/ evolved risk management mechanism. EBITDA/ MT Source: BSE
has improved from ~Rs10,100/ MT in FY12 to ~Rs15,900/ MT in FY17 and further to
~Rs17,600/ MT in FY22. During Q1FY23, the company reported its highest ever EBITDA/
MT at ~Rs26,800/ MT which the management has cited as aberration and reiterated
EBITDA/ MT range of Rs16-18,000/MT. As the contribution from high value products
increases, we believe that the EBITDA/ MT shall further go up.
Valuation and outlook
Galaxy’s growth is bolstered by its professional management team with a vast
experience in the industry. The company has developed several products based on
sustainability and green chemistry which have been well accepted by its MNC customers.
These products are expected to drive growth for the company. With rising contribution
from the high margin specialty products, we estimate the EBITDA/ MT to remain at the
higher end of the range at Rs19,000/ MT. The stock is available at 32.3x/ 29.5x FY24E/
FY25E EPS of Rs87.4/ Rs95.8. We initiate with a REDUCE rating and TP of Rs2,749
Risk – Continuing demand related challenges in AMET region coupled with currency
headwinds, EBITDA/ MT at lower end of the guidance

YE (Rs mn) FY21A FY22A FY23E FY24E FY25E
Revenues 27,841 36,857 46,501 40,298 43,725
EBITDA 4,488 4,007 5,160 4,750 5,155
Chemicals
+91-022-4215 9645
EPS growth (%) 31.1 (13.0) 25.6 (6.1) 9.6
PE (x) 33.2 38.1 30.3 32.3 29.5
EV/EBITDA (x) 22.6 25.7 19.9 20.7 18.8
PBV (x) 7.7 6.4 5.4 4.8 4.2
Jay Bharat Trivedi
RoE (%) 25.5 18.3 19.3 15.8 15.3
RoCE (%) 21.4 15.7 16.9 14.1 14.0 +91-022-4215 9201
Galaxy Surfactants 29 November, 2022
Thesis Snapshot
YE Mar (Rs bn)
FY23E FY23E (%) FY24E FY24E (%) We estimate FY22-25E Revenue/EBITDA/PAT CAGR of ~6%/ 9%/ 9%. We
Revenue 46,501 45,804 1.5 40,298 46,230 (12.8) initiate on Galaxy with a REDUCE rating and TP of Rs2,749 (3% downside)
EBITDA 5,160 5,260 (1.9) 4,750 5,426 (12.5) valuing the company at 30x FY24-25E avg. EPS of Rs91.6
PBT 4,127 4,312 (4.3) 3,874 4,466 (13.3)
Valuations Rs/share
PAT 3,302 3,416 (3.3) 3,099 3,522 (12.0)
1HFY25E EPS 91.6
Galaxy Surfactant vs. NIFTY Midcap 100 Target Price 2,749
1m 6m 1 year
GALSURF IN (0.8) 1.7 (1.5)
45
NIFTY midcap 100 2.0 17.3 2.1
35
Key assumptions
25
Volume growth (%) 0.5 5.7 6.7 15
Avg. realisation growth (%) 25.2 (18.0) 1.7
EBITDA/ MT 21,933 19,098 19,419 5
Mar-18
Mar-20
Mar-22
Nov-18
Nov-20
Nov-22
Jul-19
Jul-21
P/E Mean
30
25
20
15
10
5
0
Mar-18
Mar-20
Mar-22
Nov-18
Nov-20
Nov-22
Jul-19
Jul-21
EV/EBITDA Mean
Peer comparison
Company
Atul Ltd. 242.1 16.8 21.2 19.4 37.9 28.9 23.5 24.6 18.4 15.0 14.6 14.2 0.3
Deepak Nitrite 287.6 13.7 12.4 14.2 32.1 21.1 18.0 21.1 14.3 12.1 37.5 33.5 0.3
SRF 675.5 17.7 18.2 18.2 31.2 26.0 21.5 19.7 16.5 13.7 24.5 18.0 0.3
Vinati Organics 215.0 28.8 25.6 26.6 48.4 38.8 30.7 37.1 30.4 24.7 20.6 20.5 0.0

Company overview
Galaxy Surfactants is India’s largest manufacturer of Oleochemical based surfactants and
speciality care products for home care and personal care industries (HPC). The Home and
Personal Care industry is entirely driven by dynamic and unique consumer trends. To meet
these unique consumer demand and provide meaningful solutions, Galaxy actively
collaborates with the R&D teams of its Global MNC customers by mind partnering and
designing its offerings.
Galaxy’s business is divided into two segments i.e., Performance Surfactants and Specialty
Care Products. Together, the company manufactures 220+ products and supplies to over
1,450+ customers across 80+ countries. These products find applications across Mass,
Masstige and Prestige range of customers.
Exhibit 328: Segments, products, applications, benefits
Segment Description No. of Products Product Category Products Benefits
x Products are functional in Foam and Dirt Removal
Anionic Surfactants FAES, FAS, LABSA
Performance nature where end consumer Properties
Surfactants require foaming & cleansing
(Substantive x Large volume consumption in
45+ Cosmetics and Personal care
RM in all rinse-off formulations
Non Ionic Surfactants Ethyloxylates products as emulsifiers and
Customer’s x Products are pulled by FMCG
solubilisers
end-products) as it is required due to impulse
buying from end consumer
Amphoteric Dermatological properties to
Betaines
Surfactants reduces skin irritation
Effective conditioning aids:
Cationic Surfactants Quats substantively to hair and
antimicrobial properties
Absorb or block the harmful
Sunscreen Agents
UV Filters radiation, Mild for the skin
(OMC, OCN &Others)
with Moisturizing
Preservatives, Phenoxyethanol, Reduced toxicity & prevent
Preservative Blends Preservative Blends spoilage
MS: Cleanse adequately
Speciality Care Mild Surfactants (MS) , without compromising basic
x Niche & premium products
products Proteins and function of skin
x Low volume consumption
(Unique Syndet & Transparent Protein: cosmetic industry for
x Oligopolistic for most products 175+ Speciality Ingredients
Bathing Bar conditioning, protection and
Functionality
x Low penetration due to its Flakes , Surfactant strengthening of
to Customer’s
unique application Blends hair/skin, anti-irritancy,
End-products)
moisturization etc
Fatty Alkanolamides
FA & FAE: Foam, viscosity
(FA) and
boosters and pearlizer in a
Fatty Acid Easters
formulation
(FAE)
Improves the quality of
Conditioning Agents, another material also called as
Other Care Products Polyquats & moisturizers,
Amine Oxides conditioning benefits to the
hair etc.
Galaxy’s products find application across the spectrum of HPC including hair care
(shampoos, conditioners, etc.), oral care (toothpaste, mouth wash), home care (detergents,
fabric care), skin care (sunscreens, fairness creams, etc.), cosmetics (nail polish, lip colours),
and toiletries (hand washes, soaps, shaving creams, etc.).
Galaxy has 7 strategically located, state of the art manufacturing facilities with strong in-
house project execution capabilities. Five manufacturing facilities are located in India, and
one each in Egypt and the US. Through its diversified manufacturing facilities, the company
caters its clients across the globe.

Exhibit 329: Manufacturing operations spread across three locations globally
In line with global demand for its products, Galaxy has expanded its manufacturing
capacities judiciously. Since FY16, the capacity has expanded by 1.5x and by end-FY22 total
capacity stood at ~442,000MT.
Exhibit 330: Manufacturing capacity
Location No. of Units Installed Capacity Details
1 pilot plant for scale up and commercialisation of
Tarapur, Maharashtra 3 34,747 MTPA
new products rolling out from R&D activities
Taloja, Maharashtra 1 156,741 MTPA One of the largest sulfation facilities in India
Jhagadia, Gujarat 1 132,750 MTPA Located close to RM source ethylene oxide
Located in the Attaqa Public Free Zone, exempt
from all direct and indirect taxes.
Suez, Egypt 1 117,500 MTPA
Access to the Suez Canal, can address AMET,
Europe, and America’s (North and South) markets
Step-down Subsidiary – Tri-K Industries owns and
New Hampshire, USA 1 600 MTPA operates different grades of proteins for cosmetic
applications
Galaxy has been serving MNCs since past four decades and has long-standing relationships
yielding long-term commitments and contracts. It has long-term strategic relationship with
all of its top 10 customers. Repeat business from these customers is also a function of strict
qualifications and extensive collaboration for end-product development. During 1HFY23,
MNCs accounted for over 60% of total revenues, followed by 30% local and niche players,
and 10% from regional players.
R&D/patents
Galaxy’s focus on product development through its strong R&D capabilities has helped it to
expand the product basket over the past four decades. The company’s forte lies in
developing value added surfactants which enhance the application characteristics of the
products instead of the ‘me too’ surfactants manufactured by other players. Over the years,
customers’ focus has shifted from the conventional products more towards sustainable
products. Similarly, there is a growing focus towards natural, nontoxic ingredients in the
personal care products. The company has been focusing on innovation and research in
these areas and has been launching products which drive sustainable trends.

Exhibit 331: Production creation and technology stewardship
Galaxy’s R&D/innovation team works closely with MNC customers for customised offerings,
“right technology with right applications”. It also collaborates with local players for creating
niche and differentiated products. The R&D team comprises of 74 professionals including
PhDs, chemists, and engineers. The company has a good R&D infrastructure including a
well-equipped R&D centre, pilot plant at Tarapur, product applications centre for proteins
at Denville, USA. Galaxy adopted the innovation funnel concept since 2007 to consistently
diversify product offerings, meet customer needs, and consumer trends.
Galaxy has received multiple accolades for its client servicing and product innovations.
Exhibit 332: Recognitions from client and for product innovations
ESG initiatives
While expanding capacities and developing new products Galaxy has focused on
sustainability and implemented process improvements towards clean and green aspect.
Sustainability focus is emphasised across all the areas including water stewardship, product
innovation and technology, waste management, climate change and increasing renewable
energy consumption.

Exhibit 333: Galaxy’s ESG initiatives

Climate Change and Environmental
Water Stewardship Product innovation and technology
impact
Adopted TCFD Framework to
60% water intensity reduction from Paraben-Free Trend - PE and Non-
evaluate and manage climate-
2011-2020 Toxic Preservatives
related risks
Implemented ISO 50001:2018
Sulphate-Free Trend: Mild
ZLD across all Indian units Energy Management System at
Surfactants
Taloja Manufacturing Unit
Setting emission targets in line with
Aim to achieve ZLD in Egypt Patented Green Technology
the Science Based Targets approach
21% water recycled
Galaxy has adopted its own sustainability goals and the environment related initiatives are
steps towards achieving these targets.
Exhibit 334: Sustainability goals
Exhibit 335: Galaxy Surfactants – Growth Journey
•Incorporated as Galaxy Chemicals

1980
•Setup prlant at Tarapur

1984
•Setup Galaxy Research Centre at navi Mumbai

1997
•Commissioning Plant at Taloja

1998
•Setup first International office in Bangkok

1999
•Setting up EOU facility at Taloja

2004
•Acquisition of TRI-K Industries, USA

2009
•Commissioning of state-of-the-art manufacturing facilities at Jhagadia, Gujarat and Suez, Egypt.

2011
•Galaxy Surfactants Limited gets listed on the stock exchanges (BSE & NSE).
2018 • Opening of our International office in Shanghai, China

Strength in green product development – Inroads in specialty
care products to lead growth coupled with margin expansion
Galaxy’s specialty care products segment offers a range of products which are milder, safer,
non-toxic, bio-degradable in nature. The company’s R&D efforts over the past decades have
been yielding results and the company has been successfully commercialising several new
sustainable products under this category.
Exhibit 336: New product launches
2022 2021 2020 2019 2018
GalfuSiOn lldc, Galsoft tilS,
Galsoft GLI 21, Galsoft Galsoft sodium cocoyl
Galsoft tilS (G), Galguard
SLGL, Galguard LipoG, glutamate, Galsoft sodium
Galsoft® SLL, Galaxy Galguard LipoG, Galsoft lipoG, Galsoft Slg, Galsoft
GalFUSION LLDC, Galaxy SN Lauroyl glutamate, Galsoft
Hearth® Mix Pods SLL, GalEcoSafe Slt (n), Galguard tetra,
937 PLUS, GalSHield UV SLGL, Galsoft GLI 21,
Galguard trident S, Galsoft
Care Plus Galsoft TiLS
Gli 21.
Exhibit 337: Product Portfolio Ingredients

Mild surfactants Surfactant UV absorbers Functional Macro- Non-toxic
blends molecules molecules preservatives
Growth for specialty care products is expected to be fuelled by new product introductions,
rising acceptance of commercialised products, and new capacities commissioned in FY22.
Although, separate margin profile is not available for the segment, based on application,
these products are expected to earn better margins than Performance Surfactants. Going
forward, incremental growth coming from this segment would also aid in margin expansion.
Exhibit 338: Quarterly volumes and realisation trend
Segment volumes (MT) Realization (Rs/ MT)
70,000 250,000
60,000
200,000
50,000
150,000
(Rs/ MT)
40,000
(MT)
30,000 100,000
20,000
50,000
10,000
0 0
Q1FY18
Q2FY18
Q3FY18
Q4FY18
Q1FY19
Q2FY19
Q3FY19
Q4FY19
Q1FY20
Q2FY20
Q3FY20
Q4FY20
Q1FY21
Q2FY21
Q3FY21
Q4FY21
Q1FY22
Q2FY22
Q3FY22
Q4FY22
Q1FY23
Cleansing application drives performance surfactants growth

Performance surfactants form base of most of the HPC formulations due to its functional
attributes of cleansing and foaming. During Covid period and even some period post-Covid
the handwashing and cleaning practice of consumers led to substantially higher demand
and volume growth (8.8% yoy) in FY21. However, demand tapered down and normalised in
FY22 leading to 4.5% yoy degrowth. Incrementally, demand for cleansing applications is
expected to rise which shall drive the volume growth.
Upwards trajectory of EBITDA/MT

Fatty alcohol and fatty acids which are derived from crude palm kernel form the key RM for
Galaxy, accounting for 55-60% of total RM. The company sources fatty alcohol from multiple
suppliers located in Southeast Asia, across Indonesia, Malaysia, and Thailand. Despite
volatility in palm kernel oil prices based on planting/harvesting cycle, over the past four

decades, Galaxy has strengthened its risk management without any material impact on
financials. Particularly, during FY22, fatty alcohol prices spiked significantly due to multiple
incidents including supply shortages from Indonesia and Malaysia, increase in Covid cases
in Southeast Asia, logistics issues, etc. This incessant spike also impacted Galaxy’s RM
sourcing and in turn margins. Devoid of this incident, historically the margins have
progressively improved.
Incrementally, management has guided EBITDA/MT range of Rs16,000-18,000/MT while
being confident to achieve the higher range of margins. Based on the product rollout from
specialty products segment, we believe that the higher end of margins is achievable and
have estimated the same in our projections.
Exhibit 339: Fatty alcohol prices and EBITDA/MT trend
EBITDA (Rs/ MT) Fatty Alcohol prices (USD/ MT)
30,000 3500
25,000 3000
2500
20,000
2000
(USD/MT)
(Rs/ MT)
15,000
1500
10,000
1000
5,000 500
0 0
Q4FY18
Q1FY22
Q1FY18
Q2FY18
Q3FY18
Q1FY19
Q2FY19
Q3FY19
Q4FY19
Q1FY20
Q2FY20
Q3FY20
Q4FY20
Q1FY21
Q2FY21
Q3FY21
Q4FY21
Q2FY22
Q3FY22
Q4FY22
Q1FY23
Over the past few years, Galaxy has also expanded its manufacturing capacities, aligning
with expected volume growth. The company always plans its expansions ahead of achieving
optimal utilisation levels without affecting its volume growth. Aggregate capacity expanded
by almost 50% over FY16 to FY22 from 302,000MT to 442,000MT. These capacities are
spread across locations including overseas locations in Egypt and the US.
Exhibit 340: Capacity across locations
Location No. of Units Installed Capacity Details
Tarapur, x 1 pilot plant for scale up and commercialisation
3 34,747 MTPA
Maharashtra of new products rolling out from R&D activities
Taloja,
1 156,741 MTPA x One of the largest sulfation facilities in India
Maharashtra
x Located close to raw material source ethylene
Jhagadia, Gujarat 1 132,750 MTPA
oxide
x Located in the Attaqa Public Free Zone, exempt
from all direct and indirect taxes
Suez, Egypt 1 117,500 MTPA
x Access to the Suez Canal, can address AMET,
Europe and America’s (North and South) markets
x Step-down Subsidiary Tri-K Industries owns and
New Hampshire,
1 600 MTPA operates for different grades of proteins for
USA
cosmetic applications
R&D driven product basket expansion

Galaxy’s product basket has expanded from mere 3 products, about four decades ago to
220+ products by FY22 backed by strong R&D capabilities. Over the past decade, the R&D
efforts were directed towards sustainable products. Its mild surfactants and non-toxic
preservatives are epitome of its sustainable products. After establishing itself in surfactants,
Galaxy forayed into proteins and actives business by acquiring TRI-K in the US.

Exhibit 341: Product commercialisations
215 220
201
190
178
129
109
1980 2009 2012 2013 2015 2016 2019-20 2021-22

Galaxy’s R&D capabilities are also recognised by the industry which is exemplified by its
multiple awards for its eco-friendly and sustainable products.
Exhibit 342: R&D capabilities
Awards/Recognition Awarded by Description
For indigenously developing ‘Galguard Lipo
ICC Acharya P.C. Ray Award
Indian Chemical Council G’ – a patented, non-toxic, antimicrobial
for Development of Indigenous
(ICC) preservative technology for personal care
Technology, 2020
products
Golden Peacock Awards,
Golden Peacock For Green process of manufacturing
instituted by the Institute
Eco-Innovation Award 2021 ‘non-toxic’ antimicrobials/preservatives
of Directors (IOD), India
Top 30 in India’s BW Business World For progressive and benchmark setting
Most Sustainable in association with work done towards pushing sustainability
Companies 2021-22 Sustain Labs Paris commitment and development
Galaxy’s innovation prowess can also be ascertained from its number of patents. Since
2000, the company has been granted total 81 patents. During FY22, the company was
granted three patents in India and it filed for four patents. The company currently maintains
15 patents in the USA, 2 patents each in Japan, Brazil, and Russia, 5 in the EU, 3 in China,
and 18 patents in India
Exhibit 343: Strategic customers, patents
Strategic Contracts with top 10 customers Patents and Approvals maintained
USA 18
Unilever Himalaya Japan 2
Dabur Henkel Brazil 2

Russia 2
Procter & Gamble Emami European Union 5
Colgate Palmolive Loreal China 3

India 18
Reckitt Benckiser CavinKare Patent under Application 16
Continuous process improvement has aided betterment in the company’s operational

performance. Although volume growth has been limited to single digit, operating profits
have grown more than the volume growth in double digits. During FY16-22, Galaxy reported
6.7% volume CAGR while the EBITDA grew at 9.5% CAGR, despite FY22 getting impacted by
high input RM prices. Considering pre-Covid period of FY15-20, volume CAGR was 7.9%
while EBITDA CAGR was much higher at 14.2%.

Financial analysis
During FY19-22, Galaxy Surfactants reported Revenue/EBITDA/PAT CAGR of
10.1%/4.3%/11.2%. EBITDA margins however declined from 12.8% in FY19 to 10.9% in FY22.
During FY22, revenues surged 32.4% yoy due to higher RM prices in turn reflected in higher
product realisations. EBITDA margins contracted 520bps yoy to 10.9% (16.1%) impacted by
RM cost inflation, elevated logistics costs, and high energy prices. EBITDA declined 10.7%
yoy to Rs4.0bn (Rs4.5bn) due to company’s inability to pass on sudden surge in RM prices
to its customers.
Exhibit 344: Revenue and PAT trend (Rs bn) Exhibit 345: EBITDA (Rs bn)/EBITDA margin (%) trend
EBITDA EBITDA %
36.9
Revenues PAT
27.8 16.1
27.6
14.2
26.0
24.3
12.9 12.6 12.8

11.8
21.4
10.9
17.8
4.5 4.0
3.5 3.7
2.3 2.7 2.9
3.0
2.6
2.3
1.9
1.6
1.5
1.0

Declining operating performance, trickled down to the bottom-line which decreased by

13.0% yoy to Rs2.6bn (Rs3.0bn).
Exhibit 346: Domestic/ Exports mix
Domestic Exports
22.9
17.6 18.4
15.8 17.0
14.4
12.2
14.1
7.8 8.6 9.7 8.6 9.1
6.2
Due to one of the manufacturing facilities located in Egypt, Galaxy’s exports have been
about 2/3rd of its total revenues. Post Covid, recovery in domestic market with 9.4% yoy
volume growth and higher product prices led to 14.9% yoy growth in domestic revenues to
Rs14.0bn (Rs9.1bn) while export revenues were impacted due to deteriorated performance
in AMET region. Overall exports thus declined 7.4% yoy to Rs22.9bn (Rs18.4bn).
In FY22, India accounted for 38% of overall revenues, while revenues from AMET and ROW
accounted for 31% each. ROW volumes recovered in FY22 with 7.8% yoy growth after 6.8%
degrowth in FY21. Indian volumes continued to rise in FY22 with 9.4% yoy growth. AMET
remained the worst performing geography with a significant 15.1% yoy degrowth in
volumes in FY22.

Exhibit 347: Region wise revenue break-up (%) Exhibit 348: Region wise revenue split (%) (FY22)
India AMET ROW
28.8 32.7 33.7 29.9 31.0

ROW
31% India
38%
35.8 31.7 32.7 37.1 31.0
35.4 35.7 33.7 33.1 38.0

AMET
31%
Post significant capacity expansion in FY19, Galaxy’s capex momentum subsided a bit due
to Covid related delays with projects at Jhagadia and Tarapur getting commissioned in FY22.
Incrementally, the management expects capex run rate of Rs1.5-2.0bn p.a.
Exhibit 349: Capex trend (Rs.bn)
Gross Block Capex
12.2
11.3 11.3
9.7
8.2 8.5
7.6
1.7 1.4 1.6

1.1
0.6 0.4 0.6
Segmental performance
During FY22, Galaxy’s performance surfactants segment revenues rose 26.9% yoy whereas
the specialty care products segment revenues surged 41.8% yoy. Growth was primarily
driven due to higher price realisations supported by higher RM prices. Overall volumes
declined 0.8% yoy to 234,218MT (236,164MT), while average realisations surged 33.4% yoy
to Rs157,887/MT from Rs118,350/MT in FY21.
Exhibit 350: Segmental revenue break-up (Rs bn)
Performance surfactants Specialty Care Products
14.4
10.3 10.2
10.2
8.1
7.5
22.6
15.5 17.4 15.9 17.8
13.9
FY17 FY18 FY19 FY20 FY21 FY22


During FY22, performance surfactant segment revenues rose 26.9% yoy to Rs22.6bn
(Rs17.8bn). However, volumes declined 4.5% yoy to 149,195MT (156,153MT). Average
realisations thus increased 32.8% yoy to Rs151,212/MT (Rs113,863/MT).
Exhibit 351: Performance product segment volumes and realization trend
Volumes ('000 MT) Realisation Rs/ kg

156.2
149.2
143.5
130.6 135.3
151
115.4
129
120 119
111 114
Specialty care products

During FY22, specialty care products segment revenues surged 41.8% yoy to Rs14.4bn
(Rs10.2bn). Volumes rose 6.3% yoy to 85,023MT (80,011MT). Average realisations
increased 33.4% yoy to Rs169,601/MT (Rs127,108/MT). Growth in specialty care product
segment has been higher compared to the performance segment due to increased focus
towards green and cleaner products across the globe.
Exhibit 352: Specialty care product segment volumes and realization trend
Volumes ('000 MT) Realisation Rs/ kg
169.6
129.4 125.7 127.1

120.5 121.6
80.7 80.0 85.0

79.4
62.1 66.8

Cash flow analysis

Galaxy’s operating cash flows have consistently increased with increase in capacities and
volumes. The company manages WC very well, which has stabilised at ~70 days. EBITDA to
OCF conversion too remained healthy at 64% during FY13-22.
Exhibit 353: Consistently rising OCF
4,000
2,000
Rsm
0
(2,000)
(4,000)
Exhibit 354: WC days stable at around 70 days
90
71 70 72
65 66
63 62
60 51
42
days
40
30
0
Exhibit 355: EBITDA to OCF conversion of 64% over 10 years Exhibit 356: Healthy FCF barring FY22
100% 100%
50%
80%
0%
60% -50%
40% -100%
-150%
20%
-200%
0% -250%
Consistent deleveraging, high asset turnover, and consistent margins aided improvement in
RoEs. With strong FCF generation, the company is also a consistent dividend paying
company.

Exhibit 357: Leverage went down consistently, high RoEs

Net Debt/Equity 1.5 1.0 0.9 0.7 0.5 0.4 0.3 0.2 0.1 0.2 0.58
Net Debt/EBITDA 3.0 1.5 1.9 1.4 1.1 0.9 0.6 0.7 0.3 0.7 1.21
RoCE pre-tax 11.8% 25.8% 20.8% 25.4% 27.7% 26.0% 28.7% 24.8% 26.4% 19.7% 23.7%
RoCE 0.2% 15.9% 12.5% 15.9% 19.7% 18.8% 19.8% 19.8% 21.4% 15.7% 16.0%
RoIC pre-tax 11.0% 24.5% 20.1% 24.0% 26.1% 24.7% 27.9% 24.2% 26.1% 16.9% 22.6%
RoE 0.1% 27.0% 19.3% 24.9% 28.9% 24.4% 23.9% 23.7% 25.5% 18.3% 21.6%
Exhibit 358: DuPont Analysis – High asset turnover and consistent margins benefitted RoEs
PAT/PBT 0.01 0.62 0.60 0.63 0.71 0.72 0.69 0.80 0.81 0.80 0.64
PBT/EBITDA 0.16 0.57 0.59 0.70 0.76 0.76 0.78 0.78 0.83 0.82 0.68
EBITDA/Revenue 0.08 0.13 0.10 0.13 0.13 0.12 0.13 0.14 0.16 0.11 0.12
RoE 0.1% 27.0% 19.3% 24.9% 28.9% 24.4% 23.9% 23.7% 25.5% 18.3% 21.6%
Exhibit 359: Price movement vs. Financials – High PBT CAGR with high RoEs
75%
57%
50% 48%
31%
20% 17% 21%
25% 10% 13% 12% 9%
3% 0%
0%
Gross Margin*
PBT CAGR^
EBITDA Margin*
NWC (Ex-cash) as a
FCF/Sales*
RoE (Avrg)
PBT Margin*
OCF/EBITDA*
Stock return
Revenue CAGR^
FCF/OCF*
EBITDA CAGR^
% of revenue
Source: Company Data, Centrum Broking; ^: FY12-22 CAGR; *: aggregate, Note – Due to demerger of business in 2019, 10-year stock returns not applicable

FCF (a) 442 708 148 1,080 681 885 1,140 1,743 2,575 (1,502)
FCF yield NA NA NA NA NA 2% 3% 4% 4% NA
Dividend + Buyback (b) (103) (103) (166) (384) (173) (127) (298) (940) (495) (142)
Distribution of FCF (b/a) -23% -15% -112% -36% -25% -14% -26% -54% -19% 9%

Valuations
Galaxy’s FY20-22 performance remained muted due to Covid impact, incessant rise in RM
prices, and demand challenges in AMET region. During FY20-22, the company delivered
revenue/EBITDA/PAT CAGR of 19.1%/4.2%/6.8% while volume growth was limited to 4.9%
CAGR. EBITDA/MT improved from Rs16,452/MT in FY20 to Rs17,108/MT in FY22.
EBITDA/MT surged substantially over the last few quarters with Q4FY22/Q1FY23
EBITDA/MT at Rs25,206/MT/Rs26,780/MT. However, management maintained its
EBITDA/MT guidance of Rs16,000-18,000/MT. In our estimates, we have considered
EBITDA/ MT more than the upper end of the band in FY24E with further improvement in
FY25E. We have considered 5.5% volume CAGR during FY22-25E. Volume CAGR looks muted
as FY23E volumes are expected to be impacted particularly in the AMET region.
FY20-22 FY22-25E
CAGR% CAGR%
Revenues 25,964 27,841 36,857 46,501 40,298 43,725 19.1 5.9
EBITDA 3,689 4,488 4,007 5,160 4,750 5,155 4.2 8.8
EBITDA % 14.2 16.1 10.9 11.1 11.8 11.8
PAT 2,304 3,021 2,628 3,302 3,099 3,397 6.8 8.9
EPS 65.0 85.2 74.1 93.1 87.4 95.8 6.8 8.9
We like Galaxy Surfactant (Galaxy) due to (a) expansion into green products, (b) RM risk
management mechanism, and (c) professional stewardship. We believe Galaxy’s move
towards more eco-friendly, green products shall help in margin improvement. We estimate
FY22-25E Revenue/EBITDA/PAT CAGR of ~6%/9%/9%. We have valued the company at
30.0x avg. FY24-25E EPS of Rs91.6. We initiate with a REDUCE rating and TP of Rs2,749 (3%
downside).
Risks
AMET demand challenge, currency headwinds
AMET region is reeling under pressure from demand issues coupled with currency
headwinds which impacted Galaxy’s FY22 overall volume growth. AMET volumes declined
15.1% yoy in FY22. During Q1FY23 and Q2FY23, AMET degrew by 21.3% and 19.0% yoy
respectively. Galaxy’s volume growth is expected to come back on track only after Turkey
and Egypt markets recover to normalcy.
EBITDA/MT at lower end of guidance
During Q2FY22, the EBITDA/MT plummeted to ~Rs12,000/MT due to demand related
challenges, however it has recovered since then. EBITDA/MT peaked at ~Rs26,800/MT in
Q1FY23, however management has still maintained its guidance of EBITDA/MT range of
Rs16,000-18,000/MT. If EBITDA/MT slips to the lower end of guidance, it can materially
impact the estimates.

Story in charts
Revenues PAT EBITDA EBITDA %
46.5
43.7
40.3
16.1
36.9
14.2
12.9 12.6 12.8
11.8 11.8 11.8
27.8
27.6
10.9 11.1
26.0
24.3
21.4
17.8
4.5 5.2 4.8 5.2

3.5 3.7 4.0
2.3 2.7 2.9
3.4
3.3
3.1
3.0
2.6
2.3
1.9
1.6
1.5
1.0
Exhibit 364: Geography wise revenue split (Rs bn) Exhibit 365: Exports – Major contributor
Domestic Exports 120 Domestic % Exports %
40
35 100
30
80
25 22.9
66.2 64.7 64.6 64.3 66.3 66.9 62.0
20 60
17.6 17.0 18.4
15 15.8
14.4
12.2 40
10
14.1 20 38.0
5 8.6 9.7 8.6 9.1 33.8 35.3 35.4 35.7 33.7 33.1
6.2 7.8
0 0
Exhibit 366: Region wise revenue split Exhibit 367: FY22 Region wise revenue split
India AMET ROW India AMET ROW
28.8 32.7 33.7 29.9 31.0
31.0
35.8 31.7 37.1 31.0 38.0
32.7
35.4 35.7 33.7 33.1 38.0
31.0
Exhibit 368: Capex trend (Rs mn) Exhibit 369: Moderation in return ratios (%)
Gross Block Capex ROE ROCE
16.9 28.9
15.3
13.7 24.9 24.4 23.9 23.7 25.5
12.2
11.3 11.3 18.3 19.3
9.7 15.8 15.3
8.2 8.5 21.4
7.6 19.7 18.8 19.8 19.8
15.9 15.7 16.9
14.1 14.0
1.7 1.4 1.1 1.6 1.5 1.6 1.6
0.6 0.4 0.6

Exhibit 370: Declining net debt to equity Exhibit 371: Working capital days trend
Net debt-equity Debtor Days Inventory Days Creditor Days
0.7
100
0.5 89
77 80 77
0.4 73 69 72
66 65
0.3 0.2
0.2
0.1 61 66
0.1 57 56 60 55 58
50 55
48
(0.1) (0.1)
FY20
FY23E
FY24E
FY25E
FY16
FY17
FY18
FY19
FY21
FY22 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
Operational Charts
Exhibit 372: Segmental revenue split (Rs bn) Exhibit 373: FY22 Segmental revenue breakup (%)
Performance surfactants Specialty Care Products
14.4
10.3 10.2 Specialty Care

8.1 10.2
Products
7.5
39%
Performance
22.6
17.4 17.8 surfactants
13.9 15.5 15.9
61%

Exhibit 374: Performance surfactant – Volumes & Exhibit 375: Specialty Care Products – Volumes &
Realisation Realisation
Volumes ('000 MT) Realisation Rs/ MT Volumes ('000 MT) Realisation Rs/ MT
210.3
191
167.7 169.6 178.8 180.5
156.2 149.2 158.2
143.5
130.6 135.3
115.4 151 155 120.5 121.6 129.4 125.7 127.1
151 152
129 90.5 97.8
120 119 79.4 80.7 80.0 85.0 84.6
111 114 66.8
62.1
FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E

Quarterly trend
Exhibit 376: Quarterly Performance
Revenues 7,187 6,747 7,835 8,264 8,773 9,291 10,529 11,589 12,316 40.4 6.3
Q-o-Q gr. (%) 18.4 (6.1) 16.1 5.5 6.2 5.9 13.3 10.1 6.3
Raw Mat. Cons. 4,426 4,084 4,786 5,543 6,235 6,577 6,870 7,811 8,828 41.6 13.0
% of net sales 61.6 60.5 61.1 67.1 71.1 70.8 65.2 67.4 71.7
Purchase of prod. 152 117 186 99 210 163 188 206 177 (15.8) (14.3)
% of net sales 2.1 1.7 2.4 1.2 2.4 1.8 1.8 1.8 1.4
Employee Costs 498 491 589 542 478 516 583 619 627 31.2 1.4
% of net sales 6.9 7.3 7.5 6.6 5.4 5.6 5.5 5.3 5.1
Others 896 861 1,100 995 1,142 1,271 1,439 1,472 1,368 19.8 (7.1)
% of net sales 12.5 12.8 14.0 12.0 13.0 13.7 13.7 12.7 11.1
EBITDA 1,215 1,195 1,174 1,085 709 764 1,450 1,480 1,317 85.8 (11.0)
Q-o-Q growth (%) 34.3 (1.7) (1.7) (7.6) (34.7) 7.8 89.7 2.1 (11.0)
EBITDA Margin (%) 16.9 17.7 15.0 13.1 8.1 8.2 13.8 12.8 10.7 32.4 (16.3)
Dep. & Amor. 167 169 240 168 181 177 184 189 205
EBIT 1,048 1,026 934 916 528 587 1,266 1,291 1,112 110.7 (13.9)
Interest exp. 32 24 30 29 37 28 34 44 56 52.2 28.2
Other Income 46 30 26 45 50 18 12 -20 11 (78.6) (154.0)
Exceptional Items 0 -140 0 0 0 0 0 0 0
EBT 1,062 1,172 930 933 541 576 1,244 1,227 1,067 97.1 (13.1)
Provision for tax 245 180 143 164 122 120 260 223 228 87.3 2.1
Eff. tax rate (%) 23.0 15.3 15.4 17.6 22.5 20.8 20.9 18.2 21.4
Net Profit 817 992 787 768 419 456 984 1,004 839 100.0 (16.4)
Q-o-Q gr. (%) 44.7 21.4 (20.7) (2.4) (45.4) 8.8 115.6 2.0 (16.4)
PAT Margin (%) 11.3 14.6 10.0 9.2 4.8 4.9 9.3 8.7 6.8
Segment volumes (MT)

Performance Surfactants 41,426 36,618 41,712 38,778 38,023 36,983 35,410 35,443 38,902 2.3 9.8
Specialty Care Products 21,600 21,620 21,295 21,087 20,791 21,044 22,101 19,829 20,381 (2.0) 2.8
Total 63,026 58,238 63,007 59,865 58,814 58,027 57,511 55,272 59,283 0.8 7.3
Segment revenues (Rs mn)

Performance Surfactants 4,470 4,010 4,960 5,160 5,590 5,700 6,110 7,000 7,770 39.0 11.0
Specialty Care Products 2,790 2,770 2,900 3,140 3,230 3,610 4,430 4,570 4,560 41.2 (0.2)
Total 7,260 6,780 7,860 8,300 8,820 9,310 10,540 11,570 12,330 39.8 6.6
Realization (Rs/ MT)

Performance Surfactants 1,07,903 1,09,509 1,18,911 1,33,065 1,47,016 1,54,125 1,72,550 1,97,500 1,99,733 35.9 1.1
Specialty Care Products 1,29,167 1,28,122 1,36,182 1,48,907 1,55,356 1,71,545 2,00,443 2,30,471 2,23,738 44.0 (2.9)
Total 1,15,191 1,16,419 1,24,748 1,38,645 1,49,964 1,60,443 1,83,269 2,09,328 2,07,985 38.7 (0.6)
EBITDA (Rs/ MT) 19,281 20,514 18,630 18,122 12,050 13,166 25,206 26,780 22,214 84.3 (17.1)
Fatty Alcohol prices (USD/ MT) 1,228 1,588 2,073 2,069 2,069 2,602 2,862 2,287 1,490 (18.5) (34.8)

P&L Balance sheet

YE (Rs mn) FY21A FY22A FY23E FY24E FY25E YE (Rs mn) FY21A FY22A FY23E FY24E FY25E
Others 0 0 0 0 0 Minority Interest 0 0 0 0 0
Depreciation & Amortisation 740 711 838 874 971 Non Current Liabilities 273 563 563 563 563
Taxes 702 665 825 775 849 Net block 5,917 6,092 6,790 7,557 8,232
Cash & Cash Equivalents 1,114 711 1,144 5,009 6,179
YE FY21A FY22A FY23E FY24E FY25E
Revenue 7.2 32.4 26.2 (13.3) 8.5 Other current liab. 819 524 524 524 524
EBITDA 21.7 (10.7) 28.8 (7.9) 8.5 Provisions 12 78 78 78 78
Adj. EPS 31.1 (13.0) 25.6 (6.1) 9.6 Net current assets 6,976 9,912 11,593 13,046 14,834
Gross 36.3 29.8 28.7 30.9 30.7
EBITDA 16.1 10.9 11.1 11.8 11.8 Cashflow
EBIT 13.5 8.9 9.3 9.6 9.6 YE (Rs mn) FY21A FY22A FY23E FY24E FY25E
Returns (%) Depreciation & Amortisation 740 711 838 874 971
ROE 25.5 18.3 19.3 15.8 15.3 Net Interest 134 129 221 178 166
ROCE 21.4 15.7 16.9 14.1 14.0 Net Change – WC (1,153) (2,058) (1,496) 2,162 (869)
ROIC 21.2 13.5 16.1 15.6 15.8 Direct taxes (711) (686) (825) (775) (849)
Gross block turnover ratio (x) 2.5 3.0 3.4 2.6 2.6 Capital expenditure (648) (1,698) (1,550) (1,650) (1,650)
Inventory 77 80 89 100 77 Investments 0 0 0 0 0
Net working capital 91 98 91 118 124 Net cash from investing (540) (1,573) (1,525) (1,475) (1,422)
Solvency (x) FCF 2,085 (309) 1,314 4,663 2,015
Interest coverage ratio 33.4 31.2 23.4 26.7 31.1 Increase/(decrease) in debt (392) 22 0 0 0
Net debt/EBITDA 0.3 0.7 0.4 (0.4) (0.6) Dividend paid (496) (638) (660) (620) (679)
Adjusted EPS 85.2 74.1 93.1 87.4 95.8 Others (792) 577 0 0 0
BVPS 367.1 444.1 518.6 588.6 665.2 Net cash from financing (1,815) (167) (881) (798) (845)
CEPS 106.1 94.2 116.8 112.1 123.2 Net change in Cash 270 (476) 433 3,865 1,170
Dividend payout (%) 0.0 24.3 20.0 20.0 20.0
Valuation (x)
P/E 33.2 38.1 30.3 32.3 29.5
P/BV 7.7 6.4 5.4 4.8 4.2
EV/EBITDA 22.6 25.7 19.9 20.7 18.8
Dividend yield (%) 0.0 0.6 0.7 0.6 0.7

Appendix
R&D and Technology
Exhibit 377: Technology absorption
2022 2021 2020 2019 2018
Patent applications for two
“Personal and home care inventions have been filed,
Galaxy won prestigious ICIS
“Method to produce stimuli compositions comprising “Method to produce stimuli namely, ‘highly substantive
Innovation Award in London
responsive UV-absorbing fatty acids from Tung seed responsive UV-absorbing water-soluble UV absorbers’
fending off stiff competition
polymers”, enables synthesis oil as antimicrobial polymers”, enables synthesis and ‘preservatives for
from global majors. This
of functional polymer for use preservative.” The invention of functional polymer for use personal care and home care
award was given for
in personal care offers a personal and home in personal care products’. This is in
commercialization of
compositions, designed for care composition comprising compositions, designed for continuation of the quest for
environment friendly and
deposition on skin and unfractionated whole of deposition on skin and (a) high performing UV
sustainable process for the
protecting skin from UV fatty acids derived from protecting skin from UV absorbers and (b) non-toxic,
production of range of N-
radiations. Tung seed oil, as an radiations. eco-friendly preservatives
acylaminoacid surfactants.
antimicrobial preservative. for home and personal care
products.
“Safe and ecofriendly

persistent sanitizing gel for
“Free flowing N-acyl topical application”. The “Free flowing n- acyl
glycinate compositions at invention discloses glycinate compositions at
sub- zero temperature”. The persistent antimicrobial sub- zero temperature”. The
novel aqueous free-flowing protection of hands and/ or novel aqueous free-flowing
HPCI award committee
N-acyl glycinate surfaces of different objects n-acyl glycinate
recognized the unique and
compositions is designed to using the hydro-alcoholic gel compositions is designed to
non-toxic preservative blend
address customer composition of the present address customer
Galguard NT with 2nd prize 8 patents getting granted for
requirements of low invention in which the fatty requirements of low
in Innovation category. It is a seven inventions.
temperature flowability in acids of Tung seed oil are temperature flowability in
synergistic preservative
colder countries and useful used to stabilize and colder countries and useful
blend which is available in
in preparing isotropic immobilize the silver in preparing isotropic
easy to incorporate form.
aqueous skin and hair nanoparticles in the aqueous skin and hair
cleansing formulations such composition. The cleansing formulations such
as body wash, shower gels compositions of the present as body wash, shower gels
and shampoos. invention have ‘natural and shampoos.
origin’ index of minimum 99
% as per ISO 16128-2.
Details oil soluble

“Transparent personal
“Transparent personal
cleansing composition” for
cleansing composition” for
skin and hair care. the
skin and hair care. The
composition is formulated
composition is formulated
During the financial year, 6 with ingredients with high
with ingredients with high
patents were granted for 6 natural origin content, is Company has filed four new
natural origin content, is
inventions. This year mild to skin, Sulfate-free, patent applications in five
mild to skin, Sulfate-free,
company has also filed 2 eO-free, PeG-free and geographies.
EO-free, PEG-free and
new patent applications. alkanol amide-free and
Alkanol amide-free and
exhibits enhanced foaming
exhibits enhanced foaming
and lather capacity in
and lather capacity in
comparison to the similar
comparison to the similar
products in the market.
products in the market.
12 patents were granted for

During financial year, 3 During the financial year, 11
11 inventions and ‘notice of
patents were granted for 3 patents were granted for 10
allowance’ is received for
inventions. inventions.
another two inventions.


Mr. Ravindranath has completed B.Sc. (Maths and Statistics) followed by a
Masters in Operations Research and is a Fellow Member of the Institute of
S. Ravindranath Chairman & Non-Executive Independent Director Cost Accountants of India. He has more than 30 years of experience with
Unilever, India in various capacities. He has been associated with the
Company from 2007 till his retirement.
Mr. Shekhar is a Chemical Engineer and PGDM from IIM, Calcutta. He has
U. Shekhar Promoter & Managing Director
been associated with the Company since 1986.
Mr. Natarajan is a CWA with Advanced Management Program from Harvard

K. Natarajan Executive Director & Chief Operating Officer
Business School and is associated with the Company since 1993.
Executive Director (Finance) & Chief Financial Mr. Kamath is a qualified CS, CWA and LLB with over 20 years of experience
K. Ganesh Kamath
Officer and has been associated with the Company since 2004.
Mr. Kulkarni is a Chemical Engineer who has been appointed as a Whole-time

Director w.e.f. October 16, 2021. He was Managing Director of Galaxy
Vaijanath Kulkarni Whole-time Director Chemicals (Egypt) S.A.E. prior to his appointment. He has done his Advanced
Management Program from Harvard Business School and has been associated
with the Company since 1995.
Mr. Ramakrishnan is a qualified CA, CWA and CS. He has been associated with
G. Ramakrishnan Promoter, Non-Executive Director
the Company since 1986.
Mr. Shanbhag is a qualified CA and CWA. He has been associated with the
Shashikant Shanbhag Promoter, Non-Executive Director
Company since 1986.

Initiating Coverage
India I Chemicals
29 November, 2022
Gujarat Fluorochemicals BUY

Price: Rs3,522
Fluoropolymers Leader Target Price: Rs4,376
We are positive on Gujarat Fluorochemicals (GujFluoro) considering (a) fluoropolymers Market Data
play, (b) huge capex of Rs25bn over FY23-24E, and (c) advances in new energy vertical. Bloomberg: FLUOROCH IN
About a decade and a half ago, GujFluoro pioneered the fluoropolymers segment in 52 week H/L: 4,174/1,945
India with polytetrafluoroethylene (PTFE). Banking on the success of PTFE, the Market cap: Rs386.9bn
company further forayed into new fluoropolymers in 2015 and is currently scaling up Shares Outstanding: 109.9mn
its capacities given the rising demand globally. Last year, the company announced its
Free float: 33.9%
entry in new energy vertical catering to the emerging segments such as EV, solar,
hydrogen, etc. As an early entrant in the space, GujFluoro is in a sweet spot to Source: Bloomberg
capitalise on the exponential demand from these emerging segments. We estimate
FLUOROCH relative to Nifty Midcap 100
FY22-25E revenue/EBITDA/PAT CAGR of 28%/32%/31%. We initiate on GujFluoro with
a BUY rating and TP of Rs4,376 (24% upside) valuing the company at 30x FY24E-25E 250
FLUOROCH IN
avg. EPS of Rs146. 200
New fluoropolymers – Exponential growth 150

Starting with FKM in 2015, GujFluoro expanded its new fluoropolymers basket to PFA,
100
FEP, PVDF, etc. Simultaneously, the company also expanded fluoropolymers capacities,
NIFTY Midcap 100
reaching 700MT/month by end-FY22. Based on strong demand traction, the company is 50
doubling its capacity to 1,500MT/month by end-FY23E. Additionally, higher than Source: Bloomberg
company wide margins for new fluoropolymers will keep overall EBITDA margins at ~35%
despite some weakness in its commodity chemicals margins. Shareholding pattern
New energy vertical – To start contributing from FY24E onwards, traction from 2025
Promoter 66.1 66.1 66.1 66.4
GujFluoro has successfully developed technology and products to make ingress into the
FIIs 5.0 4.1 4.2 3.8
fast-growing new energy segments including electric vehicles, solar panels, hydrogen
DIIs 3.9 4.2 4.3 4.0
electrolysers, etc. The company has already submitted samples for validation and is
Public/other 25.1 25.6 25.4 25.9
expected to gain some orders from FY23E. Similarly, through its strong R&D, the Source: BSE
company has successfully developed Lithium hexafluorophosphate (LiPF6), which is used
as a salt in electrolytes. Currently, under commissioning, the 900MT LiPF6 capacity is
expected to be commissioned by end-FY23.
Increased capacity for PTFE and rising utilisation of fluorospecialty to add to growth
With rising demand for specialty grade PTFE, GujFluoro is expanding its PTFE capacity by
~20% taking it to ~20,000MT thus entailing volume growth. Fluorospecialty has picked
up momentum from Q1FY23 and additionally, newly commissioned capacities are
expected to support volume growth.
Outlook and valuations
GujFluoro has created a niche in fluoropolymers space globally and is reinforcing its
presence with capacity expansions. Over the next 2-3 years, new fluoropolymers are
expected to drive overall financial performance. Meanwhile, projects under the new
age/energy vertical will shape up and shall take up the growth from 2025 onwards. The
stock is available at 26.8x/22.0x FY24E/FY25E EPS of Rs131.5/Rs160.1. We initiate with
a BUY rating and TP of Rs4,376
Risks – Advances outstanding (Rs8.8bn) and guarantees given to the group companies
(Rs18.3bn), execution delays

Revenues 26,505 39,536 57,582 68,578 83,053
Chemicals
Adj. Net profit (2,187) 7,872 12,702 14,450 17,595 +91-022-4215 9645
Adj. EPS (Rs) (19.9) 71.6 115.6 131.5 160.1
EPS growth (%) nm nm 61.4 13.8 21.8
PE (x) nm 49.2 30.5 26.8 22.0
EV/EBITDA (x) 67.3 33.5 20.3 17.3 14.4
RoE (%) (6.1) 20.3 26.5 24.3 24.1 Research Associate, Chemicals
RoCE (%) (5.4) 15.6 20.9 19.9 21.2 +91-022-4215 9201
Gujarat Fluorochemicals 29 November, 2022
Thesis Snapshot
Centrum Consensus Variance Centrum Consensus Variance The stock is available at 26.8x/22.0x FY24E/FY25E EPS of
YE Mar (Rs bn)
FY23E FY23E (%) FY24E FY24E (%) Rs131.5/Rs160.1. We estimate FY22-25E revenue/EBITDA/PAT CAGR of
Revenue 57,582 54,202 6.2 68,578 62,765 9.3 28%/33%/31%. We initiate on GujFluoro with a BUY rating and TP of
EBITDA 20,002 18,529 7.9 22,941 21,704 5.7 Rs4,376 (24% upside) valuing the company at 30x FY24E-25E avg. EPS of
PBT 16,847 16,193 4.0 19,185 18,738 2.4 Rs146.
PAT 12,702 12,359 2.8 14,450 14,325 0.9 Valuations Rs/share
1HFY25E EPS 146
FLUOROCH vs. NIFTY Midcap 100 Target multiple (x) 30
Target Price 4,376
1m 6m 1 year
FLUOROCH IN (9.2) 35.1 67.2
NIFTY midcap 100 2.0 17.3 2.1 25
20
Key assumptions 15
10
PTFE rev. growth % 10 15 15
5
New fluoropolymers rev. growth % 150 50 40
Fluorospecialty Chemicals rev. growth % 70 25 25 0
Mar-20
Mar-21
Mar-22
Nov-19
Nov-20
Nov-21
Nov-22
Jul-20
Jul-21
Jul-22
EV/EBITDA Mean
Peer comparison
Company
Atul Ltd. 242.1 16.8 21.2 19.4 37.9 28.9 23.5 24.6 18.4 15.0 14.6 14.2 0.3
Deepak Nitrite 287.6 13.7 12.4 14.2 32.1 21.1 18.0 21.1 14.3 12.1 37.5 33.5 0.3
SRF 675.5 17.7 18.2 18.2 31.2 26.0 21.5 19.7 16.5 13.7 24.5 18.0 0.3
Vinati Organics 215.0 28.8 25.6 26.6 48.4 38.8 30.7 37.1 30.4 24.7 20.6 20.5 0.0

Company Overview
Gujarat Fluorochemicals belongs to the INOXGFL group. INOXGFL group is an Indian
conglomerate with a legacy of more than 90 years. The group’s businesses are spread across
a wide spectrum including Fluoropolymers, Speciality Chemicals, Wind Energy, refrigerants,
and Renewables. Gujarat Fluorochemicals is the flagship company of the INOXGFL group with
over 30 years of expertise in Fluorine Chemistry. Gujarat Fluorochemicals holds domain
expertise in Fluoropolymers, Fluorospecialities, Refrigerants, and Chemicals, catering to
various applications spread across a wide span of industries. Starting from refrigerants and
basic chemicals, the company expanded its capabilities into fluoropolymers as well as
fluorospecialities.
Exhibit 379: Gujarat Fluorochemicals – Business segments and user industries
GujFluoro is among the market leaders in refrigerant gases in India and operates under
brands Refron©. It has the largest Refrigerant manufacturing unit at Ranjitnagar, Gujarat and
is one of the largest manufacturers of HCFC22/ R22 gas in India.
GujFluoro is the pioneer and the largest manufacturer of fluoropolymers in India. Starting
with PTFE, about a decade ago, the company, during 2015, made further inroads into new
fluoropolymers such as PVDF, FKM, PFA among others. The company is among the top five
manufacturers of PTFE globally. It is a major supplier of Fluoropolymers to Europe and the
USA.


Segments Products Application
Oil & Gas, Pharma & CPI, Food, Automotive
PTFE Aero-space & Defence, Electricals, Electronics & Semi-conductors,
Cookware, Construction & Mechanical Parts
Printing Inks, Engineering plastics
Micro Powders Coatings, Industrial Finishes
Paints, Elastomers, Oils & Greases
Semi-conductors, Aero-space
PFA Chemical Processing, Corrosion Resistant Fluid Transfer
Wire & Cables, Telecom
Fluoropolymers
Chemical Processing, Electronics
PVDF Architecture, Pharma, EV Batteries, Solar Panels
Water Treatment Membranes, Oil & Gas
Wire & Cable, Defence, Aerospace
FEP
Telecom, Chemical Processing
Automotive, Chemicals, Refineries,
FKM
Semiconductors, Aviation, Food & Pharma
Improve Surface Finish & Gloss for LLDPE
PPA
HDPE & PP Films, Partitioning Agent
Agrochemical majorly Insecticides, Herbicides & Fungicides
HF Based
Pharma & API, Plant Growth Regulators, Automotive
Specialty Chemicals
TFE Based Pharmaceutical Intermediates, Agrochemical Pesticide & Intermediates
KF Based Pharmaceutical Intermediates, Agrochemical Pesticide & Intermediates
Caustic Soda Textiles, Soaps & Detergents, Alumina
Feedstock for Refrigerant Gas R 22
Chloroform
Solvent Pharma
Pharma API, Foam manufacturing
Bulk Chemicals Methylene Chloride
Agro chem & Pharma Formulation
Refrigerants Air-conditioners
Pesticides, Agricultural Chemicals
CTC
Plastics, Resins
PVDF Electrode Binders, Battery Chemicals,
LiPF6, Additives, Electrolyte Formulations Electric Vehicles
Battery casing
New Age Products
PVDF Films, Back sheet Solar Panels
Fluoropolymers(FKM, PTFE, FEP), Membranes
Hydrogen Fuel Cells/ Electrolyzers
Charging Accessories
GujFluoro has three manufacturing sites and a captive fluorspar mine. Starting from basic
chemicals such as Chlor-alkali, the company has fully integrated operations till
fluoropolymers, thus lowering its external RM dependence and in turn gaining from
integration benefits.
Dahej A, complex commissioned in 2007, is a vertically integrated manufacturing unit for
fluoropolymers, chlor-alkali, and chloromethanes. Dahej B, complex commissioned in 2019,
is a new facility for expansion of fluoropolymers and fluoroelastomers.
Exhibit 381: Manufacturing facilities
Site/ Location Capabilities Remarks
Ranjit Nagar, Gujarat, India Specialty chemicals & Refrigerants Largest refrigerant capacity in India
Dahej, Gujarat, India Fluoropolymers, Specialty & Bulk Largest fluoropolymer plant in India
Chemicals
Jolva, Gujarat, India Fluoropolymers, specialty & new age Under Phased Commissioning
chemicals
Morocco Fluorspar mine
Commissioned in 1989, Ranjitnagar, Gujarat site is dedicated for refrigerants and

fluorospecialities manufacturing. This site has four MPPs and can handle diverse chemistries
for agrochemical and pharma segments. The site is self-sufficient with in-house R & D,
process scale-up, and technology transfer capabilities.

GujFluoro is also backward integrated into fluorspar mining and beneficiation though a
strategic JV, GFL GM Fluorspar SA located at Taourirt, Morocco.
R&D infrastructure and collaborations

GujFluoro’s R&D team comprises of more than 100 personnel with R&D units located at
Ranjitnagar and Dahej. Apart from in-house R&D, the company also has multiple
collaborations with research institutes, some key collaborations include:
Indian Institute of Technology (IIT), Delhi
Indian Institute of Chemical Technology (IICT), Hyderabad
Indian Institute of Technology (IIT), Kanpur
Indian Institute of Technology (IIT), Kharagpur
National Chemical Laboratory (NCL), Pune
The Ranjitnagar R&D centre focuses on process development for the Fluorospecialities
finding applications in pharma and agro segments.
GujFluoro’s another R&D unit, Gujarat Fluoropolymers Research Center (GFRC) located at
Dahej, Gujarat develops customised solutions for its customers. It has application
development laboratory which enables the company to offer customised solutions to its
customers and to develop sustainable manufacturing technologies. The company has also
commissioned state of the art piloting facility at this R&D unit.
This R&D unit focuses on two priority areas:
New product development – customized fluoropolymer products for novel applications
Sustainable manufacturing technologies – to develop manufacturing technologies
having zero environmental impact, to develop manufacturing technologies based on
short chain and non-fluorinated surfactants with limited to zero health and
environmental hazards, all products are PFOA free.
Exhibit 382: Key focus actions

Exhibit 383: Gujarat Fluorochemicals – Growth Journey
•Incorporated as a Refrigerant manufacturer in India

1987
•Launched Public Issue and established chlorofluorocarbon refrigerant and Hydrofluoric Acid in Panchmahal, Gujarat
1988
•Commenced commercial operations and entered into a technical collaboration with Stauffer Chemicals Pennwalt Corporation and
Stearns Catalytic Corporation USA and commissioned a plant near Vadodara.
1989
•In the year 1999, GFL diversified into Entertainment business through Inox Leisure Limited - a chain of multiplexes across India.
1999
•Implemented Clean Development Mechanism Project entailing reduction of Greenhouse Gas emissions by the thermal oxidation of HFC-
23, a by-product generated at the Refrigerant gas plant at Ranjitnagar, Gujarat. In lieu of that, the company received Carbon Credits
2006 issued by the UNFCCC to be traded in international markets.
•Established a chemical complex at Dahej, comprising of a captive power plant, caustic soda and chlorine plant, chloromethane plant and
a Polytetrafluoroethylene (PTFE)plant. Also entered into a JV in China, for manufacturing of anhydrous Hydrogen Fluoride and allied
2007 activities.
•Incorporated a wholly owned subsidiary, Gujarat Fluorochemicals Americas LLC, to conduct business operations across the American
subcontinent. Also diversified into Wind energy business through Inox Wind Limited, a leading wind energy solutions provider in India.
2009
•Entered into a JV to undertake FluorsparBenefi ciation Project for supply of Acid Grade Fluorspar and MetallurgicalGrade Fluorspar to
GFL.
2011
•Incorporated a wholly owned subsidiary, Gujarat FluorochemicalsGmbH in Hamburg, Germany to conduct trading, processing,
distribution,marketing and storage of Fluoropolymers in EMEA region. With the introduction of PFOA free PTFE resins and dispersions,
2013 emerged amongst world's major players offering PFOA free Fluoropolymers.
•Expanded its monomer and polymer capacity to caterto the growing demand of Fluoropolymers and Fluoroelastomers
acrossgeographies.
Launched FKM (Fluoroelastomers) brand Fluonox in 2015. In 2016,subsequent to the success of our PTFE brand INOFLON in global
markets, added two more Fluoropolymer products- FEP and PFA under the brandname INOFLON. In 2018, started its Additives brand
2013-2019 INOLUB for marketing PTFE Micropowders and Polymer Processing Aids (PPA).
In 2019, GFL introduced PVDF under the brand name INOFLAR.
•The Chemical Business Undertaking of erstwhile Gujarat Fluorochemicals Limited now known as GFL Limited was demerged to form a
new resultant company Inox Fluorochemicals Limited now known as Gujarat Fluorochemicals Limited with all assets and liabilities
pertaining to the Chemical Business Undertaking transferred to the resultant company with effect from the appointed date, April01,
2019 2019.

Integrated value chain to tap margins at each step
GujFluoro has a mix of six commodity and specialty segments due to its integrated value
chain lowering reliance from external shocks. Starting from basic chemicals Chlor-alkali and
chloromethanes, value addition is done progressively to refrigerant gases, PTFE,
fluorospecialty chemicals, and new fluoropolymers. Incrementally, the investments are
targeted towards the value added segments such as new fluoropolymers and new energy
related chemicals while basic chemicals shall just support operations. Hence, contribution
from basic chemicals is expected to remain largely at similar levels.
Exhibit 384: Integrated fluoropolymers/fluorochemicals value chain

Among the largest players in PTFE globally

GujFluoro entered into PTFE about a decade and a half ago. Steadily the company increased
its capacity and now has become among the largest players globally. Globally, PTFE is the
largest consuming fluoropolymer with consumption of ~175,000MT. Due to the rising
demand both in the domestic as well as exports market, the company is planning to increase
its PTFE capacity by ~20% taking it to 20,000MT.
Initially, the company manufactured only commodity PTFE grades. Slowly, based on R&D
and product development, the company made ingress into specialty grades of PTFE, which
earn higher margins. The company now manufactures over 50+ grades of PTFE catering to
a diverse set of applications serving a wider customer base. Due to its larger basket of
specialty PTFE grades, the company faces competition only for 15% of its PTFE business
while 85% of the business is relatively immune to competition. Europe remains the largest
exports market for GujFluoro followed by the US. The company has also developed PTFE
micropowders based grade for water-based coating formulation, which is endorsed by key
global companies.
Exhibit 385: PTFE revenue growth (Rs bn)
6.6
5.8
5.0
4.3 4.6
2.7
1.9 2.0
0.8 0.9
Regarding China competition, GujFluoro stands unaffected as China manufactures

commodity grades while GujFluoro forte lies in specialty grades where China doesn’t
compete. By serving the global customers over the past 15 years, the company has earned
a reputation of consistent and reliable supplier to global customers. In fact, GujFluoro even
commands pricing power and demonstrated the same by raising prices in the European
market due to incessant cost increases and the competition followed. Prices have moved
up over the past 18 months by over 40% due to increase in input and logistics costs coupled
with demand coming back to normalcy. Management expects current prices to remain
largely stable in foreseeable future with 5-10% variation.
First mover advantage in new fluoropolymers

Global new fluoropolymers market stands at ~175,000MT growing at a faster clip. Under
this segment, GujFluoro manufactures FKM, PVDF, FEP, PFA, PPA, Micropowders. PVDF is
the largest in new fluoropolymers with 65-70,000MT followed by FKM. Buoyed by strong
demand, prices of both PVDF and FKM have doubled over the past 18 months. The
company’s financials also reflect the same.

Exhibit 386: New fluoropolymers revenue growth (Rs bn)
14.2
10.9
7.8
2.7
1.0
0.0 0.2 0.3
0.0 0.0
Moreover, GujFluoro is expanding overall fluoropolymers capacity from 700MT/month by

end-FY22 to 1,500MT/month by end-FY23E. It has already commissioned 400MT/month
during Q1FY23 while the remaining capacities are expected to come onstream during the
rest of FY23E. The company is well poised to benefit from robust demand and pricing
through its expanded capacities. We believe utilization levels to improve sequentially with
concurrent reflection in financials.
Exhibit 387: Planned capacity enhancement
Product Capacity Expected commercialisation period
PVDF Currently 100MT, expansion to 400MT per month During or post FY23
FKM 600MT per month Capacity ready, commercialisation in FY23
Capacity augmentation to support Fluorospecialty growth

GujFluoro was a late entrant in fluorospecialty space compared to incumbents such as SRF
and Navin Fluorine. However, the company has been able to slowly make inroads in the
segment. Notably, FY22 remained a dampener for the segment due to demand
displacement in favor of the Covid related drugs coupled with Ranjitnagar incident.
However, with augmented capacities and new product commercialization, the performance
of this segment is also expected to improve from Q3FY23E.
Exhibit 388: Fluorospecialty chemicals revenue growth (Rs bn)
2.5
2.0
1.6
0.9 0.9
0.3
0.1
0.0 0.0 0.0

Well placed to serve burgeoning new energy market

With a strong backbone of developing technology for PTFE, new fluoropolymers, and
fluorospecialty chemicals, GujFluoro again demonstrated its capabilities by developing
technologies for new energy related products. New energy vertical is growing exponentially
due to global emphasis on shifting from non-renewables, sustainability, lowering carbon
footprint. New fluoropolymers are already being used in new energy segment and
GujFluoro has been developing products for the same. These products are currently under
validation and once commercialised will further add to GujFluoro’s growth.
Additionally, the company is foraying into LiPF6 salt with an initial capacity of 900MT, which
is expected to be commissioned by end-FY23E. Validation may take a few quarters and
based on the feedback the company further plans to double its capacity in a year’s time.
The company is already working on 3-4 different products to cater to the battery segment.
All these products will go through a gestation period of validation and are likely to
contribute meaningfully from 2025 onwards.
Exhibit 389: Lithium-ion battery components
Exhibit 390: Hydrogen fuel cell components

Exhibit 391: LiPF6 execution pipeline

Capacity Commercialisation Period
Implementing 900MT capacity, to be Next capacity expansion in 12-16 months after current
commercialised by end-FY23E commercialisation
Massive capex
Rising demand for fluoropolymers and sizable opportunity in the new energy vertical
propelled GujFluoro’s significant capex plan of Rs27.5bn over FY22-24E. The company
already invested Rs6.6bn during FY22 while recently increased its FY23E capex to ~Rs15bn.
The capex momentum is expected to accelerate based on the demand traction from the
new products. As and when the products related to the new energy vertical are validated,
capex to start for those products.
Exhibit 392: Capex trajectory (Rs bn)
Gross block Capex
76.0
61.0
49.0
35.5
30.8 32.0
28.3
20.6 21.3 22.8
13.5 15.0
12.0 12.0
5.1 6.7
1.8 4.1 2.7
1.2
Risks
Advances and guarantees provided to group companies
GujFluoro has advances outstanding of Rs8.8bn with its group company Inox Wind.
Currently, in lieu of the advances, Inox Wind is executing a 20MW wind power project.
Earlier, 125MW power project was planned, however project execution was delayed due to
delay in finalizing Gujarat government policy. Management has indicated that GujFluoro will
receive the remaining advances by end-FY23E, if the project doesn’t go through.
Delays in product validations
GujFluoro is executing multiple projects and validating the samples. Any delay in execution
and product validations may hamper growth for the company.

Financial analysis
For the period FY19-22, Gujarat Fluorochemicals has reported Revenue/EBITDA/PAT CAGR
of 13.1%/15.0%/22.9%. Notably, EBITDA margins have increased from 28.9% in FY19 to
30.3% in FY22. During FY22 revenues increased 49.2% yoy supported by higher product
realisations coupled with increased capacity utilisations. EBITDA margins improved by 780
bps yoy due to increased contribution from higher margin fluoropolymer products in the
product portfolio.
39.5 30.3
28.2 28.9
27.3 26.1 26.5 22.5

20.4 21.0
20.6
16.8
13.3 14.3 12.5
7.9 11.98
4.9
1.0 1.5 2.0 7.88
5.79 5.96
4.39
2.72 3.00
(2.2)
Adverse tax impact led to FY21 losses, however operating performance remained robust
with yoy margin expansion.
Exhibit 395: Domestic/Export mix
Domestic Exports
19.5
13.4 13.4 13.0

9.0
4.8 5.6
20.0
11.8 13.8 12.6 13.2
9.4 9.7

GujFluoro’s both domestic and export sales are increasing due to increased capacity
utilisations, however exports contribution to the overall revenue has witnessed strong
uptrend from 34.0% in FY16 to 49.4% in FY22. Owing to further capacity expansions across
all segments, increasing global demand, and higher export realisations the trend is expected
to continue.
Europe and USA continue to be key exports markets for GujFluoro’s existing and as well as
new products.

Exhibit 396: Key export market (%) Exhibit 397: Region wise revenue split (FY22)
India Europe USA ROW
ROW
15.8 16.8 17.6 17.4 21.5 18.6 16.0
16%
5.2 7.2 12.0
10.4 13.2 9.1
12.9 12.7 11.7
15.1 USA
18.8 18.4 22.0 21.4
12% India
51%
66.0 63.3 56.9 50.6 50.4 50.6
48.4 Europe
21%

GujFluoro’s capex in FY22 stood at Rs6.7bn. Capex intensity increased in FY22 and is
expected to further increase due to capex across high growth and new segments.
Exhibit 398: Aggressive capex trend
Gross block Capex
35.5
32.0
30.8
28.3
22.8
20.6 21.3
12.0
6.7
4.1 5.1
1.8 2.7
1.2


During FY22, GujFluoro’s revenue growth was driven by growth across its segments except
for fluorospecialty segment which was impacted due to lower demand for Covid related
drugs.
Exhibit 399: Segment revenue (Rs bn)
Caustic Soda Chloromethanes Refgases PTFE New fluoropoly. Fluorospecialty Chem. Others
100
80
60
40
20
0

Caustic Soda
Caustic soda revenues increased at a CAGR of 10.2% between FY16 and FY22. FY22 revenue
growth was driven by surge in realisations.
Exhibit 400: Caustic soda performance
5.4
4.9
4.7
3.9
3.4
3.0
2.3

Chloromethanes
Chloromethane segment revenues increased at 10.4% CAGR from Rs2.5bn in FY16 to
Rs4.5bn in FY22.
Exhibit 401: Chloromethane business performance
4.5
3.5
3.1 3.1
2.7
2.5 2.4
Refrigerant gas
FY22 performance in refrigerant gas was impacted due to diversion of refgases for other
segments.
Exhibit 402: Refrigerant gas segment performance
5.1
4.7
4.1
3.4 3.3
2.6
2.4


Poly Tetrafluoroethylene (PTFE)

PTFE contributed ~39% of the total revenues in FY22. The revenue in FY22 stood at Rs15.2bn
vis-à-vis Rs4.2bn in FY16, growing at 23.8% CAGR. FY22 surge in revenues was driven by
higher PTFE realisations.
Exhibit 403: PTFE segment performance
15.2
11.4
9.4 9.0
7.6
5.0
4.2
New Fluoropolymers
Rising utilisation of new fluoropolymers led to growth in revenues from FY19 with
substantial growth in FY22 due to increase in volumes coupled with higher realisations.
Exhibit 404: New Fluoropolymers segment performance
6.7
3.4
1.7
1.4
0.0 0.2 0.0

Fluorospecialty chemicals
Similar to new fluoropolymers, fluorospecialty segment revenue growth was propelled by
rising utilisation levels. However, FY22 performance was impacted due to lower demand
from Covid related drugs
Exhibit 405: Fluorospecialty chemicals segment performance
3.0
2.7
1.8
0.8
0.1 0.1
0.0


Cash flow analysis

We have considered Gujarat Fluorochemicals standalone business for our cash flow
analysis. Company’s operating cash flows have improved considerably over the recent four
years. Notably, WC cycle has witnessed stark improvement over the past decade. EBITDA
to OCF conversion has been among the best at 91% during the period. Negative FCF only
during capex years.
Exhibit 406: Recently improved cash flows
10,000
8,000
6,000
Rsm
4,000
2,000
0
(2,000)
Exhibit 407: Consistent improvement in WC cycle
700
600 551
500
364 344 357
400 323 292
days
263
300 203 208 214
200
100
0
Exhibit 408: EBITDA to OCF conversion of 91% over 10 years Exhibit 409: FCF impacted during capex years
100% 100%
80%
0%
60%
-100%
40%
-200%
20%
0% -300%
Low asset turnover and lower margins led to consistently low RoEs, however marked
improvement in operating environment during FY22 led to significant improvement in RoEs.

Exhibit 410: Low RoEs, improvement in FY22 led by betterment in operational performance
Net Debt/Equity 0.3 0.3 0.1 0.1 0.2 0.2 0.2 0.4 0.4 0.3 0.26
Net Debt/EBITDA 1.1 3.4 1.1 1.5 1.9 1.2 1.1 3.4 2.3 1.2 1.81
RoCE pre-tax 21.4% 4.7% 6.3% 5.5% 6.4% 13.6% 16.6% 9.6% 11.8% 21.1% 11.7%
RoCE 14.3% 3.6% 4.1% 3.7% 4.8% 9.4% 1.3% 5.8% -5.4% 15.6% 5.7%
RoIC pre-tax 17.6% 2.6% 4.5% 3.7% 4.0% 9.7% 14.2% 4.7% 7.6% 16.7% 8.5%
RoE 17.2% 3.0% 3.8% 3.3% 4.8% 10.2% 35.9% 6.2% -6.1% 20.3% 9.9%
Exhibit 411: DuPont Analysis – Low asset turnover led to lower RoEs
PAT/PBT 0.67 0.76 0.65 0.67 0.75 0.69 1.92 0.62 (0.45) 0.75 0.70
PBT/EBITDA 0.85 0.52 0.57 0.52 0.62 0.83 0.83 0.82 0.81 0.87 0.72
EBITDA/Revenue 0.44 0.17 0.21 0.20 0.21 0.28 0.29 0.17 0.22 0.30 0.25
RoE 17.2% 3.0% 3.8% 3.3% 4.8% 10.2% 35.9% 6.2% -6.1% 20.3% 9.9%
Exhibit 412: Price movement vs. Financials – Muted financial performance

100% 83% 85%
71%
75%
50%
26% 20%
25% 7% 8%
1% 0% 12% 2% 0%
0%
Gross Margin*
EBITDA Margin*
NWC (Ex-cash) as a
PBT CAGR^
FCF/Sales*
OCF/EBITDA*
RoE (Avrg)
Stock return
Revenue CAGR^
PBT Margin*
FCF/OCF*
EBITDA CAGR^
% of revenue
Source: Company Data, Centrum Broking; ^: FY12-22 CAGR; *: aggregate, Note – Listing in 2018 hence 10-year stock returns not applicable
Exhibit 413: Good FCF generation

FCF (a) 1,799 1,590 (2,251) 1,837 1,196 623 2,722 (6,490) 3,427 674
Dividend + Buyback (b) (383) (257) (450) (925) 0 (463) 0 0 0 (220)
Distribution of FCF (b/a) -21% -16% 20% -50% 0% -74% 0% 0% 0% -33%

Valuations
Gujarat Fluorochemicals registered a strong operational performance over FY20-22 with
Revenue/EBITDA/PAT CAGR of 23.2%/65.2%/100.2%. EBITDA margins witnessed significant
improvement from 16.8% in FY20 to 30.3% in FY22 due to change in business dynamics
across its operating segments. Bottom-line almost doubled primarily on the back of EBITDA
margin improvement.
Management has guided strong growth momentum backed by favourable business
dynamics coupled with capacity augmentation. We believe that FY22 has been an inflection
point for the company backed by strong operating performance and start of large capex
cycle. Additionally, foray into new energy vertical provides the company first mover
advantage to cater to the burgeoning EV, solar, and hydrogen space. Thus, we expect
Revenue/EBITDA/PAT CAGR of 28.1%/32.1%/30.7% over FY22-25E. We expect EBITDA
margins improvement due to rising contribution from the high margin new fluoropolymers
segment.
FY20-22 FY22-25E
CAGR% CAGR%
Revenues 26,064 26,505 39,536 57,582 68,578 83,053 23.2 28.1
EBITDA 4,391 5,959 11,976 20,002 22,941 27,621 65.2 32.1
EBITDA % 16.8 22.5 30.3 34.7 33.5 33.3
PAT 1,963 (2,187) 7,872 12,702 14,450 17,595 100.2 30.7
EPS 17.9 (19.9) 71.7 115.6 131.5 160.2 100.2 30.7
We like Gujarat Fluorochemicals (GujFluoro) due to (a) fluoropolymers play, (b) huge capex
of Rs25bn over FY23-24E, and (c) advances in new energy vertical. We believe by the time
the EV battery space is established in India, the company will be able to serve the market
with its products and capacities. We have valued the company at 30.0x avg. FY24E-25E EPS
of Rs146. We initiate with a BUY rating and TP of Rs4,376 (24% upside).

Story in Charts
Exhibit 415: Revenue and PAT trend (Rs bn) Exhibit 416: Improvement in EBITDA margins (%)
83.1
34.7 33.5 33.3
68.6
30.3
57.6 28.2 28.9 27.62
39.5 22.5 22.94
20.4 21.0 20.00
27.3 26.1 26.5 16.8
20.6 17.6
13.3 14.3 12.5 12.7 14.5 11.98
4.9 7.9
1.0 1.5 2.0 7.88
5.79 4.39 5.96
2.72 3.00
(2.2)
Exhibit 417: Geography wise revenue split (Rs bn) Exhibit 418: Balanced geographical revenue mix
34.0 36.7 43.1 49.4 49.6 49.4

51.6
19.5
13.4 13.4 13.0

9.0 66.0 63.3
4.8 5.6 56.9 50.6 50.4 50.6
20.0 48.4
11.8 13.8 12.6 13.2
9.4 9.7
Exhibit 419: Europe heavy exports Exhibit 420: Region wise revenue split (FY22)
India Europe USA ROW
15.8 16.8 17.6 17.4 21.5 18.6 16.0 ROW

5.2 16%
7.2 10.4 13.2 9.1 12.0
12.9 12.7 11.7
15.1 22.0 21.4 USA
18.8 18.4
12% India
51%
66.0 63.3 56.9 50.6 50.4 50.6
48.4 Europe
21%


Exhibit 421: Increasing capex trend (Rs bn) Exhibit 422: Return ratios (from FY22 to FY25)
76.0
30 26.5
61.0 24.3 24.1
25
20.3
49.0
20 20.9
19.9 21.2
35.5
30.8 32.0 15 15.6
28.3
20.6 21.3 22.8 10
13.5 15.0
12.0 12.0
5.1 6.7 5
1.8 4.1 2.7
1.2
0
FY22 FY23E FY24E FY25E
Exhibit 423: Declining net debt to equity (x) Exhibit 424: Working capital days trend
0.41 0.40 Debtor Days Inventory Days Creditor Days
0.35
0.33
358
0.24 323 301 312
278 256 271 262
0.19 0.20 237
209
0.14 0.15
0.13 128 151 131 132 140 139
88 104
71 73
104 95 82 76 80 85 67 60 65 65

Operational charts
Exhibit 425: Segment wise revenue mix (Rs bn) Exhibit 426: Caustic soda revenue trend (Rs bn)
Caustic Soda Chloromethanes
Refgases PTFE 2.3
New fluoropoly. Fluorospecialty Chem.
Others 1.9
90 1.5 1.5 1.4 1.4
75
1.1
60 0.9
45 0.5
0.4
30
15
0
FY23E
FY24E
FY25E
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Exhibit 427: Chloromethane revenues (Rs bn) Exhibit 428: Refrigerants revenues (Rs bn)
2.2
1.0
2.0 2.0
0.9 0.8 0.8
0.7
0.6
0.5 0.5 0.5
0.5 1.0
0.8 0.8 0.8
0.7
0.5 0.5
FY22
FY23E
FY24E
FY25E
FY16
FY17
FY18
FY19
FY20
FY21
FY16
FY23E
FY24E
FY25E
FY17
FY18
FY19
FY20
FY21
FY22
Exhibit 429: PTFE revenues (Rs bn) Exhibit 430: New fluoropolymers revenues (Rs bn)
6.6 14.2
5.8
5.0 10.9
4.3 4.6
7.8
2.7
1.9 2.0
0.8 0.9 2.7

1.0
0.0 0.0 0.2 0.3
0.0
Exhibit 431: Fluorospecialty chemicals revenues (Rs bn)
2.5
2.0
1.6
0.9 0.9
0.3
0.1
0.0 0.0 0.0

Quarterly Trend
Revenues 6,173 6,342 8,403 9,119 9,640 10,039 10,738 13,340 14,613 51.6 9.5
Q-o-Q gr. (%) 10.5 2.7 32.5 8.5 5.7 4.1 7.0 24.2 9.5
Raw Mat. Cons. 1,947 2,082 2,746 3,224 2,946 2,635 3,067 3,646 3,913 32.8 7.3
% of net sales 31.5 32.8 32.7 35.3 30.6 26.2 28.6 27.3 26.8
Purchase of prod. 0 0 0 0 0 0 0 0 0
% of net sales 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Power, fuel, and water 1,120 1,077 1,238 1,402 1,528 1,890 1,920 2,344 2,465 61.3 5.1
% of net sales 57.5 51.7 45.1 43.5 51.9 71.7 62.6 64.3 63.0
Employee Costs 535 554 545 642 680 680 653 779 800 17.7 2.8
% of net sales 8.7 8.7 6.5 7.0 7.1 6.8 6.1 5.8 5.5
Others 922 1,064 1,913 1,301 1,530 1,681 1,784 1,982 2,078 35.8 4.8
% of net sales 14.9 16.8 22.8 14.3 15.9 16.7 16.6 14.9 14.2
EBITDA 1,649 1,566 1,961 2,551 2,956 3,154 3,315 4,589 5,358 81.3 16.8
Q-o-Q growth (%) 6.2 (5.1) 25.2 30.1 15.9 6.7 5.1 38.4 16.8
EBITDA Margin (%) 26.7 24.7 23.3 28.0 30.7 31.4 30.9 34.4 36.7
Dep. & Amor. 508 515 500 504 509 518 524 550 572 12.4 4.0
EBIT 1,141 1,051 1,461 2,047 2,447 2,636 2,791 4,039 4,786 95.6 18.5
Interest exp. 285 276 230 247 202 202 134 209 230 14.0 10.0
Exceptional Items 0 0 0 0 0 0 0 0 0
Other Income 317 292 349 263 461 320 270 262 243 (47.4) (7.4)
EBT 1,173 1,067 1,581 2,063 2,707 2,755 2,927 4,092 4,799 77.3 17.3
Provision for tax 381 5,878 478 552 657 742 742 1,058 1,226 86.6 15.9
Eff. tax rate (%) 32.5 551.1 30.2 26.7 24.3 26.9 25.3 25.9 25.6
Net Profit 792 -4,811 1,103 1,512 2,049 2,013 2,185 3,034 3,572 74.3 17.7
Minority Interest 1 -7 -26 -26 -22 -34 -31 -28 -40 81.0 40.8
Rep. PAT 791 -4,804 1,128 1,538 2,072 2,047 2,216 3,063 3,612 74.4 17.9
Q-o-Q gr. (%) 13.2 (707.7) (123.5) 36.3 34.7 (1.2) 8.3 38.2 17.9
PAT Margin (%) 12.2 (72.4) 12.9 16.4 20.5 19.8 20.1 22.5 24.3
Segments revenue (₹ mn)

Caustic Soda 720 700 900 880 1,020 1,780 1,690 1,890 1,890 85.3 0.0
Chloromethanes 830 750 950 940 1,220 1,460 910 1,020 800 (34.4) (21.6)
Refrigerant Gases 880 690 1,300 930 920 690 780 1,960 2,680 191.3 36.7
Poly Tetrafluoroethylene 2,050 2,150 2,650 3,200 3,600 3,860 4,510 3,790 4,430 23.1 16.9
New Fluoropolymers 640 1,110 1,050 1,480 1,870 1,560 1,830 3,310 3,410 82.4 3.0
Fluorospecialty Chemicals 730 870 1,350 860 750 490 570 1,190 1,140 52.0 (4.2)
Others 70 70 100 829 260 199 0 180 263 1.3 46.5
Contra on Consolidation 260 0 100 0 0 0 0 0 0
Total 6,180 6,340 8,400 9,119 9,640 10,039 10,290 13,340 14,613 51.6 9.5

P&L Balance sheet

Others 5,390 6,295 17,274 20,916 25,331 Minority Interest (139) (248) (348) (448) (548)
Interest expenses 1,126 784 1,332 1,017 737 Total liabilities 51,982 60,890 75,086 82,769 93,625
Other income 2,011 1,314 854 641 705 Gross block 32,048 35,541 49,041 61,041 76,041
Taxes 7,039 2,693 4,245 4,835 5,894 Net block 22,888 24,474 35,374 44,078 54,972
PAT (2,215) 7,759 12,602 14,350 17,495 Net fixed assets 27,676 31,944 42,816 51,487 62,387
Minority/Associates 28 113 100 100 100 Non Current Assets 12,589 12,453 10,753 2,753 2,561
Recurring PAT (2,187) 7,872 12,702 14,450 17,595 Investments 186 0 0 0 0
Reported PAT (2,187) 7,872 12,702 14,450 17,595 Sundry debtors 6,671 7,781 11,196 13,335 16,149
Cash & Cash Equivalents 217 1,529 278 4,730 454
Adj. EPS nm nm 61.4 13.8 21.8 Net current assets 11,530 16,490 21,514 28,526 28,674
Gross 67.7 70.0 70.5 70.0 70.0
EBITDA 22.5 30.3 34.7 33.5 33.3 Cashflow
Adjusted PAT (8.3) 19.9 22.1 21.1 21.2 Profit Before Tax 4,823 10,452 16,847 19,185 23,389
ROE (6.1) 20.3 26.5 24.3 24.1 Net Interest 1,126 784 1,332 1,017 737
ROCE (5.4) 15.6 20.9 19.9 21.2 Net Change – WC 73 (3,605) (4,575) 5,440 (4,231)
ROIC (3.5) 12.4 17.3 18.7 18.8 Direct taxes (7,098) (2,730) (4,245) (4,835) (5,894)
Turnover (days) Net cash from operations (1,065) 5,642 11,181 23,546 17,496
Inventory 358 278 256 271 262 Investments 1,706 683 0 0 0
Creditors 151 131 132 140 139 Others 2,011 1,314 854 641 705
Net working capital 159 152 136 152 126 Net cash from investing 1,599 (4,289) (12,696) (11,409) (14,395)
Solvency (x) FCF 534 1,352 (1,514) 12,136 3,101
Interest coverage ratio 5.3 15.3 15.0 22.6 37.5 Increase/(decrease) in debt (1,100) 1,423 3,500 (4,500) (4,000)
Net debt/EBITDA 2.3 1.2 0.9 0.4 0.4 Dividend paid 0 (440) (1,905) (2,168) (2,639)
Per share (Rs) Interest paid (1,126) (784) (1,332) (1,017) (737)
Adjusted EPS (19.9) 71.6 115.6 131.5 160.1 Others 1,641 (1,513) 0 0 0
BVPS 318.0 387.2 485.4 597.2 733.3 Net cash from financing (584) (1,314) 263 (7,684) (7,376)
CEPS (1.5) 90.3 139.9 162.2 198.3 Net change in Cash (50) 38 (1,251) 4,452 (4,275)
Dividend payout (%) nm 5.6 15.0 15.0 15.0
Valuation (x)
P/E nm 49.2 30.5 26.8 22.0
P/BV 11.1 9.1 7.3 5.9 4.8
EV/EBITDA 67.3 33.5 20.3 17.3 14.4
Dividend yield (%) 0.0 0.1 0.5 0.6 0.7

Appendix
R&D and Technology
Exhibit 433: Technology absorption
2022 2021 2020
GFL has made further investments in PFA grade Successfully absorbed the technology of FEP
Successfully developed environment friendly new polymer for high end market in semiconductor grades polymer for high end application in cable
age surfactant system for polymerization of PTFE applications. The product has reached second Insulation & liners. The product has been
dispersion. Product is accepted globally and level of acceptance at reputed customers. approved by reputed customers in India, EU & US.
commercialized. Business volume is expected to increase further Business volume is going to increase in the year
from Q3 21-22. 2020-21.
Pursuing hard in the endeavour of working Made investment in PFA grade polymer for
A novel fluoroelastomers was developed to make
towards new age surfactants which are increasing demand of liner application & also for
o-rings & tight joints which is used in pressure
environmentally friendly. Initial results are high end market in semiconductor industries.
regulator used in domestic LPG cylinders.
encouraging and gaining acceptance Approval under process.
Breakthrough in PTFE micro powder & additives
Developed additional key PVDF based grades for printing ink, lubricant & coating application.
Developed PVDF based grades for battery binder
being used for solar films. This is in sync with focus The company has invested in manufacturing
application.
on renewable and green energy. different grades of micro powder using
environment friendly process.
GFL-Ranjitnagar has made further investments in Successfully developed new value added TFE
Increased nearly 25% capacity in dispersion grade
capacity expansion of R142b refrigerants grades based chemicals and new intermediates of
of PTFE over a period of 2 years for the application
used for thermostatic control switches, the fluoropolymers for backward integration through
of liners, wire & cables, electrical tapes, metal
intermediate of aerial propellant, and the in-house R&D. GFL can take either of the product
coating & impregnation.
important raw material for vinylidene fluoride. to scale up to capacity on demand of market.
Automation in the batch reactor dosing system of
The new chemistry is developed in-house to cut GFL has invested into commercial production of
dispersion grade PTFE. To achieve higher level of
down the job work and outsourcing techniques ISAN, new age additive using in-house developed
consistency of critical grades in demanding
e.g., BalzSchiemann, Photochlorination chemistry. encapsulation technology.
applications.
A greener route process for new API and Agro- Development for Fluor Polymer Business - GFL has
New grades were developed in FKM to meet the
based products like CFT, MTA, and 4-TFMA has developed in house surfactant/emulsifier which
requirement of various customers.
been developed. are now under product trial phase.
GFL has more focus on the additives EV grade GFL has developed two important grades of PVDF
molecules which have great market demands e.g., polymer for tube, liner, valve & pump components
FEC, VC which are under trial with customers.
GFL has invested in backward integration of the GFL has successfully developed specialty chemicals
like TFE-DMA,3,5- DCTFEA, PCTFE, IDURATE
Successfully launched DCTFMA, BTF, 1,4 DFB, and non-PTFE polymers with expansion in VDF.
through in-house R&D. GFL can take either of the
EDFA, which are commercialized and
product to scale up capacity on demand of market.
manufactured at the site to meet the customer's
orders. Indigenously developed specialty chemicals like
V5, ISAN and DCTFMA.
New grades were developed in FKM to meet the
requirement of various customers.


Mr Devendra Kumar Jain is a graduate in History (Hons.) from St. Stephens College, Delhi. He
possesses over 62 years of experience in business management and international trade. Mr.
Devendra Kumar Jain has been a member of the Indian National Committee of the International
Mr. Devendra Kumar Jain Chairman
Chamber of Commerce and has been an Associate Member of the World Economic Forum, Geneva,
Switzerland and is a member of the Indian delegation to the Davos symposium on several occasions
in the past.
Mr. Shanti Prashad Jain is a leading Chartered Accountant and practicing since 1963. He has
Mr. Shanti Prashad Jain Independent Director
specialized in taxation matters of various reputed companies and banks.
Mr. Vivek Kumar Jain is a graduate of Commerce from St Stephens College Delhi and also has a post
graduate degree in Business Administration from the Indian Institute of Management Ahmedabad.
Mr. Vivek Kumar Jain Managing Director
He has over 35 years of rich business experience in setting up and managing several businesses. Mr.
Vivek Jain is Managing Director of Gujarat Fluorochemicals Limited (GFL), since its inception.
Mr. Sanath Kumar Mr. Sanathkumar Muppirala is Chemical Engineer and has over 35 years’ experience in
Whole-time Director
Mupiralla Petrochemical Plants – in Manufacturing, Projects, Strategic planning & commissioning.
Mr. Sanjay Sudhakar Borwankar is a Chemical Engineer and MBA and has over 27 years of experience
Mr. Sanjay Borwankar Whole-time Director in the field of Operations Management, Business Process Optimization and Technology Transfer and
Assimilations.
Mr. Niraj Kishore Agnihotri has done his Bachelor’s in Chemical Engineering from HBTI, Kanpur. He
has over 31 years of experience in Manufacturing, Plant Commissioning & Operation, New Product
Mr. Niraj Agnihotri Whole-time Director Validations, Project Management and Strategic Planning. In his last assignment, he was associated
with Glenmark Pharmaceuticals Limited. His prior assignments were with United Sprits Limited.,
Nitrex Chemicals India Limited and United Phosphorus Limited.

Initiating Coverage
India I Chemicals
29 November, 2022
Navin Fluorine International BUY

Price: Rs4,352
Execution to Fruition Target Price: Rs5,244
We like Navin Fluorine International (Navin) given (a) pure play integrated fluorine Market Data
company, (b) capex execution from Q1FY23 with Honeywell contract, (c) strong Bloomberg: NFIL IN
balance sheet, and (d) product development around new platforms. Over the past 52 week H/L: 4,848/3,360
couple of years, Navin was under execution mode for various projects, spanning Market cap: Rs215.6bn
investment of over ~Rs10bn. With commissioning of the Honeywell project in July Shares Outstanding: 49.6mn
2022, the commercialisation has started and shall continue hereon. This capex
Free float: 70.6%
provides a strong growth visibility as the supplies are largely long-term contracts.
Navin’s strong balance sheet provides further scope for any large investments to tap Source: Bloomberg
incremental growth opportunities. We estimate FY22-25E Revenue/EBITDA/PAT CAGR
NFIL relative to Nifty Midcap 100
of 33%/39%/35%. We initiate on Navin with a BUY rating and TP of Rs5,244 (20%
upside) valuing the company at 45x FY24E-25E avg. EPS of Rs116.5. 150
Navin Fluorine International
130
Honeywell plant commissioned; supplies commenced
In Feb-20, Honeywell partnered with Navin to manufacture its proprietary Solstice range 110
of hydrofluoroolefins (HFOs) in India. Navin has invested Rs4.4bn for a dedicated 90
NIFTY Midcap 100
manufacturing facility (Rs3.7bn) including a captive power plant (Rs0.7bn) which was
70
commissioned in July 2022. The long-term supply arrangement implies annual revenues Nov-2 1 Jan-22 Mar-22 May-22 Jul-22 Sep-22 Nov-2 2
of Rs4bn evenly spread over a 7-year period. This long-term contract not only Source: Bloomberg
demonstrates Navin’s R&D/process capabilities but also instils MNCs’ confidence on
proprietary technology transfer without IP violation.
Multiple projects with cumulative capex of ~Rs16bn to be executed over FY23-24E Promoter 29.4 29.7 29.7 30.2
Post commissioning of Honeywell project, Navin still has multiple projects under FIIs 20.1 21.4 23.5 25.3
execution with a cumulative capitalization of over Rs16bn in FY23-24E. Together, these DIIs 19.1 17.7 15.4 13.1
new projects entail revenue potential of ~Rs13bn in FY25E. With the large scale capex, Public/other 31.4 31.2 31.4 31.4
Navin’s revenue growth trajectory is expected to accelerate from ~14% revenue CAGR Source: BSE
over FY17-22 to ~33% over FY22-25E.
Past R&D efforts in fluorospecialty chemicals bearing fruits
Backed by three R&D facilities, Navin has scaled up its R&D over the past few years,
which is demonstrated from ~20% revenue CAGR over FY17-22 for its fluorospecialty and
CRAMS segments. To keep up the growth momentum, in FY22, it has set up an 80-
member team under technology, designing, R&D functions to develop new products
with right end application functionality. By enhancing its capabilities across R&D, new
processes, technical services, direct fluorination using fluorine gas, etc., Navin aspires to
become a long-term strategic supplier and preferred technology partner for MNCs.
Navin’s focus on enhancing its capabilities through a new R&D/technology function is
expected to keep up the capex momentum post FY23E, thus providing growth visibility.
The stock is available at 42.5x/33.3x FY24E/FY25E EPS of Rs102.3/Rs130.7. We initiate
with a BUY rating and TP of Rs5,244
Risks – Project execution delays, demand weakness from exports market
Revenues 11,794 14,534 20,104 28,255 34,330
EBITDA 3,093 3,548 5,237 7,690 9,457
Chemicals
+91-022-4219645
Adj. EPS (Rs) 48.8 53.1 71.6 102.3 130.7
EPS growth (%) (40.8) 8.7 34.8 43.0 27.8
PE (x) 89.1 82.0 60.8 42.5 33.3
EV/EBITDA (x) 68.0 60.8 41.5 28.7 23.2
PBV (x) 13.2 11.7 10.1 8.4 6.9
RoCE (%) 15.3 14.8 15.9 18.4 19.7 +91-022-42159201
Navin Fluorine International 29 November, 2022
Thesis Snapshot
YE Mar (Rs bn)
FY23E FY23E (%) FY24E FY24E (%) We estimate FY22-25E Revenue/EBITDA/PAT CAGR of 33%/39%/35%. We
Revenue 20,104 19,790 1.6 28,255 27,137 4.1 initiate on Navin with a BUY rating and TP of Rs5,244 (20% upside) valuing
EBITDA 5,237 4,988 5.0 7,690 7,375 4.3 the company at 45x FY24E-25E avg. EPS of Rs116.5
PBT 4,665 4,558 2.4 6,542 6,490 0.8 Valuations Rs/share
PAT 3,545 3,445 2.9 5,070 5,043 0.5 1HFY25E EPS 116.5
Navin Fluorine vs. NIFTY Midcap 100 Target Price 5,244
1m 6m 1 year
NFIL IN (2.2) 21.4 21.4 85
NIFTY midcap 100 2.0 17.3 2.1
65
Key assumptions 45
Revenue growth (%) 38.3 40.5 21.5 25
EBITDA Margins (%) 26.1 27.2 27.5
Source: Centrum Broking 5
May-18
May-19
May-20
May-21
May-22
Nov-17
Nov-18
Nov-19
Nov-20
Nov-21
Nov-22
P/E Mean
60
50
40
30
20
10
0
May-18
May-19
May-20
May-21
May-22
Nov-17
Nov-18
Nov-19
Nov-20
Nov-21
Nov-22
EV/EBITDA Mean
Peer comparison
Company
Atul Ltd. 242.1 16.8 21.2 19.4 37.9 28.9 23.5 24.6 18.4 15.0 14.6 14.2 0.3
Deepak Nitrite 287.6 13.7 12.4 14.2 32.1 21.1 18.0 21.1 14.3 12.1 37.5 33.5 0.3
SRF 675.5 17.7 18.2 18.2 31.2 26.0 21.5 19.7 16.5 13.7 24.5 18.0 0.3
Vinati Organics 215.0 28.8 25.6 26.6 48.4 38.8 30.7 37.1 30.4 24.7 20.6 20.5 0.0

Company overview
Navin Fluorine International (Navin) belongs to the Padmanabh Mafatlal Group and was
established in 1967. The company is among the pioneers of refrigerant gas manufacturing
in India and is one of the largest specialty fluorochemical manufacturer. The company has
a rich expertise in handling fluorine for over past five decades. Navin has strong customer
base across India and abroad which also includes global innovators. Navin’s operational
prowess has enabled it to manufacture customized fluorine based specialty molecules as
per customer’s requirements ranging from milligram to MT. The company’s in house R&D
center at Surat has been instrumental in developing key fluorine based specialty molecules
for global innovators and further manufacture these products at pilot phase and later to
commercial phase.
Business segments
Navin is one of the few integrated specialty fluorochemical companies in India and is
operational under three segments namely High Performance Product (HPP) segment,
Specialty chemical segment and CDMO. Navin through its multi-product portfolio caters to
various sectors such as steel, glass, Oil & gas, abrasives, solar, electronic products, life and
crop sciences.
Exhibit 435: Navin’s business segments
Navin Fluorine
Specialty
HPP Segment Chemical CDMO
Segment
Inorganic
Fluorides & CRAMS
Refrigerants
HPP
(Honeywell)
HPP segment is combined by merging the refrigerant business and the High
Performance products business. This combination of business segments has been done
mainly to integrate and achieve synergies in operational capabilities. Navin’s
refrigerant attracts traction from customers across the globe and has been a key global
vendor for few of the gases. Navin is the only manufacturer of BF3 gases which
predominantly has major demand in North American region. In India, Navin is the
pioneer of manufacturing R22 gas and currently under the Mafron brand the company
enjoys a significant market leadership. The comapny is also venturing into the
fluoropolymers space whereby the samples of R22PTFE are in approval phase. Navin is
the largest anhydrous hydrofluoric and diluted hydrofluoric acid manufacturer in India.
The company enjoys 90% market share of Sodium Fluoride in India.
Specialty chemical segment, Navin is engaged in developing new product around
fluoropyridine platform. It is predominantly engaged in aiming at achieving new
business relationships in the agrochemical space. Specialty chemical caters to niche
product requirements of the customer. More than 70% of the product portfolio
comprises of value added products. Specialty chemical segment is further expected to
grow, catalysed by its new Dahej site being commissioned in July 2022.
CRAMS is one of the most promising segments and Navin aims to increase its revenue
share in the CDMO space. The company is currently working on expansion of its c-GMP
plant capacity, which is to be commissioned in Q3FY23E. Similarly, investments in
advanced systems and processes to facilitate expansion are planned to strengthen
project management and technical capabilities. Navin is the only player with high
pressure fluorination capabilities with cGMP compliance for CRAMS Business.

Exhibit 436: Segments, products, and applications

Segment Products Application
Products manufactured through reaction Capabilities such
ammonolysis, chlorination, fluorination, Hydroxylation,
Hydrogenation, Halogen exchange, Alkylation,
Catering to pharmaceuticals, crop protection, hydrocarbon
Specialty Chemicals & High Ammoxidation,Chlorination, Fluorination, Oxidation,
and fragrances. Plant for production of products for
Performance Products (HPP) Hydrolysis, Sandmeyer’s (Halogenations, etc.), Schiemann,
Honeywell
Balz-Schiemann, Deamination, Hydroxylation, Acylation,
Friedel-Crafts’, Bromination, Nitration, Sulfonation,
Organometallics.
BF3 Gas, Tri-fluoro derivatives and others, R22- mafron,
Catering to sectors like steel, glass, Oil & gas, abrasives, solar,
R22PTFE, Sodium Fluoride, anhydrous hydrofluoric and
electronic products, life and crop sciences.
diluted hydrofluoric acid , potassium fluoride, ammonium
Applications in window and split room air conditioners,
Refrigerants and Inorganic bifluoride, sodium fluoride,
chillers, packaged air conditioners and commercial and
fluorides potassium fluorotitanate, potassium fluoroborate,
industrial refrigeration units, intermediate for API’s,
hexafluorophosphoric acid,
fluoropolymer resins, domestic and industrial refrigerators,
HF adducts as HF Pyridine complex and HF urea complex
mobile air conditioning (MAC)
CRAMS Catering to Pharmaceutical and Agrochemical industries

Operational capabilities
Navin’s business platform has been appreciated by MNCs which is seen through the various
collaborations it has done under its various segments. Its continuous efforts towards R&D
and key executional capabilities in the fluorination space is one of the most critical factors
in the company’s success.
Navin’s R&D has been comprehensively dovetailed into its manufacturing function, to
ensure time bound supplies which contributes towards customer acquisition and retention
globally. Moreover, Navin has developed an experienced business development team in the
western hemisphere helping the company enter and deepen associations with multi-
national customers. Due to this remarkable factors, the company currently enjoys
association from 7 out of 10 global pharmaceutical giants. Operational capacities along with
key capabilities which provides Navin an edge against its peers are as below:
Company has 3 manufacturing units in Surat, Dahej (Gujarat), and Dewas (MP)
Dahej unit operationised in FY23
Dewas facility is zero liquid discharge facility
India’s only plant with high pressure fluorination capabilities with cGMP compliance
Also, capital investment of Rs750mn is being invested towards enhancing and
debottlenecking the manufacturing unit at Dewas.
R&D
Navin has been one of the early ones to understand that being in a knowledge intensive
business, there is a spiked premium to invest into adequate research and development.
Constantly engaging new professionals and investing into new age technologies is one of
the key features of Navin’s R&D success. In FY22, the company invested into a larger R&D
facility and is expected to invest Rs400mn towards upgradation of R&D and pilot facilities.
Navin’s R&D capabilities have been instrumental towards growing specialty chemicals
revenues from Rs4.5bn in FY21 to Rs5.7bn in FY22. Also, owing to world class R&D
capabilities which is showcased in their top quality products, clients across the globe have
entered into long term supply agreements. Long term contracts from prominent clients has
enabled business sustainability for the company.

Exhibit 437: R&D investments (Rs bn)

Capital expenditure Recurring Expenditure
262
142 215
169 208
158
139
87
51
3 21 23 23 9
ESG
ESG has been a key focus area for Navin across all its business segment. Owing to the global
operations and association with MNCs, conscious efforts towards ESG has been made to
make Navin a global comparable benchmark across all its segments. Key areas of ESG
implementation are,
Adopted reduction at source as one of the principles comprising a systematic approach
of recover, reuse and abatement of environmental pollution.
Invested in new manufacturing processes (solvent-free transformations, continuous
flow reactor system, vapour pressure technology, etc.).
Refined wastewater residence time in the bromine recovery system; eliminated the
generation of 20 tonnes of wastewater load for treatment and disposal.
Reduced natural gas consumption by 8% through flue gas recycling.
Reduced per unit power consumption, which translated into an estimated reduction of
~2.2 million KWH of power per year (approximately 4%).
Recycled 2000m3/day treated waste-water, saving fresh-water consumption; made the
recycled water available for irrigation purposes.
Used greener processes of HALEX for specialty molecules; eliminated the use of 26
tonnes of solvents.
Sustained the initiative of sustainable packaging practices; supplied products in ISO and
IBC containers.
Optimized waste generation through solvent recycling, waste conversion into by-
products and novel technologies for energy conservation.

Exhibit 438: Navin Fluorine International – Growth Journey
1967
Establishment of the first integrated Fluorochemicals
Complex in South East Asia (excluding Japan) to produce
HF, refrigerant gases and a range of inorganic fluorides
1978 at Surat, India
Facility was set up at Dewas to produce Alkylated
Anilines and Toluidine’s
1982
Capacity expansion at Surat for Smelter Fluorides and
1990 AIF3
CFC 113 plant commissioned at Surat

1999
Commencement of organic and inorganic specialty
fluoride production at Surat
2000
Commencement of Fluorobenzene and Benzotrifluoride
d
2001
Set up first large scale plant in South East Asia for
production of Boron Trifluoride Gas at Surat
2004
Commissioned Trifluoroacetic acid plant at Surat
2007
Commissioned CDM plant at Surat
2009
Start-up of pilot plant for scale up of research and
development molecules
2010
Established multi-purpose plant and CRO at Surat
2011
Capacity expansion of BF3 at Surat; acquisition of Land
at Dahej for further expansion Acquisition of
Manchester Organics Limited, UK; commissioning of
cGMP pilot plant at Dewas
2015
CRAMS cGMP multi-purpose plant
Entered into JV with Piramal Enterprises at Dahej
2018
Added cGMP capacity and associated infrastructure at
Dewas, Entered into long term contract with Honeywell
International Inc.
2022
Honeywell supplies commenced

Multiple contracts under execution provide strong growth
visibility
Since the first long-term contract with Honeywell, Navin has garnered multiple long-term
contracts with global MNCs which shall be executed over FY23-24E. Including the Honeywell
contract, the revenue potential is estimated at Rs13bn in FY25E.
Honeywell contract for HPP commissioned – Supplies commenced
During February 2020, Navin and Honeywell announced their partnership for Honeywell’s
proprietary Solstice range of Hydrofluoroolefins (HFOs) in India. Navin’s R&D prowess and
IP protection commitment is exemplified by Honeywell’s intent to share its proprietary
patented technology. We believe that Navin is banking on such long-term commitments for
newer products coming in future.
Commenced operations in July 2022, trial quantities supplied, commercial supplies to
follow
USD410mn (Rs28bn) long-term contract
Capex – USD61.5mn (Rs4.4bn), investing USD51.5mn (RS3.7bn) for dedicated
manufacturing facility and ~USD10mn (Rs0.7bn) for captive power plant, funded
through internal accruals and debt
Contract period – 7 years, evenly staggered sales, to start from FY24E onwards
Royalty free access to technology
ROC and margins – Company level EBIDTA and ROC for the project (slightly higher)
Project executed through wholly owned subsidiary Navin Advanced Science Limited
(NFASL) at Dahej
To manufacture both intermediate and final product
Intermediate can be used for multi-product manufacturing, currently the contract is for
one product
Adequately protected from investment and margins point of view
New MPP – To come up by 2HFY23E
Navin is also investing into a MPP at Dahej for fluorospecialty products with revenue
contribution starting from FY24E onwards.
For 5 products
To start with few products and then scale up, can be moved to dedicated plants
depending on the opportunity size
Capex for MPP at Dahej – Rs2bn
New products in life science and crop science sectors in the specialty chemicals
business
Funded through a mix of internal accruals and debt
To be commissioned by 2HFY23E
EBITDA margins/return ratios – At company levels
Payback period – ~4 years
Peak annual revenues – Rs2.6-2.8bn, asset turnover at peak 1.35-1.45x, expected to
achieve in 2-3 years post commissioning
Agrochemical fluoro-intermediate with an MNC – Supplies from end-FY23E
During November 2021, Navin entered into a long-term contract with a MNC for supplying
a key agrochemical fluoro intermediate.
Capex – Rs1.25bn including Rs140mn for ETP, funded through a mix of debt and internal
accruals

Peak revenue potential – Rs1.5-1.7bn p.a.

Total opportunity size – Rs8bn over five years
Capacity to come on-stream by FY24E at Dahej adjacent to new HPP plant
A new fluoro speciality molecule – To start supplies from FY25E
Navin announced another major investment of Rs5.4bn in May 2022 for manufacture and
supply of a new fluoro specialty molecule to a large MNC.
Investment – Rs5.4bn at Dahej
Peak revenue potential – ~Rs6bn based on cost + pricing locked with technology
partner
50% sales to the technology partner, rest for external sales and captive consumption
Captive consumption – To be used in 2 molecules, one to be produced in MPP, another
under development
Start of commercial supplies from FY25, optimum utilisation from second year
Slightly more profitable than the rest of the other long-term projects
Only manufacturer with this environment friendly technology
Fluorochemical building block which can be used across different products/
applications
Exhibit 439: Huge capex over FY22-25E (Rs bn)
Gross block Capex
27.0
23.0
15.5
7.5
4.7 4.9 5.5 4.6

4.6 4.4 4.0
3.3 3.6
1.0 0.9 5.8
0.2 0.5 0.6
0.2
Research of decades turning into opportunities

Navin’s fluorospecialty chemicals journey commenced a couple of decades ago with
addition of CRAMS segment about 12 years back. During this period, the company scaled its
R&D capabilities substantially yielding results through the long-term contracts.
Demonstrated capabilities such as timely development of new products/grades, superior
product quality, and robust product characteristics helped it to gain confidence from global
customers. Within budgeted cost and timely commissioning of Honeywell’s plant reinforce,
Navin’s project management capabilities as a single large Greenfield project has ever
commissioned. This certainly helps in instilling confidence for future projects.
During FY22, the company has developed four products which shall be commercialised
soon. Furthermore, another 10+ products in the pipeline are expected to be commercialised
in future.

Exhibit 440: Fluorine application

22% Share of drugs
25% Share of fluorine approved by FDA 53% Share of pesticides
67% Share of fluorine
containing drugs approved containing at least one introduced during 1998-
containing pesticides over
by FDA over the last five fluorine atom on an 2020 containing fluorine
the last five years
years average over the last two atom
decades
Navin has been investing consistently in R&D which is helping in new product
commercialisations. With rising revenues the R&D investments are also expected to go up.
Exhibit 441: Rising R&D investments along with revenue growth
R&D exp. (Rs bn) % of revenues
400 3.5
3.0
350 3.0
300 2.5
2.3
2.5
2.1 2.0 2.0
250 1.9
2.0
200
1.5
150
1.0
100
50 0.5
192 143 179 192 238 217 349
0 0.0

Financial analysis
During FY19-22, Navin reported revenue/EBITDA/PAT CAGR of 13.4%/17.6%/21.3%. EBITDA
rose from Rs.3.1bn in FY21 to Rs3.5bn in FY22. Higher revenues in FY22 were on account of
higher raw material prices. However, due to supply chain disruptions and inflationary
pressure EBITDA margins were impacted and came in at 24.4% in FY22 viz-a-viz 26.2% in
FY21, declining by 180 bps.
14.5 26.2
24.8 24.4
23.6
11.8 21.4 21.9
10.6
10.0 17.3
9.1
7.4
6.8
4.1
2.6 2.6 3.5
1.4 1.8 1.5 2.1 2.2 2.6 3.1
0.8 1.2 1.6
FY22 PAT remained stable yoy at Rs2.6bn due to exceptional income and higher other
income in FY21.
Exhibit 444: Domestic/Exports mix
Domestic Exports
7.1
6.1
4.9
4.8
4.8
3.6
3.3
7.4
5.1 5.7 5.7
3.9 4.2 4.4

Navin has a balanced domestic/export mix over the past few years. Despite Covid related
demand and supply chain challenges, Navin’s export revenues grew 16.7% yoy in FY22 while
domestic revenues grew at a higher clip of 30.2% yoy. With commercialisation of long-term
contracts, exports revenues are likely to move up substantially.
With commissioning of new projects, Navin capex jumped from Rs0.9bn in FY19 to Rs5.8bn
in FY22.

Exhibit 445: Capex accelerated from FY22 (Rs bn)

Gross block Capex
5.5 5.8
4.9
4.6 4.7
4.4
3.6
3.3
1.0
0.6 0.9
0.5
0.2 0.2
Segmental Performance
During FY22 refrigerants segment/inorganic fluorides segment/specialty chemicals

segment/CRAMS segment grew at 27.9%/42.5%/24.9% and 6.5% yoy, respectively.
Going forward, the company has decided to bifurcate its operational segment into
Specialty chemicals & High Performance Products (HPP)
Refrigerants & Inorganic Fluorides
CRAMS
Refrigerants Inorganic Fluorides Specialty Chemicals CRAMS
3.0
2.8
1.7
1.8 5.7
2.0
1.2 3.0 3.8 4.5
0.9
2.2
2.4 2.3 2.8
2.0 2.1
1.2 1.5 1.9
0.9
2.2 2.1 2.5 2.8 2.6 2.1 2.7

Cash flow analysis

Navin’s OCF has been lumpy and has declined over the years due to consistently rising WC
days from a low of 53 days to 131 days in FY22. Despite rising WC intensity, the company
has been able to lower its leverage over the years due to healthy cash flows and relatively
lower capex.
Exhibit 447: OCF rose consistently (excl. FY19), WC rose too
4,000
3,000
2,000
Rsm
1,000
0
(1,000)
(2,000)
Exhibit 448: Working capital levels rose substantially over the years
150 131
123
120 105
95 87 83 83
90 79
60
days
60 53
30
0
Exhibit 449: EBITDA to OCF conversion of 66% over 10 years Exhibit 450: OCF to FCF conversion over 10 years
120% 500%
100% 0%
80% -500%
60% -1000%
40% -1500% @-2070%, and the impact is due to
increase in WC coupled with
20% -2000% substantial capex
0% -2500%
During first half of the decade, RoEs were depressed due to lower asset turnover and lower
margins, which has changed in second half with improvement in margins. RoEs are still
lower due to recent capex, which is yet to reflect in numbers. Rising margin profile coupled
with significantly high capex intensity aided 50% stock return CAGR for Navin over the
decade.

Exhibit 451: Virtually debt-free, lumpy return ratios

Net Debt/Equity 0.1 0.0 0.1 0.1 (0.0) (0.0) (0.0) (0.2) (0.3) 0.0 (0.0)
Net Debt/EBITDA 0.6 0.3 0.5 0.5 (0.1) (0.1) (0.2) (1.1) (1.8) 0.0 (0.1)
RoCE pre-tax 13.0% 12.3% 12.7% 17.2% 23.4% 28.9% 21.7% 20.9% 22.6% 19.3% 19.2%
RoCE 8.2% 9.7% 9.5% 12.4% 17.6% 19.8% 14.3% 9.2% 15.3% 14.8% 13.1%
RoIC (pre-tax) 10.0% 6.8% 7.5% 12.4% 14.9% 17.3% 17.4% 19.4% 23.0% 16.1% 14.5%
RoE 8.8% 12.4% 9.5% 13.5% 18.5% 19.8% 14.5% 32.9% 15.9% 15.1% 16.1%
Exhibit 452: DuPont Analysis – RoE improvement concurrent to margin improvement

PAT/PBT 0.63 0.79 0.74 0.72 0.75 0.68 0.66 1.56 0.68 0.76 0.80
PBT/EBITDA 0.85 1.05 1.08 0.98 1.15 1.24 1.03 0.98 1.11 0.97 1.04
EBITDA/Revenue 0.15 0.14 0.12 0.17 0.21 0.24 0.22 0.25 0.26 0.24 0.20
RoE 8.8% 12.4% 9.5% 13.5% 18.5% 19.8% 14.5% 32.9% 15.9% 15.1% 16.1%
Exhibit 453: Price movement vs. Financials

75%
59%
54% 50%
50%
21% 23% 25%

25% 18% 19% 16%
11%
3% 0%
0%
Gross Margin*
EBITDA Margin*
NWC (Ex-cash) as a
PBT CAGR^
OCF/EBITDA*
RoE (Avrg)
FCF/Sales*
PBT Margin*
Stock return
FCF/OCF*
Revenue CAGR^
EBITDA CAGR^
% of revenue
Source: Company Data, Centrum Broking; ^: FY13-22 CAGR; *: aggregate, Note: FY13-22 CAGR, excluded FY12 due to substantial income from carbon credits

FCF (a) 598 525 (593) 99 469 1,520 295 587 1,629 (4,851)
FCF yield 20% 24% NA 1% 2% 4% 1% 1% 2% NA
Dividend + Buyback (b) 832 169 183 216 343 350 611 714 394 542
Distribution of FCF (b/a) 139% 32% (31%) 218% 73% 23% 207% 122% 24% (11%)

Valuations
Adjusting for prior period tax in FY20, Navin has reported healthy financial performance
over FY20-22 with Revenue/EBITDA/PAT CAGR of 17.0%/16.0%/20.3%. EBITDA margins
remained robust at ~25. Bottom-line benefitted due to adoption of new tax regime.
Navin’s capex has started coming to fruition with commercialisation of the Honeywell
project. Incremental project commissioning over FY23-24E is expected to foster revenue
growth. Margins are expected to go up with new projects earning better than base business
margins. Thus, we expect Revenue/EBITDA/PAT CAGR of 33.2%/38.7%/35.0% over FY22-
25E.
FY20-22 FY22-25E
CAGR% CAGR%
Revenues 10,616 11,794 14,534 20,104 28,255 34,330 17.0 33.2
EBITDA 2,635 3,093 3,548 5,237 7,690 9,457 16.0 38.7
EBITDA % 24.8 26.2 24.4 26.1 27.2 27.5
PAT Adj. 1,819 2,436 2,631 3,545 5,070 6,478 20.3 35.0
EPS Adj. 36.7 49.2 53.1 71.6 102.3 130.7 20.3 35.0
We like Navin due to (a) pure play integrated fluorine company, (b) capex execution from
Q1FY23 with Honeywell contract, (c) strong balance sheet, and (d) product development
around new platforms. We have valued the company at 45x avg. FY24E-25E EPS of Rs116.5.
We initiate with an BUY rating and TP of Rs5,244 (20% upside).
Risks
Project execution delays
Navin has substantial capex coming onstream in FY23-24E which is likely to drive growth
momentum. Any delays in execution and teething problems may impact the growth for the
company.
Demand weakness from exports market
Navin derives ~50% of its revenues from exports with 100% CRAMS revenues from exports.
Any demand challenges in the exports market may impact growth of the company.

Story in Charts
Exhibit 456: Revenue and PAT trend (Rs bn) Exhibit 457: EBITDA (%) margins to improve
34.3 27.2 27.5
26.2 26.1
24.8 24.4
28.3 23.6
21.4 21.9
17.3
20.1
14.5
10.6 11.8 9.5
9.1 10.0 7.7
6.8 7.4 6.5 5.2
4.1 5.1 3.1 3.5
2.6 2.6 3.5 2.1 2.2 2.6
0.8 1.4 1.8 1.5 1.2 1.6
Exhibit 458: Geography wise revenue split (Rs bn) Exhibit 459: Balanced geographical revenue mix
7.1 46.2 45.9 52.4 48.4 46.6 51.7 49.0
6.1
4.9
4.8
4.8
3.3 3.6
7.4 53.8 54.1 47.6 51.6 53.4 48.3 51.0

5.1 5.7 5.7
3.9 4.2 4.4
Exhibit 460: Rising trend in capex to continue Exhibit 461: Return ratios set to improve going ahead
27.0 Effect of previous
32.9 years' tax refund on
23.0
ROE
21.5 22.7
15.5 18.5 19.8 17.8
14.5 15.9 15.1
13.5
19.8 18.4 19.7
7.5 17.6
5.5 14.3 15.3 14.8 15.9
4.6 4.4 4.7 4.9 4.6 12.4
3.3 3.6 5.8
4.0 9.2
0.6 1.0
0.2 0.5 0.2 0.9
Exhibit 462: WC days trend

120 122
115 111
105 103 108
102
86
89
73 78 81
71 67 78 76
59 60 76

Operational Charts
Exhibit 463: Segmental revenue mix (Rs bn; histo. seg.) Exhibit 464: Increasing refrigerants exports
Refrigerants - Dom. Refrigerants - Exp.
Refrigerants Inorganic Fluorides Specialty Chemicals CRAMS
38.0 32.0 34.0

3.0 44.0 44.0 46.0 46.0
1.7 2.8
1.8 5.7
2.0 3.8
0.9 1.2 3.0 4.5
2.2 62.0 68.0 66.0
2.4 2.3 2.8 56.0 56.0 54.0 54.0
1.5 2.0 2.1
0.9 1.2 1.9
2.2 2.1 2.5 2.8 2.6 2.1 2.7
Exhibit 465: Domestic focused inorganic fluorides segment Exhibit 466: Stable contri. from specialty chemicals exports
Inorganic Fluorides- Dom. Inorganic Fluorides - Exp. Specialty Chemicals- Dom. Specialty Chemicals - Exp.
11.0 8.0 14.0 10.0 12.0 12.0 12.0
46.0 42.0 39.0 40.0 42.0 40.0 40.0
89.0 92.0 86.0 90.0 88.0 88.0 88.0
54.0 58.0 61.0 60.0 58.0 60.0 60.0

Quarterly Trend
Quarterly (Rs mn) Q2FY21 Q3FY21 Q4FY21 Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 YoY%) QoQ(%)
Revenues 3,189 3,091 3,364 3,265 3,390 3,790 4,089 3,975 4,192 23.7 5.5
Q-o-Q gr. (%) 55.8 (3.1) 8.8 (2.9) 3.8 11.8 7.9 (2.8) 5.5
Raw Mat. Cons. 1,361 1,374 1,558 1,422 1,438 1,636 1,906 1,767 1,782 23.9 0.9
% of net sales 42.7 44.4 46.3 43.6 42.4 43.2 46.6 44.5 42.5
Purchase of prod. 71 52 48 62 85 45 62 56 53 (37.4) (4.3)
% of net sales 2.2 1.7 1.4 1.9 2.5 1.2 1.5 1.4 1.3
Employee Costs 340 362 369 438 436 469 473 507 572 31.1 12.9
% of net sales 10.7 11.7 11.0 13.4 12.9 12.4 11.6 12.7 13.6
Others 510 512 546 566 588 654 707 654 846 43.9 29.3
% of net sales 16.0 16.6 16.2 17.3 17.3 17.3 17.3 16.5 20.2
EBITDA 907 792 842 778 842 986 943 991 938 11.5 (5.3)
Q-o-Q growth (%) 74.2 (12.7) 6.4 (7.7) 8.2 17.1 (4.4) 5.2 (5.3)
EBITDA Margin (%) 28.4 25.6 25.0 23.8 24.8 26.0 23.0 24.9 22.4
Dep. & Amor. 109 110 116 120 119 121 119 124 177 48.7 42.8
EBIT 799 682 727 658 723 865 824 868 762 5.3 (12.2)
Interest exp. 4 4 8 5 4 4 6 3 40 930.8 1,286.2
Other Income 97 112 233 89 105 75 124 109 109 4.1 (0.1)
EBT 891 790 952 742 824 936 941 974 831 0.8 (14.7)
Excp. Item 0 0 -155 0 0 0 0 0 0
PBT 891 790 1,107 742 824 936 941 974 831 0.8 (14.7)
Eff. tax rate (%) 27.7 28.6 39.3 24.6 23.3 26.5 23.6 23.5 30.4
Net Profit 644 564 733 559 632 688 719 745 578 (8.6) (22.4)
Q-o-Q gr. (%) 24.9 (12.4) 29.8 (23.7) 13.1 8.8 4.5 3.6 (22.4)
PAT Margin (%) 19.6 17.6 20.4 16.7 18.1 17.8 17.1 18.2 13.4
EPS 13.0 11.4 14.8 11.3 12.8 13.9 15.2 15.0 11.7 (8.6) (22.4)
Standalone segment revenues (Rs mn)

Refrigerants 580 470 580 590 550 720 800
Inorganic Fluorides 490 570 590 560 650 830 710
Specialty Chemicals 1,020 1,220 1,310 1,330 1,220 1,520 1,590
CRAMS 990 710 760 670 820 600 880
Total 3,080 2,970 3,240 3,150 3,240 3,670 3,980
New segment bifurcation (Rs mn)

HPP Segment 1,070 1,040 1,170 1,150 1,200 1,550 1,510 1,520 1,575 66.8 7.4
Specialty Chemicals 1,020 1,220 1,310 1,330 1,220 1,520 1,590 1,760 1,770 45.1 0.6
CRAMS 990 710 760 670 820 600 880 590 390 (52.4) (33.9)
Total 3,080 2,970 3,240 3,150 3,240 3,670 3,980 3,870 3,735 15.3 (3.5)

P&L Balance sheet

EBITDA 3,093 3,548 5,237 7,690 9,457 Total debt 25 1,045 5,039 6,039 5,039
Depreciation & Amortisation 442 479 745 1,084 1,265 Non Current Liabilities 409 372 372 372 372
Taxes 1,108 812 1,120 1,472 1,774 Net block 3,537 3,776 13,097 19,521 22,265
Effective tax rate (%) 32.4 23.6 24.0 22.5 21.5 Capital WIP 949 7,421 1,921 1,921 1,921
Cash & Cash Equivalents 5,439 958 3,345 691 1,328
Revenue 11.1 23.2 38.3 40.5 21.5 Other current liab. 879 2,275 2,725 2,725 2,725
Adj. EPS (40.8) 8.7 34.8 43.0 27.8 Net current assets 9,953 6,398 9,577 8,455 10,212
Gross 54.4 54.2 54.6 54.4 54.5
EBITDA 26.2 24.4 26.1 27.2 27.5 Cashflow
Returns (%) Depreciation & Amortisation 442 479 745 1,084 1,265
ROE 15.9 15.1 17.8 21.5 22.7 Net Interest 18 19 141 362 302
ROCE 15.3 14.8 15.9 18.4 19.7 Net Change – WC (4,309) 3,012 (591) (1,532) (1,120)
ROIC 15.5 12.3 14.4 16.2 18.1 Direct taxes (1,194) (818) (1,120) (1,472) (1,774)
Turnover (days) Net cash from operations (2,305) 5,742 3,527 4,686 6,563
Net working capital 308 161 174 109 109 Net cash from investing 7 (6,662) (4,256) (7,212) (3,647)
Solvency (x) FCF (2,298) (920) (730) (2,526) 2,915
Net debt-equity (0.3) 0.0 0.1 0.2 0.1 Issue of share capital 0 0 0 0 0
Interest coverage ratio 168.1 186.7 37.1 21.2 31.3 Increase/(decrease) in debt 11 1,020 3,995 1,000 (1,000)
Net debt/EBITDA (1.8) 0.0 0.3 0.7 0.4 Dividend paid (396) (545) (536) (765) (976)
Adjusted EPS 48.8 53.1 71.6 102.3 130.7 Others 2,252 (97) 0 0 0
BVPS 329.8 372.2 432.9 519.8 630.8 Net cash from financing 1,849 359 3,317 (127) (2,279)
CEPS 57.8 62.8 86.6 124.2 156.3 Net change in Cash (449) (561) 2,588 (2,654) 637
Dividend payout (%) 15.4 20.7 15.1 15.1 15.1
Valuation (x)
P/E 89.1 82.0 60.8 42.5 33.3
P/BV 13.2 11.7 10.1 8.4 6.9
EV/EBITDA 68.0 60.8 41.5 28.7 23.2
Dividend yield (%) 0.2 0.3 0.2 0.4 0.5

Appendix
R&D and Technology
Exhibit 468: Technology absorption in FY22
R&D has ventured into new areas such as
continuous flow reactions and electrochemical
The R&D centres along with its technical services
fluorinations. While the former would be an
team handles difficult reagents and processes
alternative to batch process, with an improved
safely, which are used in fluorination.
yield and lower cost, the latter would help
The R&D centre continues to be focused on R&D teams have started working on specific
synthesize per fluorinated compounds having novel
utilizing its experience and knowledge base along projects on various technology platforms and
applications.
with its technical capabilities to handle difficult validated a few at its pilot plant facility.
The R&D team provides modern tools, its customer
and complex chemistries, especially in fluorination. NAVIN has developed a few niche technology
networks and advanced online literatures to all its
platforms, which have created novel areas of
scientists to look for global techniques, to
competence and capabilities.
introduce required fluorine atom in a desired
position in a molecule in more than one way in
selected chemical entities.
Greater emphasis and constantly improving processes towards sustainability by means of

technology has been instrumental towards company’s success. Key achievements due to
technological absorption are,
Enhanced safety and sustainability.
Increase in revenue and profitability of all the business units within the company.
Enhanced visibility through partners in India and abroad.
Successfully becoming long term strategic supplier and partner of choice of customers
in the areas of crop protection, life sciences, specialties chemicals, etc.
Achieving status of a preferred technology partner of multinational companies to
manufacture their pipeline of products.
Enhanced abilities to adopt technologies from reputed multinational global companies
to help them manufacture their pipeline product in India by becoming their technology
partner.

Name Details
He is an industrialist having varied experience of over 25 years in the field of textiles
Mr. Vishad P. Mafatlal Executive Chairman and chemicals. He holds a Bachelor’s of Science degree in Economics from University
of Pennsylvania, Wharton School.
Mr. Nambiar has a vast experience of over 59 years. He is a commerce graduate and
Mr. Mohan M. Nambiar Non-Independent Non-Executive Director
member of the Institute of Chartered Accountants of India.
With 25 years of work experience, Mr. Welling has worked in and handled many
functions ranging from Innovation to Sales & Marketing to Corporate Strategy to
Manufacturing, across multiple geographies. He has obtained Mechanical Engineering
Mr. Radhesh R. Welling Managing Director
degree from National Institute of Technology, India and has done his Masters in
International Business from IIFT, New Delhi. He has also done his MBA from IMD,
Lausanne, Switzerland.

Initiating Coverage
India I Chemicals
29 November, 2022
SRF Ltd BUY

Price: Rs2,279
Unparalleled R&D + execution capabilities Target Price: Rs2,646
We like SRF given its (a) fluorine synthesis capabilities, (b) superior capital allocation, Market Data
(c) capex of Rs31-33bn in FY23E and Rs150bn during FY24-28E, and (d) diversification Bloomberg: SRF IN
into adjacencies. SRF to continue its forte in fluorospecialty backed by robust 52 week H/L: 2,865/1,973
investments driven by strong growth visibility. Prudent capital allocation across Market cap: Rs675.5bn
business adjacencies including polytetrafluoroethylene (PTFE), and aluminium foil are Shares Outstanding: 296.4mn
expected to forge overall growth. SRF will continue to lead the Indian specialty
Free float: 49.5%
chemicals baton over the next few years owing to the massive investments lined up
over FY24-28E. We estimate FY22-25E Revenue/EBITDA/PAT CAGR of 18%/18%/18%. Source: Bloomberg
We value SRF with SOTP methodology and initiate with a BUY rating and TP of Rs2,646
SRF relative to Nifty 50
(16% upside).
140
Specialty chemicals to remain the driving force
SRF
Backed by R&D prowess, SRF has been supplying fluorospecialty intermediates to agro 120
and pharma segments since more than a decade. Owing to strong visibility, SRF has
upped its chemicals business (CB) capex to Rs23-25bn for FY23E vs. Rs42bn invested 100
during past five years. The company has guided continued capex momentum in CB with NIFTY 50
80
massive Rs120-130bn capex over FY24-28E. We estimate FY22-25E revenue and EBITDA Nov-2 1 Jan-22 Mar-22 May-22 Jul-22 Sep-22 Nov-2 2
CAGR at 28% and 24% respectively for CB owing to commissioned and ongoing capexes. Source: Bloomberg
Diversification in complimentary segments Shareholding pattern

During the past five years, SRF has invested ~Rs27bn in packaging films business (PFB). Sep-22 Jun-22 Mar-22 Dec-21
With these investments, the company has augmented its BOPP/BOPET capacities across Promoter 50.5 50.7 50.7 50.7
India, Thailand, and Hungary. Under the packaging film adjacency, SRF is investing FIIs 19.2 19.2 19.6 19.1
Rs4.3bn to foray into aluminium foil (21,000MT capacity), an import substitute product DIIs 13.3 9.4 8.7 9.2
utilized in packaging films. With Rs4.2bn investment in PTFE, the company is entering Public/other 16.9 20.7 21.0 21.0
the fluoropolymers segment. Source: BSE
Superior capital stewardship

SRF’s superior capital allocation has aided robust revenue growth, FY17-22/FY12-22
CAGR of 19%/12% despite volatility in its PFB segment caused by crude prices and largely
stable Technical Textiles Business (TTB) performance. Of the total Rs73bn investments
during past five years, ~58% investments were directed into fast growing/high margin
CB segment closely followed by PFB segment.
Risks – Correction in refgas prices, demand challenges in PFB impacting margins
SRF has positioned itself as a partner of choice for global customers with its superior
R&D/technology capabilities, vast manufacturing footprint, safely handling fluorine
chemistry along with other chemistries, and capex strength. Further, massive Rs150bn
capex visibility over FY24-28E provides healthy growth potential for the company,
maintaining its leadership position in the Indian specialty chemicals market. The stock is
available at 26.2x/21.6x FY24E/FY25E EPS of Rs87.1/Rs105.3. We have valued SRF using
SOTP methodology and initiate with a BUY rating and TP of Rs2,646
Revenues 82,954 123,128 154,038 174,848 201,836
EBITDA 21,333 31,032 35,945 43,020 51,263
Chemicals
Adj. EPS (Rs) 40.4 63.7 72.7 87.1 105.3 +91-022-4215 9645
EPS growth (%) 30.8 57.6 14.0 19.8 21.0
PE (x) 56.4 35.8 31.4 26.2 21.6
EV/EBITDA (x) 32.9 22.8 19.8 16.6 13.8
PBV (x) 9.9 7.9 6.5 5.4 4.4
RoCE (%) 14.4 18.0 17.4 18.1 18.7
+91-022-4215 99201
SRF Ltd 29 November, 2022
Thesis Snapshot
Centrum Consensus Variance Centrum Consensus Variance The stock is available at 26.2x/21.6x FY24E/FY25E EPS of
YE Mar (Rs bn)
FY23E FY23E (%) FY24E FY24E (%) Rs87.1/Rs105.3xx. We estimate FY22-25E Revenue/EBITDA/PAT CAGR of
Revenue 1,55,248 1,49,418 3.9 1,75,718 1,71,935 2.2 18%/18%/18%. We value SRF with SOTP methodology and initiate with a
EBITDA 35,945 36,240 -0.8 43,020 42,357 1.6 BUY rating and TP of Rs2,646 (16% upside).
PBT 28,798 29,193 -1.4 33,953 34,175 -0.6 1HFY25E EV/ EBITDA Value (Rs
SOTP
PAT 21,541 21,632 -0.4 25,805 25,398 1.6 EBITDA (x) mn)
Source: Bloomberg, Centrum Broking Technical textiles business (TTB) 4,438 10 44,384
Chemicals business (CB) 29,705 22 653,513
SRF vs. NIFTY 50 Packaging films business (PFB) 11,909 10 119,094
1m 6m 1 year Others 587 8 4,695
SRF IN (8.9) 1.9 4.3 Net Debt 37,243
NIFTY 50 4.9 15.5 5.6
Source: Bloomberg, Centrum Broking Implied value (Rs mn) 784,443
No. of shares 296
Key assumptions
Target price 2,646
Segment rev. growth (%)
Technical textiles business (TTB) (2.3) 2.5 2.5 45
Chemicals business (CB) 44.8 17.9 21.2
Packaging films business (PFB) 13.3 12.0 12.0 35
Segment EBITDA margin (%)
Technical textiles business (TTB) 18.0 21.0 21.0 25
Chemicals business (CB) 31.0 30.0 30.0
15
Packaging films business (PFB) 16.0 18.0 19.0
5
May-18
May-19
May-20
May-21
May-22
Nov-17
Nov-18
Nov-19
Nov-20
Nov-21
Nov-22
P/E Mean
25
20
15
10
5
May-18
May-19
May-20
May-21
May-22
Nov-17
Nov-18
Nov-19
Nov-20
Nov-21
Nov-22
EV/EBITDA Mean
Peer comparison
Company
Atul Ltd. 242.1 16.8 21.2 19.4 37.9 28.9 23.5 24.6 18.4 15.0 14.6 14.2 0.3
Deepak Nitrite 287.6 13.7 12.4 14.2 32.1 21.1 18.0 21.1 14.3 12.1 37.5 33.5 0.3
SRF 675.5 17.7 18.2 18.2 31.2 26.0 21.5 19.7 16.5 13.7 24.5 18.0 0.3
Vinati Organics 215.0 28.8 25.6 26.6 48.4 38.8 30.7 37.1 30.4 24.7 20.6 20.5 0.0

Company overview
SRF is one of the leading producers of fluorine based specialty chemicals catering mainly to
the agrochemical and pharmaceutical segments. The company’s distinguished expertise in
handling complex reactions such as halogenation, ethylation, hydrogenation, nitration,
diazotization, grignard, isomerization, amination, organocatalysis, and decarboxylation
shall aid in creating niche products for the agrochemical and pharma segment. SRF has
successfully developed 57 molecules historically and has gained positive traction in the
fluorine based specialty chemical segment. SRF has filed 370 patents till date of which 124
have been granted.
Business segments
SRF is one of the largest players in most of its product segment categories given the strong
expertise in R&D and efficient execution capabilities. SRF’s operations are spread across
wide range of segments and products.
Exhibit 470: Leading position across business segments
SRF’s business is bifurcated into technical textile business (TTB), packaging film business
(PFB), and chemical business (CB).
Further, CB is bifurcated into specialty chemical business and fluorochemicals business.
While TTTB is bifurcated into tyre cord fabrics, belting fabrics, and polyester industrial yarn.

Exhibit 471: Segments and sub segments

SRF
Technical Chemical Packaging Film

Textile Business Business Business
Tyre Cord
Fluorochemicals
Fabrics
Specialty
Belting Fabrics Chemicals
Business
Polyester
Industrial Yarn
Exhibit 472: Segments, sub-segments, products, and applications

Segment Sub segment Products Applications
Specialty Active, non-active advanced Applications in agrochemicals and
Chemical Business
Chemicals intermediaries pharmaceutical industries
Applications in air-conditioners, pharma,
F134a, F32, HFC 134a, 32 and
Fluorochemicals automobile air-conditioners, refrigerators
125, HFC 410A and 407C
and chillers
Applications in fast moving consumer
Packaging Film goods, Food & Agro, confectionery, soaps
BOPP, BOPET
Business & detergents, solar panels, labelling,
overwraps, embossing, etc.
Applications, such as tyres, seat-belts,
Technical textile Tyre cord fabrics, belting
conveyor-belts and other industrial
business fabrics and industrial yarn
applications
Technical Textile Business

TTB business comprises of three sub-segments namely Tyre Cord Fabrics, Belt Fabrics
and Polyester Industrial Yarn.
Tyre Cord Fabrics: Nylon Tyre Cord Fabric is a key raw material for the OEMs having
application in the automobile industry. With increasing demand for automobiles, the
segment is expected to grow at a higher rate.
Belt Fabrics: Steel, cement, coal, and power generation industries are key end-user
industries for the Belting Fabrics segment. SRF constantly gains market share with
improved margins by introducing value added products in the belting fabrics segment.
Polyester Industrial Yarn: Being synthetic in nature and dependency on crude
derivatives for raw material makes it key demand driver for the polyester
Exhibit 473: TTB Business – Sub-segments, applications

TTB sub-segment Applications
NTCF- tyre reinforcements in bias tyres
Tyre cord fabrics
PTCF : tyre reinforcements in radial tyres
Belting fabrics Reinforcement material for conveyor belts
Geo-grids, seatbelts, ropes and cordage, solid woven fabric, transmission
Polyester industrial yarn
belts, PVC conveyor belts, hoses, narrow woven belts
Chemical Business
SRF’s chemical business comprises of specialty chemicals and fluorochemicals sub-
segments. Both sub-segments are integrated in terms of chemistries and processes.
Finished products from specialty chemicals are used for manufacturing products in the
fluorochemicals sub-segment.

Exhibit 474: Specialty and fluorochemicals value chain
Fluorochemicals: This segment comprises of mainly Refrigerants & Propellants and

Industrial Chemicals. SRF is one of the only fully backward integrated manufacturer of
Ozone-friendly refrigerant gases. SRF caters to customers across 90+ countries. The
company had planned and also executed to replace its existing refrigerant gas with
ozone friendly gases (i.e. transfer from HCFC to HFC). This development has come after
global adoption of capping air conditioning at 750 GWP (Global Warming Potential).
Moreover, the company is also focusing towards getting into 1234YF which is a
technological transition for the future. Although the transition period is over 10-15
years, SRF has developed the technology and is currently under the optimisation phase.
Further, SRF is aiming to foray into fluoropolymers through PTFE manufacturing.
Exhibit 475: Fluorochemicals segment – Products, applications

Fluorochemicals segment Products Applications
Cooling medium in room A/Cs,
F22, F32, F134a, F125
Refrigerants automobile A/Cs, commercial
HFC blends- F410A, F404A, F407C
refrigeration
Metered dose inhaler DYMEL: F134a/P Propellant in asthma inhalers
Solvent in pharma & agro chemical
Methylene chloride, Chloroform,
industries, Feedstock for our range of
Chlorinated solvents Carbon tetrachloride,
refrigerants, Cleaning agent in steel
Trichloroethylene, Perchloroethylene
industry
Fuel for Butane torch, Purifies the split
N Butane, AC Air pure, cleaning
Others & car A/C air, Commercial use for toilet
chemicals
bowl cleaning, floor & glass cleaning
Specialty Chemicals Business: This segment focuses on agrochemical and

pharmaceutical segments, whereby it collaborates with major global innovators for
process development, commercialisation, and production of complex, new-age
molecules having downstream application in agrochemical and pharmaceutical
segments. SRF in this endeavor to grow the specialty chemical business has planned to
set up a dedicated facility to manufacture agrochemical intermediaries in Dahej,
Gujarat. The total capacity for this plant shall be 1,000MTPA, and shall be mainly
utilized for manufacturing advanced agrochemical intermediates. Moreover, SRF is also
planning to set up a dedicated pharma intermediate manufacturing plant.

Exhibit 476: Specialty chemicals segment – Product value chain

Product/ Service category Applications/ services
Agrochemical industry: Active Ingredients (AI) for Herbicides, Fungicides,
Insecticides, etc.
Intermediates for API/ AI
Pharmaceutical industry: Key Starting Materials (KSM)/Intermediates for
Active Pharmaceutical Intermediates (APIs)
Contract manufacturing, custom Contract manufacturing of intermediates / AI for the agro and pharma
research and synthesis innovators
Other specialty chemicals that find application in material sciences, surface
Intermediates for applications
chemistry, etc.
Packaging Films Business

This segment comprises of BOPP and BOPET films which are primarily used as packaging
films. SRF’s manufacturing capability in value added products has been enhanced by
the recent addition of paper metallisation and Alox coating assets. Further, the
company plans to set up an aluminium foil plant which is currently under execution.
Exhibit 477: Packaging products and characteristics

Packaging products Characteristics
BOPET films Transparent, metallized, high-performance
Value added products Specialty coatings, chemical / acrylic coatings, metallized film
BOPP films Sealable, non-sealable, metallized, high-performance
Exhibit 478: Packaging product applications

Food Confectionery, dairy, bakery, household spices, ready-to-eat, pet food
Non food Shampoos, detergents, packaging for perfumes, cardboard
Hot stamping foils, thermal transfer, electric cables, air ducting, solar panels,
Industrials
battery separators, flat screen display

SRF is a market leader in most of its business segments in India and also commands a
significant global presence in some of its businesses, with operations in four countries i.e.,
India, Thailand, South Africa, and Hungary. SRF caters to global markets in each of its
product segments catering to customers spread across 90+ countries.
Exhibit 479: Operational capabilities (India and global)
Through its 6,647 employees including 400+ employees in R&D (FY22), SRF seeks to achieve
all round development across all its business segment. The key differentiating factor for SRF
is its diversification from a technical textile business and successfully establishing
completely unrelated segments of packaging films, specialty chemicals, and fluoropolymers.
Further, SRF aims to foray into the newer product categories in the packaging films segment
by implementing aluminium foil business. In fluorochemicals segment, SRF is venturing into
fluoropolymers segment through PTFE.

R&D
Focus on R&D, improving processes, and efficient execution capabilities are the growth
pillars for SRF throughout its journey. SRF is one of the few conglomerates having in-house
R&D as well as execution capabilities for all its business segments. R&D activities have been
set at four dedicated R&D centres located across Tamil Nadu, Rajasthan, Haryana, and
Madhya Pradesh. The company collaborates with prestigious research institutes to leverage
technical expertise in identified areas. Further, SRF also collaborates with its customers to
identify evolving needs for further product and service development.
Exhibit 480: Future growth levers
The Chemical Technology Group (CTG) has been formed under the chemical business for
nurturing R&D initiated growth in the segment. CTG specifically focuses towards
development of new products and process technologies for specialty chemicals and
fluorochemicals businesses. CTG employs more than 400 research scientists to develop
innovative green chemistries, achieve process improvements, and demonstrate viability of
new chemistries for the future.
Exhibit 481: R&D investment trend (Rs mn)
1,372
1,328
1,170
1,069 1,105
1,044
789
SRF has been consistently investing towards R&D across all its segments and SRF’s R&D
investments are the highest in the Indian chemical industry.

Exhibit 482: SRF – Growth Journey
1970 SRF began as Shri Ram Fibres in 1970 to manufacture nylon tyre cord fabrics.
1974 Established Tyre Cord Fabrics plant in Manali near Chennai in 1974.
1977 Production of Fishnet Twines started in the Manali plant near Chennai in 1977.
1979 Engineering Plastics Business was established in 1979.
Started manufacturing belting fabrics that are used as reinforcement material in conveyor belts and
1983
other mechanical rubber equipment at Viralimalai, Tamil Nadu.
1986 Coated Fabrics Business was set up in 1986.
Started its journey in Fluorochemicals in 1989, manufacturing refrigerants at our facility in Bhiwadi,
1989
Rajasthan, India.
Entered the chemicals business to manufacture refrigerants. Consequently, renamed SRF Limited
1990
Acquired a BOPET film plant at Kashipur in India from M/s Flowmore.
Acquired the nylon tyre cord division of CEAT Ltd. Located at Malanpur, near Gwalior at INR 325 crore.
1995
Collaborated with Elf- Atochem, a leading global chemical technology developer in 1995 to manufacture
Commenced operations at SRF Overseas Limited set up in the Jebel AN Free Trade Zone, Dubai to
1996 manufacture nylon tyre cord fabric.
Acquired the facility with its purchase of DuPont subsidiary DuPont Fibres Ltd (DFL) in September 2000
2000 and renamed it Tyre Cord Fabric Ltd.
Entered the Specialty Chemicals Business as a supplier of fine chemicals to the agrochemicals and
2004 pharmaceuticals industry.
A new manufacturing plant for packaging films was set up in Indore in 2004.
Acquired Thai Baroda Industries Limited plant in Rayong, Thailand that manufactured Nylon 6 tyre cord
2008 fabric. Further also acquired Belting fabrics business of Industex Technical Textiles (Pty) Limited
Commenced commercial production of Polyester Industrial Yarn in May 2009 with a capacity of 14,500
2009 MTPA at Gummidipoondi (Tamil Nadu, India), the manufacturing facility has state-of-the-art
technology installation from Toray Industries, Japan.
2010 Set up the Laminated Fabrics Business in 2010 with the commencement of our plant at Kashipur, India.
Set up two Packaging Films facilities in Thailand and South Africa in the same year to cater to our
2013 customers worldwide.
2015 Acquired the Dymel® HFA 134a/P regulated medical pharmaceutical propellant brand from DuPont™
Set up a BOPET and BOPP films manufacturing facility at the Domestic Tariff Area (DTA), in Indore,
2017 Madhya Pradesh
Acquired the HFC-125 assets and the technical know-how on an exclusive basis. The company
relocated the assets to India and set up the facility for manufacturing HFC-125 at its Chemical complex
2019 in Dahej, Gujarat.
Sold its Engineering Plastics Business to DSM, the Life Sciences and Materials Sciences company in an all-
cash transaction, amounting to INR 320 cr.
2020 SRF’s Bi-axially Oriented Polyethylene Terephthalate (BOPET) film manufacturing facility is located at
Jaszfenyszaru, Hungary. This facility houses an ultra-modern 10.4m wide BOPET film line capable of
producing 40,000 MT/annum.
2022 Incorporated as a wholly owned subsidiary of SRF Ltd., to engage in the manufacturing of Aluminium foil.

Specialty chemicals investments accelerate
Rising demand for fluorine based intermediates led to substantial investments in SRF’s CB
segment over the past few years. During past five years, the company invested Rs42bn in
CB segment consequently generating 24.9% revenue CAGR over FY17-22.
Exhibit 483: Continuous growth (qoq) Exhibit 484: Huge growth in CB segment (yoy)
Revenues (Rs bn) EBIT %
20000 Revenues (Rs mn) EBIT % 35.0
25.9
30.0
15000 25.0 25.6
20.0 26.5
10000
15.0 26.7
5000 10.0 20.0

5.0 24.0 17.2
19.0 16.7 15.7
108.5
0 0.0
52.4
75.9
89.5
16.1
16.4
17.2
Q2FY21
Q3FY21
Q4FY21
Q1FY22
Q2FY22
Q3FY22
Q4FY22
Q1FY23
Q2FY23
24.5
36.4
29.7
Globally, over ~30% of drugs and 50% of crop protection products under development
contain fluorine molecule which is driving fluorine based intermediates growth. Although
at a lower base, use of fluorine based intermediates is rising in other specialty chemicals,
which offers incremental growth opportunity.
Due to buoyant international market and continuous increase in refgas prices, SRF recorded
strong 93% yoy growth in FY22 despite relatively weak demand environment in the
domestic market. Chloromethanes and industrial chemicals market saw healthy demand
from the pharma and agrochem segments, the segment witnessed 13% yoy growth in FY22.
SRF’s Dymel propellants made entry into new geographies along with market share gain.
Refgas demand in domestic market is expected to grow while exports are anticipated to
remain stable. The company is positive on the US exports market with growth continuing
going ahead. Furthermore, chloromethanes expansion and PTFE foray shall further support
growth.
Exhibit 485: CB – Growth across sub-segments
Refgas Fluorospecialty Chloromethanes etc. Others
0.0
3.5
0.0
3.1 31.0
0.0
3.4
0.1
3.5 23.9
0.9 0.4 16.2
1.0 1.4 10.4
1.4 1.6 5.7
7.4 6.1 17.2
8.2 9.9 9.3 8.9
4.5 5.9
Fluorospecialty continued its strong growth trajectory even at a higher base, growing by
F
30% yoy in FY22. Further, large investments are planned in the segment to augment
capacities and capabilities which shall aid in continuing the growth momentum over the
next few years.

Enhancing portfolio resiliency through complimentary

diversification
Portfolio diversification into complimentary business segments demonstrates SRF’s
superior capital allocation, entailing continued growth momentum in medium to long-term.
SRF is foraying into PTFE, extending its fluorochemicals basket while foray into aluminium
foils is complimentary to its existing PFB segment (similar/overlapping customers). With a
demonstrated history of efficient capital allocation, we believe these diversifications will
help the conglomerate to sustain its growth in future.
Aluminium foil
Capex – Rs4.2bn, at a new site in Jaitapur, Indore
Capacity – 21,000MT
Commissioning – Sep/Oct 2023
Asset turnover – 1.75-2.00x, IRR 15-17%
Applications – Widely used in food and non-food packaging
Indian market size is – ~200,000MT, expected to grow at ~8.5% p.a., mainly driven by
food products and pharma packaging
Import substitution – Annual estimated imports of ~100,000MT
Foray into aluminium foil segment provides promising opportunities to leverage
existing customer base as one-stop shop for customers with products ranging from
BOPP, BOPET and aluminium foil
State of the art machine with capability to produce a wide range of gauges
Potential to emerge as an enabler to cater to demand from Electric Vehicle (EV) space
in the future
PTFE with R22 as feedstock

Capex – Rs4.2bn, at Dahej
Capacity – 5,000MT, capacity ramp up in 2-3 years
Commissioning – November 2022
Asset turnover – 0.75-0.85x
Intent to produce higher quality products instead of standard products, initially to
produce base products which later will be upgraded
Expect 3-4% higher RoCE than company’s commodity business
PFB – Capacity enhancement with margin improvement

SRF enhanced its packaging films capacity (BOPP, BOPET) across India, Thailand, and
Hungary in past few years. Healthy demand from the food packaging segment coupled with
highest ever output of ~307,000MT led to best ever performance by the PFB segment.
During FY22, PFB segment reported 46% yoy revenue growth accompanied by 23% EBITDA
margins. Expansion in value added product (VAP) portfolio led to overall growth of BOPET
VAP sales in FY22.
During FY23E, SRF is commissioning new BOPP line in India which shall enhance overall
capacity further. However, several new lines are expected in India as well as globally which
can lead to an oversupply situation in the interim period with consequent impact on
margins. In its continuous endeavour to enhance value added products portfolio, SRF has
enhanced its capabilities through addition of paper metallisation and alox coating assets,
which shall be leveraged incrementally. PFB segment may remain under transition for a
couple of quarters due to oversupplies.

Exhibit 486: EBIT margins moderation recently (qoq) Exhibit 487: Growth from capacity addition (yoy)
Revenues (Rs mn) EBIT %
20000 35.0 67.9
30.0 60.6
15000 25.0 54.1
47.8
20.0
10000
15.0 32.9
5000 10.0 26.5 26.0
27.3
5.0 17.8 19.8
13.6 14.1
0 0.0
21.3 12.8 14.8 15.9
15.5
14.3 12.9
Q2FY21
14.3
Q3FY21
Q4FY21
Q1FY22
Q2FY22
Q3FY22
Q4FY22
Q1FY23
Q2FY23
TTB – Favourable industry dynamics aids margin trajectory

TTB segment witnessed marked surge from Q1FY22 margins due to some Chinese capacities
going off permanently. Margin trajectory has structurally moved up from earlier sub-15%
to ~20%. Healthy growth coupled with margin expansion led to robust performance of TTB
segment in FY22. During FY22, revenues surged 68% yoy while margin expansion led to
EBITDA surging by over 140% yoy.
Exhibit 488: Continuous growth (qoq) Exhibit 489: Significant growth in TTB segment (yoy)
Revenues (Rs mn) EBIT %
6000 30.0 22.6
18.6
5000 25.0
15.8 18.4
4000 20.0
13.8 14.4
3000 15.0 14.3
12.8
2000 10.0
9.5 11.2
1000 5.0
0 0.0
20.9
19.0
20.1
18.4
20.7
13.6
12.4
20.4
20.9
21.4
Q2FY21
Q3FY21
Q4FY21
Q1FY22
Q2FY22
Q3FY22
Q4FY22
Q1FY23
Q2FY23
Outlook for the segment remains positive as it caters to the industrial segment and rising
industrial activity/infrastructure development aids growth.

Financial analysis
During FY22, SRF reported revenue/EBITDA/PAT CAGR of 20.5%/33.7%/49.8%. EBITDA
margins significantly improved from 18.3%in FY19 to 25.0% in FY22, quantifying a net
increase of 670bps. Despite Covid related challenges, revenues grew by a healthy 48.0% yoy
in FY22, up from Rs84.0bn in FY21 to Rs124.3bn in FY22. EBITDA margins remained largely
stable yoy in FY22. However, revenue growth trickled down to EBITDA which surged 45.5%
yoy at Rs31.0bn in FY22 vs. Rs21.3bn in FY21.
Exhibit 490: Revenue and PAT trend (Rs bn) Exhibit 491: EBITDA (Rs bn)/EBITDA margin (%) trend
124.3
25.0
25.4
84.0 21.0 20.1 20.2
71.0 72.1 18.3
16.2
55.9
45.9 48.2
18.9
12.0
13.0
14.5
21.3
31.0
5.9 9.2
9.6
9.7
9.1
4.3 5.1 4.6
FY22 PAT jumped 57.6% yoy to Rs18.9bn from Rs11.9bn in FY21. Apart from EBITDA growth,
lower interest outgo and higher other income aided PAT growth.
Exhibit 492: Domestic/Exports mix
Domestic Exports
71.7
47.6
33.5 35.5
25.0
20.8 22.3
52.6
31.8 37.5 36.5 36.4
28.2 29.1
SRF’s exports are diversified across geographies without any material concentration in a
particular geography. USA remained the largest export destination in FY22 accounting
11.6% (6.9%) of total revenues.

Exhibit 493: Geographical exports mix (%) Exhibit 494: Region wise revenue split (FY22)
India South Africa Singapore Germany Belgium
USA Thailand Hungary Switzerland 4% Others
Belgium Others Switzerland 23%
7%
100
80 Thailand
3%
60
USA
40 12%
Germany India
20 42%
4%
South
0 Africa
FY16 FY17 FY18 FY19 FY20 FY21 FY22 5%
SRF’s capex momentum has continued over the past few years, including Covid year.
Exhibit 495: Gross Block and capex trend (Rs bn)
Gross block Capex
104.0
94.2
75.1
66.6
58.2
48.4
42.7
18.2
12.8 10.5 13.7 12.0
5.8 6.4

During FY22, the Technical Textile Business (TTB)/Chemical Business (CB)/Packaging Film
Business (PFB)/Other Businesses grew 68.1%/43.8%/45.2%/46.7% on yoy basis. Growth
across all segments was due to increased volumes and higher realisations.
TTB CB PFB Others
3.4
47.8
2.3
5.3 2.8
0.7 4.6 32.9
0.3 26.5 26.0
13.6 14.1 17.8 52.4
17.2 24.5 29.7 36.4
16.4 16.1
19.0 20.1 18.4 20.7 13.6 12.4 20.9
FY16
FY17
FY18
FY19
FY20
FY21
FY22

Technical Textile Business (TTB)

TTB segment, over 2016-22 has grown at a CAGR of 1.6%. In FY22 revenues surged
significantly to Rs20.9bn vis-à-vis 12.4bn in FY21 due to favourable industry dynamics.
Further, EBIT margins too improved 834bps yoy from 14.3% in FY21 to 22.6% in FY22.
Exhibit 497: EBIT margin improvement in TTB from FY22
22.6
13.8 14.4
14.3
12.8 11.2
9.5
19.0
20.1
18.4
20.7
13.6
12.4
20.9
Chemical Business (CB)

CB segment comprises of the specialty chemical business and the fluorospecialty chemical
business. CB segment has grown substantially from Rs16.4bn in FY16 to Rs52.4bn in FY22
thereby growing at a CAGR of 21.4%. EBIT margins between FY16 and FY22 have improved
by 270bps. CB segment EBIT margins improved from 24.0%in FY16 to 26.7% in FY22.
Exhibit 498: Rising revenue and EBIT margin trend
26.7
24.0 20.0
19.0 17.2
16.7 15.7
16.4
17.2
16.1
24.5
29.7
36.4
52.4

Packaging film business (PFB)

PFB segment’s revenue has grown at 23.3% CAGR from Rs13.6bn in FY16 to Rs47.8bn in
FY22. PFB segment revenue growth was propelled due to increased volumes coupled with
higher realisations. EBIT margins in the PFB segment normalised in FY22, declining by
750bps yoy from 27.3% in FY21 to 19.8% in FY22.
Exhibit 499: PFB segment performance
47.8
32.9
26.5 26.0
17.8 27.3 19.8

21.3
13.6 14.1
15.5
14.3 14.3 12.9


Cash flow analysis

SRF’s CF from operations has been positive and risen consistently over FY13-22. Notably,
WC under 50 days is probably the best in the industry despite SRF’s size of operations. SRF’s
FCF generation has been negative due to the consistently rising capex intensity; SRF
invested Rs98bn over FY13-22. Given a combination of speciality and commodity segments,
SRF’s return ratios are lower than comparable chemical industry peers; average pre-tax
RoCE and RoE being 15% and 16%, respectively. Despite negative FCF generations in some
years, SRF has been a consistently dividend paying company.
Exhibit 500: Consistently rising cash flow from operations for the entire period
32,000
24,000
16,000
Rsm
8,000
0
(8,000)
Exhibit 501: Impressive WC control, probably the best in the industry

150
120
90
62
days
55 56
60 40 45 46 43
48 43 33
30
0
Exhibit 502: EBITDA to OCF conversion of 72% over 10 years Exhibit 503: Rising capex intensity affected FCF
120% 100%
100% 50%
80% 0%
-50%
60%
-100%
40%
-150%
20% -200%
0% -250%


Exhibit 504: Leverage consistently going down

Net Debt/Equity 0.6 0.9 0.8 0.6 0.6 0.7 0.7 0.6 0.4 0.4 0.65
Net Debt/EBITDA 1.9 3.9 2.7 1.8 1.9 2.9 2.4 2.2 1.2 1.0 2.19
RoCE pre-tax 14.3% 8.2% 12.8% 15.5% 15.1% 12.3% 14.1% 14.3% 19.4% 24.7% 15.1%
RoCE 10.4% 6.4% 9.7% 11.4% 11.8% 9.8% 10.8% 14.3% 14.4% 18.0% 11.7%
RoIC (pre-tax) 11.9% 6.4% 10.1% 13.9% 12.7% 9.0% 12.3% 12.7% 16.7% 20.4% 12.6%
RoE 13.2% 8.1% 13.9% 17.0% 17.3% 13.7% 15.4% 20.2% 20.3% 24.5% 16.4%
Exhibit 505: DuPont Analysis – Despite lower asset turnover RoE improvement through EBITDA margin expansion
PAT/PBT 0.73 0.78 0.76 0.73 0.78 0.79 0.77 1.00 0.74 0.73 0.78
PBT/EBITDA 0.57 0.41 0.56 0.61 0.68 0.64 0.59 0.63 0.76 0.83 0.63
EBITDA/Revenue 0.16 0.13 0.16 0.21 0.20 0.16 0.19 0.21 0.26 0.25 0.19
RoE 13.2% 8.1% 13.9% 17.0% 17.3% 13.7% 15.4% 20.2% 20.3% 24.5% 16.4%
Exhibit 506: Price movement vs. Financials – Stock returns led by margin expansion, efficient WC mgmt., high OCF/EBITDA
75% 67%
48%
50% 42%
16% 21% 16%

25% 12% 14% 14% 13%
0%
-2%
-13%
-25%
EBITDA Margin*
Gross Margin*
PBT CAGR^
OCF/EBITDA*
FCF/Sales*
NWC (Ex-cash) as a
FCF/OCF*
RoE (Avrg)
PBT Margin*
Stock return
Revenue CAGR^
EBITDA CAGR^
% of revenue

FCF (a) (3,314) (5,484) (428) 3,835 (1,013) (7,084) (3,766) 123 4,097 1,930
FCF yield NA NA NA 6% NA NA NA 0% 2% 0%
Dividend + Buyback (b) 660 667 678 692 829 829 836 969 1,408 2,117
Distribution of FCF (b/a) (20%) (12%) (158%) 18% (82%) (12%) (22%) 787% 34% 110%
Cash & equivalents*/Capital employed 10.1% 2.7% 4.7% 11.2% 5.2% 3.5% 4% 4% 7.1% 6.4%

Valuations
Rising utilisation of the new capacities, new product commercialisations, and favourable
demand environment led to SRF’s strong financial performance over FY20-22 with
Revenue/EBITDA/PAT CAGR of 31.3%/46.0%/43.6%. EBITDA margins too improved from
20.2% in FY20 to 25.0% in FY22.
SRF’s strong capex momentum is expected to continue over the next five years. Due to
strong growth visibility, management has guided Rs35bn capex in FY23E while ~Rs150bn
over FY24-28E. Almost 80%+ capex would be directed towards high growth/high margin CB
segment. We believe capex momentum coupled with demand traction shall help the
company to continuously grow over the next 5-10 years. We expect Revenue/EBITDA/PAT
CAGR of 17.7%/18.2%/18.2% over FY22-25E. We expect some moderation in EBITDA
margins in PFB and TTB segments incrementally.
FY20-22 FY22-25E
CAGR% CAGR%
Revenues 72,094 84,000 1,24,337 1,55,248 1,75,718 2,02,756 31.3 17.7
EBITDA 14,549 21,333 31,032 35,945 43,020 51,263 46.0 18.2
EBITDA % 20.2 25.4 25.0 23.2 24.5 25.3
PAT 9,159 11,983 18,889 21,541 25,805 31,224 43.6 18.2
EPS 30.9 40.4 63.7 72.7 87.1 105.3 43.6 18.2
We like SRF due to its (a) fluorine synthesis capabilities, (b) superior capital allocation, (c)
capex of Rs31-33bn in FY23E and Rs150bn during FY24-28E, and (d) diversification into
adjacencies. We have valued the company with SOTP methodology and initiate with a BUY
SOTP 1HFY25E EBITDA EV/ EBITDA (x) Value (Rs mn)
Technical textiles business (TTB) 4,438 10 44,384
Chemicals business (CB) 29,705 22 653,513
Packaging films business (PFB) 11,909 10 119,094
Others 587 8 4,695
Net Debt 37,243

No. of shares 296
Target price 2,646
Risks
Correction in refgas prices
During FY22, SRF’s refgas revenues almost doubled from Rs8.9bn to Rs17.2bn. Revenue
growth was primarily propelled by strong refgas pricing particularly in the exports market.
If refgas prices start correcting, it will impact revenues and profitability of CB segment.
Demand challenges in PFB impacting margins
SRF has expanded its PFB capacities over the past few years which is also reflected in its
financial performance. During Covid times, packaging films segment was benefitted due to
strong demand from the food packaging amidst demand-supply mismatch. This
phenomenon also benefited PFB EBIDA margins. If demand subsides considerably with
consequent impact on margins, PFB segment performance can impact overall performance.

Story in charts
Exhibit 510: Revenue trend (Rs bn) Exhibit 511: EBITDA (Rs bn)/EBITDA margin (%) trend
202.8 25.3
175.7
155.2 24.5
23.2
124.3
25.4 25.0
21.0 20.1
84.0 18.3 20.2
71.0 72.1 16.2
55.9
45.9 48.2
31.2
21.5 25.8
12.0 18.9
13.0
14.5
21.3
31.0
35.9
43.0
51.3
9.2
9.6
9.7
9.1
4.3 5.1 4.6 5.9
Exhibit 512: Geography wise revenue split (Rs bn) Exhibit 513: Increasing weightage of exports
42.4 43.4 44.0 47.1 49.3 56.7 57.7

71.7
47.6
33.5 35.5
22.3 25.0 57.6 56.6 56.0 52.9
20.8 50.7 43.3 42.3
52.6
28.2 29.1 31.8 37.5 36.5 36.4
Exhibit 514: Region wise revenue split (%) Exhibit 515: FY22 region wise revenue breakup
India South Africa Singapore Germany Belgium
USA Thailand Hungary Switzerland 4% Others
Belgium Others Switzerland 23%
7%
Thailand
3%
USA
12%
Germany India
4% 42%
South Africa
FY16 FY17 FY18 FY19 FY20 FY21 FY22 5%

Exhibit 516: Capex trend (Rs.bn) Exhibit 517: Consistent return ratios (%)
188
162 24%
23% 22% 22%
20% 20%
135
17% 17%
15%
104 14%
94 19%
18% 17% 18%
75
67 14% 14%
58
43 48 11% 12% 11%
31 27 27 10%
13 14 12 18
6 6 11
FY19
FY23E
FY24E
FY25E
FY16
FY17
FY18
FY20
FY21
FY22
Exhibit 518: Declining net debt to equity (x) Exhibit 519: Working capital days
Debtor Days Inventory Days Creditors Days
0.75 0.75
0.64 120 121
0.63 112 114 108
0.59 108 103 101 100
100
0.39 0.36 0.36

0.30
0.21
45 44 44 44 49 47 45 46 48 47
Operational charts
Exhibit 520: Segmental revenue split (Rs bn) Exhibit 521: Technical textile business performance
TTB CB PFB Others Revenues (Rs bn) EBIT %
4.0 22.6
18.6
3.8
67.9
3.6 18.4
60.6 15.8
3.4 54.1
13.8 14.4
47.8 14.3
108.5 2.3 12.8
5.3 2.8
4.6 26.5 26.0
0.7 17.8 75.9 89.5 32.9
9.5 11.2
0.3
13.6 14.1 52.4
16.4 17.2 16.1 24.5 29.7 36.4
19.0 20.1 18.4 20.7 13.6 12.4 20.9 20.4 20.9 21.4
20.9
19.0
20.1
18.4
20.7
13.6
12.4
20.4
20.9
21.4
FY23E
FY24E
FY25E
FY16
FY17
FY18
FY19
FY20
FY21
FY22

Exhibit 522: Chemical business performance Exhibit 523: Packaging film business performance
Revenues (Rs bn) EBIT % Revenues (Rs bn) EBIT %
67.9
25.9
60.6
25.6 54.1
47.8
26.5
26.7
32.9
20.0 26.5 26.0 27.3
24.0 17.2 17.8
19.0 16.7 15.7 13.6 14.1 21.3 19.8
12.8 14.8 15.9
108.5
15.5
52.4
75.9
89.5
14.3 14.3 12.9
16.1
16.4
17.2
24.5
36.4
29.7

Quarterly trend
Revenues 21,008 21,464 26,077 26,994 28,390 33,459 35,494 38,947 37,278 31.3 (4.3)
Q-o-Q gr. (%) 36.0 2.2 21.5 3.5 5.2 17.9 6.1 9.7 (4.3)
Raw Mat. Cons. 9,344 10,073 12,849 13,023 14,157 15,965 15,769 17,826 18,904 33.5 6.0
% of net sales 44.5 46.9 49.3 48.2 49.9 47.7 44.4 45.8 50.7
Purchase of prod. 207 113 189 294 144 450 868 751 626 334.3 (16.7)
% of net sales 1.0 0.5 0.7 1.1 0.5 1.3 2.4 1.9 1.7
Power, fuel, and water 1,897 1,946 2,097 2,318 2,638 3,002 3,398 4,103 3,737 41.6 (8.9)
% of net sales 20.3 19.3 16.3 17.8 18.6 18.8 21.5 23.0 19.8
Employee Costs 1,507 1,579 1,753 1,820 1,777 2,068 2,135 1,942 1,953 9.9 0.5
% of net sales 7.2 7.4 6.7 6.7 6.3 6.2 6.0 5.0 5.2
Exchange currency fluctuation
96 -215 -91 -72 -206 -335 -114 249 361 - 45.1
loss / (gain)
% of net sales 1.0 (2.1) (0.7) (0.6) (1.5) (2.1) (0.7) 1.4 1.9
Others 2,233 2,307 2,846 2,895 3,130 3,496 3,958 4,126 4,007 28.0 (2.9)
% of net sales 10.6 10.7 10.9 10.7 11.0 10.4 11.2 10.6 10.7
EBITDA 5,725 5,661 6,433 6,716 6,750 8,814 9,480 9,950 7,691 14.0 (22.7)
Q-o-Q growth (%) 57.6 (1.1) 13.6 4.4 0.5 30.6 7.6 5.0 (22.7)
EBITDA Margin (%) 27.3 26.4 24.7 24.9 23.8 26.3 26.7 25.5 20.6
Dep. & Amor. 1,140 1,166 1,185 1,230 1,303 1,324 1,316 1,307 1,393 6.9 6.6
EBIT 4,585 4,496 5,249 5,486 5,447 7,490 8,164 8,642 6,298 15.6 (27.1)
Interest exp. 362 285 262 275 234 294 357 325 445 90.4 36.8
Other Income 98 217 130 138 111 107 72 99 327 194.4 232.4
EBT 4,321 4,428 5,117 5,349 5,324 7,303 7,879 8,416 6,181 16.1 (26.6)
Provision for tax 1,164 1,195 1,302 1,396 1,500 2,247 1,996 2,336 1,693 12.9 (27.5)
Eff. tax rate (%) 26.9 27.0 25.4 26.1 28.2 30.8 25.3 27.8 27.4
Net Profit 3,157 3,233 3,815 3,953 3,825 5,055 5,883 6,080 4,488 17.4 (26.2)
Q-o-Q gr. (%) 78.5 2.4 18.0 3.6 (3.2) 32.2 16.4 3.3 (26.2)
PAT Margin (%) 15.0 14.9 14.6 14.6 13.4 15.1 16.5 15.6 11.9
Segments revenue (₹ mn)

Technical textile business (TTB) 3,321 3,670 4,006 4,929 5,579 5,378 4,967 5,710 4,662 (16.4) (18.4)
Chemicals Business (CB) 8,812 9,059 11,526 11,137 11,264 14,283 15,725 17,224 18,302 62.5 6.3
Packaging film business (PFB) 8,329 8,020 9,795 10,413 10,717 12,760 13,902 14,960 13,310 24.2 (11.0)
Others 569 738 777 536 863 900 934 1,056 1,004 16.3 (4.9)
Total 21,030 21,486 26,104 27,015 28,423 33,321 35,527 38,951 37,278 31.2 (4.3)
EBIT
Technical textile business EBIT 502 679 728 1,337 1,328 1,135 914 1,162 629 (52.6) (45.8)
% EBIT 15.1 18.5 18.2 27.1 23.8 21.1 18.4 20.4 13.5
Chemicals Business EBIT 1,744 1,899 2,752 2,223 2,511 4,192 5,043 5,202 5,173 106.0 (0.6)
% EBIT 19.8 21.0 23.9 20.0 22.3 29.4 32.1 30.2 28.3
Packaging film business EBIT 2,462 2,124 2,186 2,368 1,795 2,542 2,758 2,952 1,014 (43.5) (65.6)
% EBIT 29.6 26.5 22.3 22.7 16.7 19.9 19.8 19.7 7.6
Others EBIT 88 83 88 19 58 86 41 68 76 31.1 12.3
% EBIT 15.5 11.2 11.3 3.5 6.7 9.5 4.4 6.4 7.6
Total EBIT 4,796 4,785 5,753 5,947 5,692 7,955 8,757 9,384 6,892 21.1 (26.5)
% EBIT 22.8 22.3 22.0 22.0 20.0 23.9 24.6 24.1 18.5

P&L Balance sheet

Depreciation & Amortisation 4,531 5,172 5,775 7,368 8,677 Non Current Liabilities 1,507 3,402 3,402 3,402 3,402
Interest expenses 1,340 1,159 1,718 2,304 2,229 Total liabilities 103,240 131,224 151,533 173,967 199,008
Other income 664 1,155 347 606 728 Gross block 94,172 104,017 135,017 161,617 188,317
Taxes 4,144 6,966 7,257 8,149 9,860 Net block 74,972 80,505 105,828 125,161 143,287
Cash & Cash Equivalents 2,820 4,594 150 717 4,288
Adj. EPS 30.8 57.6 14.0 19.8 21.0 Net current assets 13,335 26,001 21,036 24,188 31,155
Gross 52.8 51.7 49.9 50.3 50.6
EBITDA 25.4 25.0 23.2 24.5 25.3 Cashflow
ROE 20.3 24.5 22.7 22.5 22.4 Net Interest 1,340 1,159 1,718 2,304 2,229
ROCE 14.4 18.0 17.4 18.1 18.7 Net Change – WC (3,911) (12,067) (478) (2,586) (3,396)
Inventory 121 108 103 101 100 Investments (2,140) 958 1,000 0 0
Creditors 122 111 108 113 111 Others 664 1,155 347 606 728
Solvency (x) FCF (479) (4,129) (1,494) 6,241 11,984
Interest coverage ratio 15.9 26.8 20.9 18.7 23.0 Increase/(decrease) in debt (3,364) 6,086 2,000 500 (1,500)
Net debt/EBITDA 1.2 1.0 1.0 0.9 0.6 Dividend paid (1,413) (2,119) (3,231) (3,871) (4,684)
Per share (Rs) Interest paid (1,340) (1,159) (1,718) (2,304) (2,229)
Adjusted EPS 40.4 63.7 72.7 87.1 105.3 Others 6,716 3,006 0 0 0
BVPS 231.3 289.0 350.7 424.7 514.3 Net cash from financing 607 5,814 (2,949) (5,675) (8,413)
CEPS 278.8 81.2 92.2 111.9 134.6 Net change in Cash 128 1,685 (4,443) 566 3,571
Dividend payout (%) 11.8 11.2 15.0 15.0 15.0
Valuation (x)
P/E 56.4 35.8 31.4 26.2 21.6
P/BV 9.9 7.9 6.5 5.4 4.4
EV/EBITDA 32.9 22.8 19.8 16.6 13.8
Dividend yield (%) 1.0 0.3 0.5 0.6 0.7

Appendix
Technology absorption and R&D
SRF has made consistent efforts over the years across all its segments to imbibe
technological absorption to achieve sustainability and improve efficiencies. The focus has
been predominantly towards automation and improve process stability which will reduce
operational costs and simultaneously improve yields. Technology absorption has been the
key across all segments. Critical focus areas where technological absorption has been
implemented over the years are mentioned below.
Chemical business segment
Building capabilities and exploring novel technologies to develop new age molecules.
Strong emphasis on waste generation minimization and ensuring process safety.
Efforts to create and protect IP.
Invest in the technological advancements, people, and processes, to enhance learnings,
and overall value proposition for the customers.
Augmenting capabilities to cater efficiently from market assessment to meeting
customer needs.
Building process development capabilities to go beyond reported chemistries and
technologies by developing novel processes.
Developing new products and maintaining a robust pipeline of futuristic products.
Technological learnings from new projects, deployed horizontally to enrich overall
delivery.
Technical Textile business
Developing exhaustive variants of polyester industrial yarns as reinforcements in
geotextiles and aramid-based reinforcement fabric for hoses, each tailor-made for the
respective application.
Apart from the developments in existing business space, novel products involving
Nano-technology are also being developed by this center in close association with
leading Academic and Research Institutes in India and abroad for various research
projects.
Working in close collaboration with major customers for joint developments in the field
of tyre cords, belting fabrics and other mechanical rubber good reinforcements.
Maximizing competitiveness of technical textiles business through market oriented
new product/technology development.
Sewage treatment plant having Mixed Bed Bio Reactor (MBBR) technology was
installed & commissioned.
Decanter system installation and commissioning for sludge separation.


Name Details Designation
Arun Bharat Ram stepped down as Executive Chairman and Director of the company at the
close of business hours on March 31, 2022.
Arun Bharat Ram Chairman Emeritus
Arun Bharat Ram joined the Board of the company in 1975 and has been instrumental in
the success of the company over the last five decades.
Chairman & Managing Ashish Bharat Ram is the Chairman & Managing Director of SRF Ltd. Under his leadership,
Ashish Bharat Ram
Director SRF Ltd. has grown into a major global conglomerate.
As Joint MD, Kartik is involved in the creation and strengthening of a performance-based

culture within the organization, through value-based leadership. Kartik has successfully
Kartik Bharat Ram Joint Managing Director
shaped SRF into being a trusted corporate brand – one that is respected for its
commitment to deliver sustainable growth through total excellence.
Vellayan Subbiah is the Managing Director of Tube Investments of India since August 2018.
Non-Executive, Non-
Vellayan Subbiah Vellayan holds a B. Tech in Civil Engineering from IIT Madras and earned a Master’s in
Independent Director
Business Administration from the University of Michigan.
Pramod G. Gujarathi is a B. Tech. (Chemical Engineering) from IIT Bombay and a

Postgraduate in Management Studies from the Bombay University. He has been working
with SRF Limited since 2017 as Director (Safety & Environment), where he is responsible
Director, Safety &
Pramod Gopaldas Gujarathi for compliance with the laws relating to safety, health and environment at the factories of
Environment
the company, present and future. He also discharges such other responsibilities as are
entrusted to him by the Chairman, Managing Director, Deputy Managing Director and/or
the Board, from time-to-time.

Prashant Yadav President & CEO (FCB & TTB)
Prashant Mehra President & CEO (PFB, LF & CF)
Anurag Jain President & CEO (SCB & CTG)
Rahul Jain President & CFO
Sanjay Rao President & CIO
Ajay Chowdhury President & CHRO

Initiating Coverage
India I Chemicals
29 November, 2022
Vinati Organics BUY

Price: Rs2,092
Growth focused, balanced capital allocation Target Price: Rs2,451
We like Vinati Organics (Vinati) for its (a) impeccable R&D/process skills, (b) prudent Market Data
capital allocation, and (c) focus on high margin/niche products. Process, technology, Bloomberg: VO IN
and R&D has been the backbone of Vinati’s business philosophy over the past three 52 week H/L: 2,377/1,674
decades. With a focused approach towards niche chemistries and products, the Market cap: Rs215.0bn
company has, over a period of time, mastered the product manufacturing process Shares Outstanding: 102.8mn
through continuous optimization. Resultantly, Vinati has become the global market
Free float: 25.9%
leader in ATBS (2-Acrylamido-2-Methylpropane Sulfonic Acid) and IBB (Iso butyl
benzene). Financials too reflect its capabilities with above-industry average margins. Source: Bloomberg
Prudent capital allocation has remained forte of Vinati and the company is now
VO relative to Nifty Midcap 100
investing ~Rs6bn over FY23-24E. Rising utilisation of Butyl Phenols, upcoming
commissioning of VAPL, entry into new products through Veeral Organics is expected 130
VINATI ORGANICS
to aid future growth. We estimate FY22-25E Revenue/EBITDA/PAT CAGR of
110
~29%/26%/27%. We initiate coverage on Vinati Organics with a BUY rating and TP of
Rs2,451 (17% upside) valuing the company at 40x FY24-25E avg. EPS of Rs61.3. 90
Strengthening its position in ATBS with capacity expansion to 60,000MT NIFTY Midcap 100
Due to its technology prowess, Vinati became the largest and most competitive player 70
in ATBS globally and its position further strengthened post Lubrizol’s exit from the Source: Bloomberg
market. Based on the growing market demand, the company expanded its ATBS capacity
from 26,000MT in FY18 to 40,000MT, and plans to further expand to 60,000MT by
December 2023 with an outlay of Rs3bn.
Promoter 74.1 74.1 74.1 74.1
Entry into import substitute antioxidant market through VAPL acquisition FIIs 4.8 4.7 4.6 4.5
During FY21, Vinati approved amalgamation of Veeral Additives (VAPL). Notably, Veeral DIIs 8.0 8.1 7.8 7.5
Additives is setting up 24,000MT anti-oxidants (AOs) capacity which is used in polymers Public/other 13.2 13.2 13.6 13.9
applications. Currently, the domestic AO demand is estimated at 10-12,000MT, which is Source: BSE
primarily catered through imports. With VAPL, Vinati will be able to cater to the domestic
demand as well as exports. Importantly, it’s a forward integration for Vinati’s butyl
phenols which are used as RM for anti-oxidants.
Diversification into MEHQ, Guaiacol through Veeral Organics
Vinati, through its subsidiary, Veeral Organics is diversifying into MEHQ and Guaiacol
(2,000MT cap.), Iso Amylene (30,000MT cap.) with an estimated capex of Rs2.8bn. This
new facility is expected to be commissioned by September 2023 and start contributing
to the revenues meaningfully from FY24E onwards.
Valuation and outlook
Efficient capital allocation remained the key for Vinati’s growth. Incrementally too, the
company’s aggressive capex plan of Rs6bn justifies its growth visibility and product
diversification strategy. We believe the company has demonstrated its ability to become
the best operator of its products, continuing margin sustainability. The stock is available
at 38.7x/30.5x FY24E/FY25E EPS of Rs54.1/Rs68.5. We initiate with a BUY rating and TP
of Rs2,451.
Risks – Project execution delays, export demand challenges due to EU/US issues
Revenues 9,543 16,155 22,643 27,912 34,559
EBITDA 3,525 4,341 5,802 7,045 8,595
Rohit Nagraj
Chemicals
Adj. Net profit 2,693 3,466 4,459 5,556 7,039 +91-022-4215 9645
Adj. EPS (Rs) 26.2 33.7 43.4 54.1 68.5
EPS growth (%) (19.3) 28.7 28.6 24.6 26.7
PE (x) 79.8 62.0 48.2 38.7 30.5
EV/EBITDA (x) 61.0 49.6 36.9 30.3 24.6
RoE (%) 19.1 20.6 22.2 23.1 24.2
+91-022-4215 99201
RoCE (%) 19.1 20.5 22.1 22.9 24.1 jay.trivedi@centrum.co.in
Vinati Organics 29 November, 2022
Thesis Snapshot
YE Mar (Rs bn)
FY23E FY23E (%) FY24E FY24E (%) We estimate FY22-25E Revenue/EBITDA/PAT CAGR of ~29%/26%/27%.
Revenue 22,643 21,419 5.7 27,912 26,631 4.8 We initiate on Vinati Organics with a BUY rating and TP of Rs2,451 (17%
EBITDA 5,802 5,834 (0.5) 7,045 7,870 (10.5) upside) valuing the company at 40x FY24-25E avg. EPS of Rs61.3.
PBT 5,961 NA - 7,428 NA -
Valuations Rs/share
PAT 4,459 4,504 (1.0) 5,556 5,841 (4.9)
1HFY25E EPS 61.3
Vinati Organics vs. NIFTY Midcap 100 Target Price 2,451
1m 6m 1 year
VO IN 5.1 2.0 8.8
65
NIFTY midcap 100 1.9 14.2 5.6
Source: Bloomberg, Centrum Broking 55
45
Key assumptions
35
25
Revenue growth (%) 40.2 23.3 23.8
EBITDA Margin (%) 25.6 25.2 24.9 15
Source: Centrum Broking 5
May-18
May-19
May-20
May-21
May-22
Nov-17
Nov-18
Nov-19
Nov-20
Nov-21
Nov-22
P/E Mean
50
40
30
20
10
0
May-18
May-19
May-20
May-21
May-22
Nov-17
Nov-18
Nov-19
Nov-20
Nov-21
Nov-22
(10)
EV/EBITDA Mean
Peer comparison
Company
Atul Ltd. 242.1 16.8 21.2 19.4 37.9 28.9 23.5 24.6 18.4 15.0 14.6 14.2 0.3
Deepak Nitrite 287.6 13.7 12.4 14.2 32.1 21.1 18.0 21.1 14.3 12.1 37.5 33.5 0.3
SRF 675.5 17.7 18.2 18.2 31.2 26.0 21.5 19.7 16.5 13.7 24.5 18.0 0.3
Vinati Organics 215.0 28.8 25.6 26.6 48.4 38.8 30.7 37.1 30.4 24.7 20.6 20.5 0.0

Company overview
Vinati Organics is a niche specialty chemicals manufacturer, with a strong focus on process
capabilities. Over a period of time, it has optimized its manufacturing processes in such a
way that is has become the most cost efficient and the largest manufacturer globally for Iso
butyl benzene (IBB) and 2-Acrylamido-2-Methylpropane Sulfonic Acid (ATBS). Process,
technology, and R&D remain the backbone of Vinati’s business philosophy since its
inception about three decades ago. Due to its niche focus, the company has grown from a
single product manufacturer to an integrated player, offering multiple products to some of
the largest companies across the US, Europe, and Asia.
Segment Product Applications
Iso butyl benzene/ IBB, N-Butyl Benzene or NBB, Secondary

Butyl Benzene (SBB), Tertiary Amyl Benzene or TAB has the Pharmaceutical speciality solvent paint & coatings,
Specialty Aromatics
chemical formula C11H16, 3-Phenylpentane, C10 Aromatic agrochemicals catalysts electronics perfumery
solvent, 4-Butylaniline
2-Acrylamido 2-Methyl propane sulphonic acid (atbs), Sodium

Construction, water treatment, textile, adhesives and paint &
salt of 2-Acrylamido-2-Methylpropane sulphonic acid (naatbs),
Specialty Monomers paper coating personal care, paper, metal adhesives, personal
n-Tertiary butyl acrylamide (tba), n-Tertiary octyl acrylamide
care, antiscalants
(toa)
Ortho tertiary butyl phenol (otbp)/2 Tert butylphenol, para

Perfumery Resins Polycarbonate Agrochemicals Plastic
Butyl Phenols tertiary butyl phenol (ptbp)/ 4 Tert butyl phenol, 2, 4 di tert
Additives Antioxidant Dyestuff
butylphenol (2 4 dtbp), 2, 6 di tert butylphenol (2 6 dtbp)
Isobutylene, Methanol, High purity Methyl Tertiary Butyl Ether, Pharmaceutical agrochemicals speciality solvent paint &
Other Specialty Products Tertiary Butylamine, Para tertiary butyl Benzoic Acid, Methyl 4- coatings, agrochemicals, tyre industry rubber, crop protection,
Tertiary butyl benzoate, Mixed Hexene personal care, PVC stabilizers, alkyd resins
Miscellaneous Polymers Vintreat Polymer, Vinplast245, Vinflow HT Construction, ceramics, oil drilling, mining, leather and paper
Veeral Additives Pvt. Ltd. Veenox 1010, Veenox 1076, Veenox 168, Veenox 1300 Primary/Secondary antioxidant for polymers
Key products and their characteristics

ATBS, specialty monomer – Plays a key role in chemical reaction (polymerization) and
is used across wide applications like water treatment, paper processing, mineral
sequestering, textile processing, personal care products, pharmaceuticals, petroleum
production, enhanced oil recovery, etc. ATBS contributes up to 50% of Vinati’s revenue
mix.
IBB – A colourless, flammable chemical compound that is widely used as a basic RM in
the pharmaceutical and perfume industries. Owing to its technology prowess in process
improvement and optimisation, Vinati currently enjoys ~65% market share in both
ATBS and IBB and is a global leader.
Speciality aromatic chemicals, also known as Effect Chemicals – Industrial sector
heavily relies on these chemicals for various applications across varied industries.
Sectors in which the specialty aromatics are utilised include - flavors, food additives,
fragrances, cosmetic additives, etc. Other industrial uses of these chemicals include
applications in aerospace, food, cosmetics, agriculture, manufacturing, automotive,
and textiles.
Speciality monomers – Chemical intermediates responsible for designing unique
polymer structures. They are used in applications such as water treatment, paper
processing, mineral sequestering, textile processing, personal care products, etc.
Butyl Phenols – Class of different compounds manufactured by reaction of phenols
with isobutylene. Butyl Phenols have application in agriculture, automotive care, fuels,
lubricants, fragrance, producing plasticizers, resins, etc.
MEHQ, Guaiacol & Iso Amylene – Vinati, through its subsidiary, Veeral Organics is
diversifying into MEHQ and Guaiacol.

Exhibit 528: Key user industries
Vinati has two state-of-the-art manufacturing facilities in Maharashtra located at Mahad
and Lote. These facilities are equipped with advanced technologies and adhere to green
practices to minimize environmental footprints.
Exhibit 529: Manufacturing facilities
Mahad plant is the old plant established in 1989 and houses the IBB product along with the
quality unit. Lote plant, relatively newer one, established in 2002 manufactures ATBS and
IB. Both the facilities are certified with ISO 9001:2015, ISO 14001:2015, ISO 45001:2018
certifications.
R&D capabilities
Vinati is known for its strong R&D and process development capabilities. Hence, for a long
period of time, the company concentrated its efforts to optimize its products so that it can
become the lowest cost producer globally. Consequently, it became a market leader in
those products. Its R&D investment is aimed at modifying the use of catalysts, equipment,
processes, and operating parameters to achieve high purity standards. Simultaneously, the
company is also investing in green chemistry/sustainable technologies to minimize the
impact of climate change.
Vinati’s R&D prowess can be exemplified by its product purity standards which exceed the
global benchmark.
ATBS – Purity tolerance of ~0.5%, as against an accepted global tolerance level of ~3%
IBB – 99.7% purity standard, which is among the highest in the world
IB – 99.85% purity standard, which is among the highest in the world
HP-MTBE – 99.97%, generally accepted as one of the highest in the world

Exhibit 530: Vinati Organics – Growth Journey
ATBS capacity expanded to 40000 MT 2021
2020 Butyl Phenol project commissioned
IBB plant expanded to 25000MT capacity 2018
2016 Tertiary Butyl Amine and aligning product plant
ATBS capacity expanded to 26000 MT 2013
2011 Started HP MTBE production with 7000MT
Started Isobutylene production with 12000MT 2010
Vinati Organics Ltd. (VOATBS capacity expanded to 12000 MT

2009 and TBA capacity expanded to 500MTL) got incorporated
2007 Started nTBA production
IBB plant expanded to 10,000MT capacity and ATBS

capacity expanded to 3600 MT
2006
2002 ATBS plant setup at Lote with 1000MT capacity
1996 IBB plant expanded to 3000MT capacity
IBB plant setup at Mahad with 1200MT capacity 1992
1989 Vinati Organics Ltd. (VOL) got incorporated

Incremental growth fueled through efficient capital allocation
ATBS capacity expansion on cards
Historically, Vinati’s growth was fueled from capacity expansions aligned with market
demand. The company has exemplified its technology prowess by gaining global market
share and moving to the market leadership position in ATBS and IBB.
Vinati has been working on Para Amino Phenol (PAP), a precursor to paracetamol since
more than a decade. However, due to unsatisfactory results from its pilot studies, the
company has not commercialized the project. Unless, the results from this project are
better than the existing market technologies, the company is not going ahead with the
project. This exemplifies the company’s commitment towards excellence.
Based on market demand for ATBS, Vinati has planned to invest Rs3bn to expand ATBS
capacity from current 40,000MT to 60,000MT. This shall enhance its global market
leadership in the product.
Exhibit 531: ATBS and IBB capacity expansion
ATBS IBB
60,000
40,000
26,000 25,000
25,000
14,000 14,000
10,000 12,000
5,000
3,600
1,000

Forward integration into anti-oxidants through Veeral Additives

amalgamation
During FY21, Vinati approved amalgamation of Veeral Additives (VAPL) with itself. Veeral
Additives is setting up 24,000MT capacity to manufacture three anti-oxidants, AO-1010, AO-
1076, and AO-168 along with an intermediate with capacity of 16,000MT.
Global AO demand is estimated at ~300,000MT and is expected to grow at 2-3% p.a. BASF,
Songwon, SI Group, Addivant, Adeka, Jiyi, Richyu, Everspring, Kaoching are the leading
manufacturers of Antioxidants globally. BASF is the global leader for antioxidants followed
by Songwon, Korea.
Currently, domestic demand of 10-12,000MT is primarily catered from imports. Although
global growth rate for AOs is relatively lower, domestic growth rate would be higher than
global growth rate as new polymer capacities are coming up in India and these AOs are used
in polymer applications.

Exhibit 532: Antioxidants capacity (MTPA)
Intermediate 16,000
AO-168 8,000
AO-1010, AO-1076 16,000
0 5000 10000 15000 20000
New product diversification through Veeral Organics

Vinati has incorporated a wholly owned subsidiary, Veeral Organics to introduce new
products catering to niche segments. Initially, with an investment of Rs2.8bn, the company
is venturing into MEHQ & Guaiacol, 2,000MT capacity together and Iso Amylene 30,000MT
capacity.
Exhibit 533: Guaiacol price and volume trend
Qty (MT) Price (USD/PMT)
6000
5,159
4,976 4,865 4,867
4,735 4,598
5000 4,393
4000
3000
2000 1,554 1,553

1,277
1,091 920 988 1,027
1000
0
These products are used in polymerization inhibitors, flavors, fragrances, pharmaceuticals

and agrochemicals. The plant is expected to be commissioned by September 2023. Revenue
contribution from these new products will start meaningfully from FY25E onwards. Revenue
potential from these products is estimated at ~Rs3.5bn with 25-30% EBITDA margins. Due
to lower tax rate for this facility, profitability will be better for the subsidiary.
Debt free balance sheet provides further opportunity to raise

capex
Vinati’s capex plan has always been in line with demand growth. Despite diversification into
butyl phenols, the company’s balance sheet has been virtually debt-free since FY15. During
FY23-24E, the management has guided Rs6bn capex. We believe that with diversification
and new opportunities emanating from import substitution space, additional capex cannot
be ruled out. The balance sheet is well poised to cater to any large capex. Nonetheless, the
capex momentum is expected to continue even post FY24E.

Exhibit 534: Capex trend (Rs bn)

Gross block Capex
19.6
16.6
13.6
10.6
8.5 9.0
4.8 5.0 5.4

4.8
3.0 3.0 3.0
2.1 1.7
0.8 1.0 1.4 0.8
0.5

Financial analysis
During FY19-22, Vinati Organics reported revenue/EBITDA/PAT CAGR of 13.4%/2.5%/7.1%.
EBITDA margins declined 1,330bps from 40.2% in FY19 to 26.9% in FY22. The company
reported 69.3% yoy increase in revenues in FY22 owing to higher product realisations,
however due to increased product pricing EBITDA margins were impacted.
16.2 40.2
36.4 36.9
32.8 33.9
11.1 27.0 26.9

10.3
9.5
7.3
6.3 6.4
2.8 3.3 3.5

2.7
1.3 1.4 1.4 4.0 4.1 3.5 4.3
2.1 2.2 2.0
Vinati’s financial performance was impacted in FY21 due to Covid related challenges
However, performance recovered in FY22 with EBITDA and PAT increase of 26.9% and 20.7%
respectively.
Exhibit 537: Domestic/ Exports mix
Domestic Exports
11.0
8.1
7.5 6.4
5.3
3.9 4.7
5.1
2.3 2.2 3.0 2.6 3.0
1.9

Due to global leadership in its products, Vinati’s revenues have been skewed towards
exports. Thus the company garners more than 2/3rd of its revenues from the exports
market.
Vinati’s capital allocation has been prudent and only when the company exhibits strong
growth visibility. This has led to efficient use of capital and capexes directed only towards
niche, high margin, and high growth products. Recent capex trend has been towards
capacity enhancements of existing products and entry into butylated phenols segment.

Exhibit 538: Capex accelerated in FY22

Gross block Capex
10.6
9.0
8.5
5.4
4.8 4.8 5.0
2.1 1.7
1.4
0.8 1.0 0.8
0.5

Cash flow analysis

Vinati’s OCF has been consistently positive despite WC stress, particularly pronounced in
recent years keeping the avg. WC days above ~110 days. OCF to FCF conversion is healthy
due to intermittent large capex. Vinati utilised its CFs for deleveraging over the years.
Consistently positive cash flows, however lower OCF due to WC stress over the past 3-4
years.
Exhibit 539: Stable Operating cashflow
5,000
4,000
3,000
2,000
Rsm
1,000
0
(1,000)
(2,000)
(3,000)
Exhibit 540: WC stress increased in recent years

150 135
112 108
120 105 106 104
105 91
84 90
90
days
60
30
0
Exhibit 541: EBITDA to OCF conversion of 66% over 10 years Exhibit 542: Healthy OCF to FCF conversion over 10 years
120% 100%
100%
75%
80%
50%
60%
40% 25%
20% 0%
0%
-25%
FCF/ OCF (%) Aggregate
OCF/EBITDA (%) Aggregate -50%
Due to incremental products with low margins and asset turnover, RoEs have trended lower
in recent years. However, due to healthy P&L growth, continuous deleveraging, and robust
return ratios, Vinati has delivered stock returns of 49% CAGR over the decade.

Exhibit 543: Consistently low leverage, declining return ratios due to incremental products with lower margins
Net Debt/Equity 0.7 0.3 0.0 (0.1) (0.0) 0.0 (0.0) (0.0) (0.0) 0.0 0.1
Net Debt/EBITDA 1.4 0.5 0.1 (0.3) (0.0) 0.1 (0.0) (0.1) (0.0) 0.0 0.2
RoCE pre-tax 29.2% 33.6% 40.5% 37.8% 33.5% 27.4% 45.7% 36.5% 23.7% 26.5% 33.4%
RoCE 19.5% 22.5% 27.0% 26.6% 22.8% 19.4% 30.3% 28.7% 19.1% 20.5% 23.6%
RoIC (pre-tax) 25.4% 32.5% 35.9% 35.3% 25.5% 19.5% 33.0% 29.3% 19.1% 20.1% 27.6%
RoE 32.1% 31.3% 31.1% 27.0% 23.0% 19.5% 30.6% 28.6% 19.1% 20.6% 26.3%
Exhibit 544: DuPont Analysis – Lower asset turnover impacting RoEs

PAT/PBT 0.67 0.67 0.67 0.71 0.68 0.71 0.66 0.79 0.80 0.77 0.71
PBT/EBITDA 0.85 0.84 0.90 0.90 0.95 1.03 1.05 1.03 0.95 1.03 0.95
EBITDA/Revenue 0.22 0.22 0.25 0.33 0.34 0.27 0.36 0.40 0.37 0.27 0.30
RoE 32.1% 31.3% 31.1% 27.0% 23.0% 19.5% 30.6% 28.6% 19.1% 20.6% 26.3%
Exhibit 545: Price movement vs. Financials – Healthy P&L growth with high avg. RoEs aided robust stock returns
75% 65%
50% 49%
50% 42%
31% 30% 28% 26%
25% 14% 16% 19%
8%
0%
PBT CAGR^
Gross Margin*
EBITDA Margin*
NWC (Ex-cash) as a
RoE (Avrg)
FCF/Sales*
OCF/EBITDA*
FCF/OCF*
PBT Margin*
Stock return
Revenue CAGR^
EBITDA CAGR^
% of revenue
Exhibit 546: Effective FCF utilization – Consistent dividend payouts

FCF (a) (269) 1,014 542 921 335 985 (1) 2,850 1,394 (439)
FCF yield NA 14% 3% 4% 1% 2% NA 3% 1% NA
Dividend + Buyback (b) 80 142 145 217 35 32 278 1,046 55 618
Distribution of FCF (b/a) (30%) 14% 27% 24% 11% 3% (28817%) 37% 4% (141%)
Cash & equivalents*/Capital employed 10.5% 10.5% 6.3% 13.5% 9.8% 16.9% 9.5% 22% 12.1% 0.2%

Valuations
Vinati’s FY21 performance was impacted due to lacklustre demand for its products due to
Covid. However, performance improved substantially in FY22 with significant ~70% yoy
growth in revenues supported from volume growth and more from pricing increase (owing
to RM increase). Further, FY21 being a transition year, the operating performance remained
muted despite top-line growth. The company reported FY20-22 revenue/EBITDA/PAT CAGR
of 25.3%/2.4%/1.9%. EBITDA margins optically look depressed; however, the company was
able to maintain the per kg margins.
We believe Vinati’s future growth would be driven primarily from volumes supported by
rising utilisation of butyl phenols and contribution from Veeral Additives. Thus, we expect
Revenue/EBITDA/PAT CAGR of 28.8%/25.6%/26.6% over FY22-25E. We expect EBITDA
margins to hover at ~25%.
FY20-22 FY22-25E
CAGR% CAGR%
Revenues 10,289 9,543 16,155 22,643 27,912 34,559 25.3 28.8
EBITDA 4,139 3,525 4,341 5,802 7,045 8,595 2.4 25.6
EBITDA % 40.2 36.9 26.9 25.6 25.2 24.9
PAT 3,338 2,693 3,466 4,459 5,556 7,039 1.9 26.6
EPS 32.5 26.2 33.7 43.4 54.1 68.5 1.9 26.6
We like Vinati due to its (a) impeccable R&D/process skills, (b) prudent capital allocation,
and (c) focus on high margin/niche products. We believe the company’s technology driven
product selection would aid incremental growth while holding up its margins. We have
valued the company at 40.0x avg. FY24-25E EPS of Rs61.3. We initiate with a BUY rating and
TP of Rs2,451 (17% upside).
Risks
Project execution
Vinati is currently executing three different projects including VAPL, ATBS expansion, and
greenfield Veeral Organics project. ATBS capacity is currently utilized almost fully and hence
incremental volume growth is expected from upcoming expansion. A large part of Vinati’s
revenue growth over FY22-25E is dependent on VAPL and Veeral Organics commissioning.
So, any project execution delays may hamper growth trajectory.
Demand slowdown in exports market
Vinati derives more than 2/3rd of its sales from exports. Any demand slowdown in
Europe/US can impact overall sales.

Story in charts
Exhibit 548: Revenue and PAT trend (Rs bn) Exhibit 549: EBITDA margins (%) to stabilise
34.6
40.2
27.9 36.4 36.9
32.8 33.9
22.6 27.0 26.9 25.6 25.2
24.9
16.2
11.1 10.3
9.5
6.3 6.4 7.3 7.0 8.6
4.5 5.6 5.8 7.0
2.8 3.3 2.7 3.5 4.0 4.1 3.5 4.3
1.3 1.4 1.4 2.1 2.2 2.0
11.0 63.0 68.4 68.5

71.0 70.9 73.4 73.9
8.1
7.5 6.4
3.9 4.7 5.3
5.1 37.0 31.6 31.5
29.0 29.1 26.6 26.1
2.3 1.9 2.2 3.0 2.6 3.0
Exhibit 552: Rising capex trend (Rs bn) Exhibit 553: Healthy return ratios
Gross block Capex
ROE ROCE
19.6
30.3
28.7
16.6 26.6
24.1
13.6 22.8 30.6
28.6 22.1 22.9
27.0 19.4 19.1 20.5
10.6 24.2
9.0
23.0 22.2 23.1
8.5 19.5 20.6
19.1
4.8 4.8 5.0 5.4
3.0 3.0
2.1 1.7 3.0
0.8 1.0 0.5 1.4 0.8
Exhibit 554: Stable net working capital days

92
79 79 83
78 73 73
71 73 69
57 55 55
46 46 47
41 38
33
27

Quarterly trend
Revenues 2,194 2,235 2,798 3,864 3,741 3,690 4,861 5,063 5,663 51.4 11.8
Q-o-Q gr. (%) (5.2) 1.8 25.2 38.1 (3.2) (1.4) 31.7 4.2 11.8
Raw Mat. Cons. 880 1,007 1,142 2,140 1,904 1,884 2,621 2,757 3,113 63.5 12.9
% of net sales 40.1 45.0 40.8 55.4 50.9 51.1 53.9 54.5 55.0
Purchase of finished goods 0 0 0 0 58 0 0 0 0
% of net sales 0.0 0.0 0.0 0.0 1.6 0.0 0.0 0.0 0.0
Employee Costs 181 184 177 209 212 215 205 232 231 9.1 (0.2)
% of net sales 8.2 8.3 6.3 5.4 5.7 5.8 4.2 4.6 4.1
Power And Fuel 0.0 0.0 0.0 240.0 0.0 0.0 347.1 399.6 453.3
% of net sales 0.0 0.0 0.0 0.1 0.0 0.0 0.1 0.1 0.1
Others 293 323 488 260 557 664 300 366 380 23.3 4.0
% of net sales 13.3 14.4 17.4 6.7 14.9 18.0 6.2 7.2 6.7
EBITDA 841 721 991 1,015 1,010 928 1,388 1,309 1,485 47.0 13.4
Q-o-Q growth (%) (13.4) (14.3) 37.5 2.4 (0.5) (8.2) 49.6 (5.7) 13.4
EBITDA Margin (%) 38.3 32.3 35.4 26.3 27.0 25.1 28.6 25.8 26.2
Dep. & Amor. 108 108 107 110 113 115 117 128 130 15.7 1.7
EBIT 734 613 884 905 897 813 1,271 1,181 1,354 50.9 14.7
Interest exp. 0 0 1 0 0 0 2 5 0 135.6 (97.7)
Other Income 14 93 66 176 136 146 151 187 200 47.4 6.8
EBT before excp. 747 706 949 1,081 1,033 958 1,420 1,363 1,554 50.4 14.0
Exceptional Items 0 0 0 0 0 0 0 0 0
EBT after excp. 747 706 949 1,081 1,033 958 1,420 1,363 1,554 50.4 14.0
Eff. tax rate (%) 17.0 9.2 25.3 25.1 21.3 13.2 28.8 25.7 25.3
Net Profit 620 641 709 809 813 832 1,011 1,012 1,160 42.6 14.6
Q-o-Q gr. (%) (14.2) 3.4 10.5 14.2 0.5 2.3 21.5 0.1 14.6
PAT Margin (%) 28.1 27.6 24.7 20.0 21.0 21.7 20.2 19.3 19.8

P&L Balance sheet

Employee cost 726 840 991 1,189 1,427 Shareholders fund 15,434 18,280 21,847 26,292 31,923
EBITDA 3,525 4,341 5,802 7,045 8,595 Total debt 20 184 184 184 184
Depreciation & Amortisation 429 455 561 701 840 Non Current Liabilities 60 45 45 45 45
Other income 258 609 731 1,096 1,645 Gross block 8,995 10,603 13,603 16,603 19,603
Taxes 659 1,026 1,502 1,872 2,346 Net block 7,557 8,719 11,175 13,495 15,680
Effective tax rate (%) 19.7 22.8 25.2 25.2 25.0 Capital WIP 547 515 515 515 515
Recurring PAT 2,693 3,466 4,459 5,556 7,039 Investments 1,078 935 935 935 935
Cash & Cash Equivalents 68 43 795 1,618 3,426
Growth (%) Trade payables 664 1,146 2,076 2,582 3,226
Revenue (7.3) 69.3 40.2 23.3 23.8 Other current liab. 331 289 289 289 289
EBITDA (14.8) 23.1 33.7 21.4 22.0 Provisions 47 54 54 54 54
Adj. EPS (19.3) 28.7 28.6 24.6 26.7 Net current assets 5,508 6,271 7,374 9,495 12,941
Gross 59.4 46.7 45.0 44.5 44.0
EBITDA 36.9 26.9 25.6 25.2 24.9 Cashflow
Returns (%) Depreciation & Amortisation 429 455 561 701 840
ROE 19.1 20.6 22.2 23.1 24.2 Net Interest 2 3 11 13 14
ROCE 19.1 20.5 22.1 22.9 24.1 Net Change – WC (499) (362) (351) (1,297) (1,638)
ROIC 15.3 15.5 17.7 18.4 19.6 Direct taxes (585) (905) (1,502) (1,872) (2,346)
Creditors 57 38 47 55 55 Others 258 609 731 1,096 1,645
Net working capital 211 142 119 124 137 Net cash from investing (467) (975) (2,294) (1,929) (1,380)
Solvency (x) FCF 1,974 2,098 1,655 1,947 3,230
Interest coverage ratio 1,663.6 1,677.9 525.6 540.3 612.2 Increase/(decrease) in debt 17 164 0 0 0
Net debt/EBITDA 0.0 0.0 (0.1) (0.2) (0.4) Dividend paid (51) (668) (892) (1,111) (1,408)
Adjusted EPS 26.2 33.7 43.4 54.1 68.5 Others (2,458) (1,650) 0 0 0
BVPS 150.2 177.9 212.6 255.8 310.6 Net cash from financing (2,495) (2,157) (903) (1,124) (1,422)
CEPS 30.4 38.1 48.8 60.9 76.7 Net change in Cash (520) (59) 752 823 1,808
Dividend payout (%) 32.4 1.5 15.0 16.1 15.8
Valuation (x)
P/E 79.8 62.0 48.2 38.7 30.5
P/BV 13.9 11.8 9.8 8.2 6.7
EV/EBITDA 61.0 49.6 36.9 30.3 24.6
Dividend yield (%) 0.4 0.0 0.3 0.4 0.5

Appendix
R&D and Technology
The technologies for the production of IBB, ATBS, IB and other products have been
commercialized and further upgraded over the years through in-house innovation and
knowledge engineering to achieve better material and energy efficiencies.
Complete understanding of the technology has helped the company to identify, implement
and successfully achieve schemes for recovering by-products such as:
Pure NBB at Mahad unit
ATFE Bottom Polymers from manufacturing Tertiary Butyl Acrylamide at Lote unit
Better process knowledge and simulation has facilitated achievement of higher production
volumes, quality improvement, and energy conservation. Through ongoing R&D efforts
towards product innovation and improved quality, Vinati has achieved significant
milestones such as:
ATBS product successfully achieved a high purity standard with a purity tolerance of
~0.5%, as against an accepted global tolerance level of ~3%
IBB product achieved a 99.7% purity standard, which is among the highest in the world
IB product achieved a 99.85% purity standard, which is among the highest in the world
HP-MTBE product achieved a purity standard of 99.97%, generally accepted as one of
the highest in the world

Mr. Vinod Saraf is the founder of Vinati Organics Ltd. He has over 50 years of experience in the Indian
chemical industry. Prior to VOL he was associated with Bhilwara Group, Modern Syntex (I) Ltd. and
Mr. Vinod Banwarilal Saraf Executive Chairman
Grasim Industries and was nominated as the MD of Mangalore Refinery & Petrochemicals Ltd. (MRPL).
He was recently awarded the 2019 HURUN India Selfmade Entrepreneur of the year.
Ms. Vinati Saraf joined VOL in 2006. She holds a Bachelor’s of Science in Economics (Finance) from The
Wharton School and Bachelors in Applied Science from the School of Engineering (University of
Ms. Vinati Saraf Mutreja Managing Director & CEO Pennsylvania). She has over 16 years of experience in the managerial team at VOL and manages the
Marketing, Finance & Operation functions at Vinati Organics Ltd. She is named in the World Economic
Forum’s Young Global Leader’s list and was also featured in Forbes Asia’s Power Businesswomen list.
Ms. Viral Saraf Mittal holds a Bachelor’s of Science degree in Economics (Finance and Management)
from The Wharton School, University of Pennsylvania. She has volunteered at reputed non-profit
Ms. Viral Saraf Mittal Director
organizations like Pratham and Dasra and brings her rich knowledge of the social sector to VOL’s CSR
activities. She is also a Partner and a Volunteer at Social Venture Partners (SVP) Mumbai chapter.
Bachelor of Engineering (Chemical) and Master in Management Studies (Operation) from Mumbai
Mr. Jayesh Ashar Director
University having about 30 years of experience mostly in chemical plants.
Name Designation
Ms. Vinati Saraf Mutreja CEO
Mr. N.K. Goyal CFO
Mr. Milind Wagh Company Secretary
Mr. Jayesh Ashar Director- Operations
Mr. Kaviraj Devaraj GM- Corporate Finance
Mr. Amit Thanawala Sr. VP Marketing

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Add – The stock is expected to return 5-15%.
Reduce – The stock is expected to deliver -5-+5% returns.
Sell – The stock is expected to deliver <-5% returns.
Aarti Industries Anupam Rasayan Atul Ltd

1200 1550 15000
1050 10000
700
550 5000
200 50 0
Nov-1 9 May-20 Nov-2 0 May-21 Nov-2 1 May-22 Nov-2 2 Mar-21 Jul-21 Nov-2 1 Mar-22 Jul-22 Nov-2 2 Nov-1 9 May-20 Nov-2 0 May-21 Nov-2 1 May-22 Nov-2 2
Aarti Industries Ltd Anupam Ras ayan India Ltd Atul Ltd
Deepak Nitrite Galaxy Surfactants Gujarat Fluorochemicals
3200 4200 6200
3200
2200 4200
2200
1200 2200
1200
200 200 200

Nov-1 9 May-20 Nov-2 0 May-21 Nov-2 1 May-22 Nov-2 2 Nov-1 9 May-20 Nov-2 0 May-21 Nov-2 1 May-22 Nov-2 2 Nov-1 9 May-20 Nov-2 0 May-21 Nov-2 1 May-22 Nov-2 2
Deepak Nitrite Ltd Galaxy Surfactants Ltd Gujarat Fluorochemicals Ltd
Navin Fluorine International SRF Ltd. Vinati Organics
6200 3200 15200
4200 2200 10200
2200 1200 5200
200 200 200

Nov-1 9 May-20 Nov-2 0 May-21 Nov-2 1 May-22 Nov-2 2 Nov-1 9 May-20 Nov-2 0 May-21 Nov-2 1 May-22 Nov-2 2 Nov-1 9 May-20 Nov-2 0 May-21 Nov-2 1 May-22 Nov-2 2
Navin Fluorine International Ltd SRF Ltd Vinati Organics Ltd
Source: Bloomberg

Disclosure of Interest Statement

1 Business activities of Centrum Broking Centrum Broking Limited (hereinafter referred to as “CBL”) is a registered member of NSE (Cash, F&O and Currency Derivatives
Limited (CBL) Segments), MCX-SX (Currency Derivatives Segment) and BSE (Cash segment), Depository Participant of CDSL and a SEBI registered
Portfolio Manager.
2 Details of Disciplinary History of CBL CBL has not been debarred/ suspended by SEBI or any other regulatory authority from accessing /dealing in securities market.
3 Registration status of CBL: CBL is registered with SEBI as a Research Analyst (SEBI Registration No. INH000001469)
Navin
Aarti Anupam Atul Deepak Galaxy Gujarat SRF Vinati
Fluorine
Ind. Rasayan Ltd Nitrite Surfactants Fluorochem Ltd. Organics
International
Whether Research analyst’s or relatives’ have any financial interest in the subject company and
4 No No No No No No No No No
nature of such financial interest
Whether Research analyst or relatives have actual / beneficial ownership of 1% or more in securities
5 of the subject company at the end of the month immediately preceding the date of publication of the No No No No No No No No No
document.
6 Whether the research analyst or his relatives has any other material conflict of interest No No No No No No No No No
Whether research analyst has received any compensation from the subject company in the past 12
months and nature of products / services for which such compensation is received
Whether the Research Analyst has received any compensation or any other benefits from the subject
company or third party in connection with the research report
9 Whether Research Analysts has served as an officer, directoror employee of the subject company No No No No No No No No No
10Whether the Research Analyst has been engaged in market making activity of the subject company. No No No No No No No No No
Whether it or its associates have managed or co-managed public offering of securities for the subject
company in the past twelve months;
Whether it or its associates have received any compensation for investment banking or merchant
banking or brokerage services from the subject company in the past twelve months;
Whether it or its associates have received any compensation for products or services other than
13investment banking or merchant banking or brokerage services from the subject company in the past No No No No No No No No No
twelve months;
Member (NSE and BSE). Member MSEI (Inactive)
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Depository Participant (DP)

CDSL DP ID: 120 – 12200
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Research Analyst
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Thematic - Chemicals - Centrum 29112022-1

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Rohit Nagraj Jay Bharat Trivedi

Centrum Institutional Research 2

Exhibit 1: Key financials of companies

Exhibit 2: Valuation details of companies

Centrum Institutional Research 3

chemical companies benefitted from Global MNCs diversification of sourcing which is 110 NIFTY 50

regulatory compliances, favourable policy measures, strong technical/ synthesis 80

India Chemicals benefitted since 2015, to continue further

Centrum Institutional Research 5

Exhibit 3: Indian Chemicals Landscape

Chlor-Alkali Pesticides Agri Inputs/ Seeds Aksharchem Aarti

Centrum Institutional Research 6

Exhibit 4: Companies with Key Chemistries/ Segments

PVC Chemplast Sanmar

Rubber Chemicals NOCIL

Centrum Institutional Research 7

India Chemicals benefitted since 2015, to

Centrum Institutional Research 8

Indian chemical industry growth reflected

Centrum Institutional Research 9

Policy changes in China impacting chemical

Chinese chemical industry is expected to face challenges due to government focus on

Centrum Institutional Research 10

Levers for continued growth of Indian

Source: India Chem 2021

Centrum Institutional Research 11

Exhibit 10: Major petrochemical projects under implementation

Source: India Chem 2021

Exhibit 11: Major petrochemical projects under consideration

Source: India Chem 2021

India 60 India 0.12

Centrum Institutional Research 12

Source: India Chem 2021

Centrum Institutional Research 13

Exhibit 16: Policy initiatives for Chemical industry

Source: India Chem 2021

Source: India Chem 2021

Centrum Institutional Research 14

Impending Free Trade Agreement (FTA) with EU

Exhibit 19: Limited coverage Preferential Trade Agreements (PTAs)

Centrum Institutional Research 15

Fluorine – Aspirational Chemistry

Centrum Institutional Research 16

Exhibit 20: Fluorine applications

Exhibit 21: Fluorspar to fluorochemicals value chain

Centrum Institutional Research 17

Global Fluorochemicals Market – To Grow at

28.8 Fluorine Fluorocarbon

Global fluorochemicals usage is dominated by air-conditioning and refrigeration, accounting

Centrum Institutional Research 18

Asia Pacific dominates the fluorochemicals market globally, followed by Europe.

Source: RHPs, DRHPs

Centrum Institutional Research 19

India Fluorochemicals Market – To Grow at a Faster Clip during

Fluorocarbons Basic Inorganics Fluoropolymers Fluorine based intermediates

2014 2019 2024

Source: RHPs, DRHPs

Exhibit 30: Market share by products (%)

Fluorocarbons Basic Inorganics Fluoropolymers Fluorine based intermediates

18.4 21.2 25.6

38.3 36.5 32.1

2014 2019 2024

Source: RHPs, DRHPs