Confidential ET Young Leaders B-School Edition 2017

Aditya Birla Chemicals: The Chlorine Conundrum

Background

Aditya Birla Chemicals is a leading manufacturer of bulk & specialty chemicals as well as
viscose filament yarn. Its business is spread across 16 manufacturing locations in India,
Thailand, Germany & China. A market leader in the domestic Chlor alkali segment, it stands
second in Viscose filament yarn & is the third largest manufacturer of sulphates worldwide.
Current product portfolio of the company includes Chlor-Alkali, Chlorine Derivatives, Epoxy
resins, Phosphates & phosphoric acids, Sulphites, Peroxides, Fluorine Chemicals and Viscose
filament yarn.
Aditya Birla Chemicals currently operates 9 chlor alkali manufacturing units in India. These
plants were originally intended to provide backward integration support to Aditya Birla
Group’s existing Alumina and VFY plants. A by-product of the chlor-Alkali manufacturing
process is chlorine. Total production of chlorine amounts to ~2000 tonnes per day (TPD).
The produced chlorine is currently being disposed through three offtake channels: Merchant
sales, pipeline sales and specialty chemicals (also known as chloro-derivatives or Value
added products).
Despite being amongst the largest merchant sellers of chlorine in the country, the current
offtake pattern is considered unsustainable by the business for the following reasons:

 Transport of Chlorine is unsafe, risky and is subject to strict quality control measures

 Its sale is unprofitable leading to a negative annualised contribution of INR 45 - 60 Cr

The key channel looked upon favourably by the management is the specialty chemicals
channel, which contributes positively. The management team has indicated strategic intent to
expand their specialty chemicals portfolio (specialty chemicals currently constitute ~25% of
the total chlorine portfolio by volume). Besides expanding their footprint in current specialty
products, the business is looking to foray into product segments such as high strength
bleaching powder, metal chlorides, other metal chloro-hydrates, epichlorohydrin, etc.
Additionally, the domestic specialty chemicals industry is largely diversified based on end
use. It is currently valued at USD 25 Billion and has delivered a growth of 13% over the last
5 years. Given this context, Aditya Birla Chemicals is looking at organic/inorganic
opportunities in the segment with special focus on high volume (non-niche) chemicals.

Deliverables

1. Based on the company’s existing and intended product portfolio, identify prospective
high volume chloro-derivatives. Evaluate the attractiveness of the target specialty
chemicals Industry segment from a perspective of margins, growth, competition and
regulatory environment
2. Suggest suitable mode of growth. What specific chloro-derivative(s) do you think the
business must enter into. State explicitly your rationale and the challenges you
foresee.
Confidential ET Young Leaders B-School Edition 2017

3. If proposed mode of growth is in inorganic, identify a suitable target for merger/JV,

clearly highlighting the synergies and integration challenges. Arrive at a reasonable
value for the transaction
4. If proposed mode of growth is organic, clearly outline the business strategy and the
level at which you expect to compete and explain the rationale for it. Build a revenue
model for the business with at least 5 years of financial projections. Highlight key
parameters you would use to appraise the capital investment proposal.

Instructions:
1. Candidates are encouraged to refer financials of global and domestic companies with
similar product portfolio to gain financial perspective for the sake of model building
2. For all projections, make reasonable assumptions based on industry/market trends.