The implementation of initiatives such as Inclusive Banking Smart Cities UrbanRejuvenation Revamp of Power Distribution Companies and the thrust towards renewableenergy improved regional air connectivity ease of doing business and the Swachh BharatAbhiyaan are driving meaningful changes within the fabric of the country while impactingbusiness sentiment positively.
The Financial Year (FY) 2015-16 continued to throw up several challenges across theeconomic landscape. The pattern of heightened volatility and increased uncertainty fromthe last couple of years spilled over into the current fiscal as well. Amidst theuncertain global scenario India remains relatively well placed to deliver improvinggrowth as economic fundamentals remain stronger than in other emerging market economies.Over the last three years GDP growth is steadily gaining momentum and as per IMF Indiais currently the brightest spot amongst the global economies. Where global GDP growth isstagnating around 3.0% India in FY 2015-16 has achieved a GDP growth of 7.6% surpassingChinas GDP growth. The Central Government has unleashed a slew of initiatives thatare directed at changing the landscape and ushering a steady economic revival. Theimplementation of initiatives such as Inclusive Banking Make-in-India Smart Cities andurban rejuvenation revamp of Power Distribution Companies and thrust towards renewableenergy ease of doing business and Swachh Bharat Abhiyaan are driving meaningful changeswithin the fabric of the country while impacting business sentiment positively.
The Make in India campaign has been instrumental in bringing globalrecognition to the potential of India as a cost effective manufacturing hub. The responsethus far has been highly encouraging and several giants of global industry have comeforward committing to set-up manufacturing units in India with some even creating Indiainto a regional hub. The competitive advantage enjoyed by India due to its locationdemographics and availability of requisite resources is being appropriately leveraged.
With over 40 years presence in manufacturing your Company has been one of theearliest adopters of the Make in India philosophy. Increased globalisation hasserved to provide greater thrust to develop India as one of the leading manufacturingcenters of the world and within that the chemical industry has been a standout performer.We expect this movement to gain further traction in the backdrop of increasedconsolidation within the chemical industry. This would throw up plenty of opportunitiesfor the Indian chemical players. As a result the Indian chemical industry is expected togrow at 11% per annum to reach US$ 224 billion by 2017.
Your Company recorded a steady volume growth by tapping pockets of demand in key exportmarkets of USA and Europe supported by some exciting initiatives in the domestic market.By religiously pursuing its vision backed by well crafted strategy and flawless executionyour Company today stands as a very strong global brand. Your Company supplies quality andvalue-added products to renowned multi-national companies across the globe. The supplierexcellence award bestowed on your Company by Bayer CropScience this year is testament tothe quality and excellence of your Companys products and reflects its exceptionalperformance and track record in environmental health safety and sustainability as aleading supplier of intermediates to the chemical industry.
Your Company reported consistently good performance during the year with balancedgrowth across domestic and export markets led by strong demand in the end userindustries. While topline growth was muted due to re-pricing of products that are linkedto crude oil and related petrochemical intermediates the positive momentum in business isbetter represented by the growth in volumes while margins improved. Overall profitabilityimproved during the year as a result of a favourable product-mix combined with efficiencygains. On the back of stable performance the Board of Directors has recommended adividend of Rs 1.20 per share of a face value of Rs 2 on enhanced capital against Rs 1 pershare recommended in the previous year.
Your Companys export revenues stood at Rs 525.75 crore which contributed 40% tothe total revenues for the year. Europe USA and China continue to dominate the exportrevenues with contribution of 48% 23% and 8% respectively. Your Company anticipates afirm momentum in the export markets led by better demand and customer acceptance for itsproducts.
As you are aware in order to intensify focus on individual businesses and to driveaccelerated growth in both top and bottom line your Company transformed its operationsinto Strategic Business Units (SBU) during the previous year. This enabled your Company toassemble products having synergies within a particular business unit for achievingsuperior end-to-end supply chain management having regard to nature of product and end useapplications.
Your Company sensed huge untapped opportunity to cater to domestic Phenol and Acetonedeficit. Hence it took investment decision for manufacturing Phenol and Acetone to matchthe shortfall in domestic market through its wholly owned subsidiary Deepak PhenolicsLimited. The capacity of the proposed Phenol Plant will be 200000 MTPA and that ofco-product Acetone will be 120000 MTPA. The project aims to tap the entire domesticdemand facilitating import substitution.
While the current business of your Company was built on the platform of Nitration andHydrogenation as a strategy the Phenol and Acetone business will bring in new platformfor growth. Phenol serves as a major building block for the infrastructure industryincluding housing roads construction as well as for wind mills automobiles etc. As thecountry increases its infrastructure investment and a larger number of smarter cities getsdeveloped the demand growth for Phenol and Acetone based derivatives would havesignificant benefits. While initially these products would be filling imports gap as bulkcommodities in the long run they will support specialities for markets such asperfumeries plastic additions and decorative laminates. A major contribution from phenolsegment would be in offering a range of solvents for the pharma industry thusstrengthening its relationship with pharma industries in India.
Your Company is confident that this project shall take off well and lift your Companyinto different orbit along with its existing business and hence create higher shareholdervalue in the near future.
I am happy to highlight that we have tied up for long term debt to finance this projectand also raised Rs 83.31 crore through a Qualified Institutions Placement (QIP) fromprominent domestic and foreign institutional investors. Additionally we have also startedseed marketing of phenol with an objective of developing working relationships with allmajor clients in India.
Your Company will continue to create a large base to outpace the industry and deliversustained growth year-on-year on the back of its strengths combined with cost leadershipand value-added product offerings. As a strategy your Company is in the process ofcreating separate building blocks which can be a strong platform for future growth. Inview of creating a strong base due to Phenol and other products your Company will be inits own league in coming years by creating value for its esteemed shareholders. Stabilityin the global crude oil prices and related petrochemical intermediates will furthersupport this momentum. The steady economic growth momentum in the domestic economy wouldlead to growing business opportunities for your Company.
On behalf of the Board of Directors I would like to take this opportunity to commendthe entire team of Deepak Nitrite for their contribution and commitment. I would also liketo thank all our business partners and associates. Finally I would like to extend mysincere gratitude to each and every stakeholder for the unwavering confidence in yourCompany through the years and count on their support going forward.
|With best wishes |
|D.C. MEHTA |
|Vice-Chairman & Managing Director |