Aarti Industries to invest Rs 700-800cr to expand in FY19

Aarti Industries, a speciality chemicals and pharmaceuticals company, plans to invest Rs 700-800 crore in FY19 to improve its scale and drive sustained improvement in the business.

The company also plans to invest approximately Rs 75 crore in setting up the 4th R&D and scale-up unit at Navi Mumbai that will facilitate further enhancement of the product portfolio and also help to further improve our manufacturing processes.

"We continued to invest in building manufacturing capabilities and plan to invest about Rs 700-800 crore for FY19 to execute a multi-pronged expansion plan across multiple processes / products in a calibrated manner," the company had said in its annual note to shareholders for the year.

"The plan includes speciality chemical complex at Jhagadia in Gujarat, acid re-concentration plants, API and pharma intermediate de-bottlenecking and expansions at Vapi & Tarapur," it said.

Aarti Industries is India's leading producer of benzene-based basic and intermediate chemicals. It is one of the leading suppliers of dyes, pigments, agro-chemicals, pharmaceuticals and rubber chemicals to global manufacturers.

The speciality chemicals segment accounts for close to 78 per cent of its total revenues of Rs 3,800 crore, while the pharmaceuticals and home & personal care (H&PC) division contributes over 15 and 7 per cent respectively.

"We are exploring new growth opportunities beyond benzene derivatives. Our nitrotoluene facility at Jhagadia became operational last year and reached 40 per cent utilisation. We expect this facility to achieve its peak utilisation over the next 3-4 years with an estimated revenue visibility of Rs 350-400 crore per annum," Aarti Industries chairman and managing director Rajendra Gogri said.

The pharma segment is also gaining significant momentum. While the revenues have been growing at over 20 per cent, the EBITA has doubled in the last 3 years.

"Our optimism in this segment remains strong. With various projects in hand, we are looking at investing further in various greenfield as well as brown field projects," Gogri added.

The chairman noted that globally, the chemicals industry has been undergoing some tectonic shifts. Indian companies focused on speciality chemicals with better compliance standards are expected to be the major beneficiaries of the growing trend of easternisation and reduction of capacities in China on environmental concerns.

Aarti Industries, which manufactures 45 commercial APIs and also provides intermediates for these APIs, is hopeful of getting benefit from this trend.

As part of the major growth plans, the company has entered into a 10-year Rs 4,000 crore contract with a global agriculture company for supply of a high value intermediates used in the manufacturing of herbicides.

The supplies are expected to commence from second half of FY 2019-20 and would generate expected revenues of approximately Rs 4,000 crore over the contract term, it said.

The project will entail investment of about Rs 400 crore by the company.

The global chemical conglomerate has also provided the company with the basic technology package based on which it will build a dedicated production facility with an investment of approximately USD 35-40 million, the company said.