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Privi Speciality Chemicals Ltd.

BSE: 530117 Sector: Industrials
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OPEN 1116.90
52-Week high 2268.00
52-Week low 1011.60
P/E 43.45
Mkt Cap.(Rs cr) 4,246
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1116.90
CLOSE 1096.60
52-Week high 2268.00
52-Week low 1011.60
P/E 43.45
Mkt Cap.(Rs cr) 4,246
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Privi Speciality Chemicals Ltd. (PRIVISCL) - Chairman Speech

Company chairman speech

From the Chairman's Desk

Utkarsh Shah

My Dear Fairchem Family Members

With pleasure I present the annual report for the year ended 31st March 2017.

On Fairchem:

In the year ended 31st March 2017 your company earned EBITDA of Rs. 8076.96 lakhs onnet revenue of Rs. 59743.56 lakhs which includes only 8 months' contribution of theAroma chemical business of Privi Organics India Limited. As on 31st March 2017 Net Worthof your company is Rs. 43801.34 lakhs with Total Debt of Rs. 25534. 57 lakhs. This is aformidable financial foundation for future growth both organic and inorganic.

February 2016 marked an inflection point in the history of your Company as Canadabased Fairfax group under dynamic and inventive leadership of Mr. Prem Watsa acquired aportion of the equity held by the existing promoter group totalling to 44.9% of thepaid-up capital. Clearly the objective was to set Adi Finechem Limited as your companywas known then into a higher orbit of growth and corporatization.

Our new name "Fairchem Speciality Limited" reflects this changed scenario.

Merger with Privi:

The first initiative on the transformation was completed in March 2017 as thehonourable NCLT approved the scheme of arrangement of merger of businesses between yourCompany and Privi Organics Limited. Accordingly the aroma chemical Business of PriviOrganics Limited is vested in Privi Organics India Limited (incorporated as Adi AromaticLtd.) a 100 % subsidiary of Fairchem Speciality Limited.

Net worth of Rs.43801 lakhs and market capitalization of Rs. 180000 lakhs lays asolid foundation for future growth -organic and inorganic.

Over the past two decades under the visionary and inspirational leadership of thefounders - Mr. Mahesh

Babani and Mr. D B Rao Privi has become a formidable player in the Aroma chemicalmarket as a leading global player in Pinene based products with global relevant scale ofoperations. Both Mr. Babani and Mr. Rao have joined the Board of your Company with Mr.Babani in the role of Managing Director. I am sure that the Board will benefit immenselyfrom their vast experience and successful track-record.

Both Adi and Privi have gained the expertise in utilizing renewable resourcesparticularly waste generated in other process industries. Whilst Adi converts the wastefrom vegetable oil mills into nutraceutical and Fatty acid based products Privi procureswaste from the pulp & paper mills across the globe to produce aroma chemicals. This -the proficiency in converting waste to wealth has driven the merger of our companies andwill be the epicentre of future path.

Both companies have long standing and cordial relationship with leading global users.

Glimpse of future Metamorphosis of Fairchem:

Going forward I envisage a multi-dimensional metamorphosis of your Company. I am happyto share a glimpse of the emerging scenario:

• Under the pragmatic leadership of Mr. Nahoosh Jariwala the Oleochemical andNutraceutical business of Fairchem (erstwhile Adi Finechem) will continue to grow withadditional capacities being created. A part of the expansion is already operational.Further opportunities to isolate and extract value added molecules from the existingfeedstocks is also being explored.

• Privi has been in the process of expanding manufacturing capacities of itsexisting products as well as creating capacities for newer and exclusive aroma chemicals.With its close connect with the customers these capacities would be fully occupied.Further Privi has been conducting applied research which has been significantlysuccessful so far in converting some of the byproducts formed during manufacturing intohigh value and specialised products.

The proficiency in converting waste to wealth has driven the merger of our companiesand will be the epicentre of future path.

• We firmly believe that India has a great potential to strengthen its position asa speciality chemical manufacturer. There are several companies - small and medium - whohave specialised in a specific niche of the chemical industry. Fairchem will provide aplatform for these companies and their promoters to coalesce with Fairchem team to growtogether. We foresee significant opportunities for M & A under the prudent andaggressive insights of Mr. Harsha Raghavan and Mr. Sumit Maheshwari of Fairfax.

• There is and will always be emphasis on Corporate Governance and compliance. Wewill incorporate latest and most efficient risk management systems develop acomprehensive Sustainability Policy and commit to the Corporate Social Responsibility.This Annual Report will touch upon these areas and going forward I assure you thatFairchem will set further high standard in Corporate Governance.

Increasing emphasis on higher standards of corporate governance and compliance will bethe cornerstone of our future growth

On Global and Indian Scenario:

We are living in uncertain yet interesting times. Globally there is a wave of change -the USA UK and France have witnessed change of leadership. Both the US and the UK areembracing policies which are more inward looking and conservative. In case of Britain thechange has manifested itself into the act of Brexit. In a world that is barely recoveringfrom the economic slow-down these events and protectionist view may create challenges forexports of goods and services from India.

Indian economy is undergoing a variety of path breaking reforms which are paving wayfor long term sustainable growth. Demonetisation is one of the crucial milestones ineradicating parallel economy. Introduction of the Goods & Services Tax (GST) will pavea way for efficient taxation as well as substantially increased compliances.

Fairchem management is proactively tracking these developments and I want to assure youthat we are continuously working to mitigate the risks posed by the global uncertainties.

On Independent Directors:

I would like to thank all the outgoing independent directors for their extremelyvaluable contribution in the growth of erstwhile Adi Finechem Limited.

I take this opportunity to welcome Mr. Budhrani Mr. Barpande Mr. Gandhi and Ms.Radhika who have joined the Board of Fairchem as Independent Directors.

Thank you my dear shareholders:

Over the past one year your company has undergone several changes which will surelyhave benevolent impact on the future of the Company. All of you have whole heartedlysupported us in these endeavours. I would like to thank each one of you for yourcontinuing support and patronage. It strengthens our resolve to make your company abenchmark in speciality chemicals industry.

In closing:

Our honourable Prime Minister has been promoting the idea of "Make in India"with great conviction and faith in the abilities of us Indians.

On our part we are committed to do our best to create a formidable sustainable andprofitable Speciality chemical company - Fairchem Speciality Limited.

From the Chairman's Desk

Utkarsh Shah

From the desk of Managing Director

Nahoosh Jariwala

Dear Members

It is indeed a pleasure for me to share my views as a statement forming part of AnnualReport of Fairchem Speciality Limited for F.Y. 2016-17.

The unfolding of events during last 18 months have been immensely beneficial for allthe stakeholders of the Company. Firstly in November 2015 Fairfax decided to take ~ 45 %equity of Adi Finechem Limited (as the Company was then known) from the promoters of theCompany. Then in August 2016 Fairfax took equity stake in Privi Organics Limited whosebusiness of Aroma Chemicals is now vested in the Company’s wholly owned subsidiarycompany as per the Scheme of Arrangement. The synergies between Adi and Privi are many andunder the umbrella of Fairfax and its deep resources - financial and management - thecombined performance is bound to grow.

I will talk more on Adi’s business here. Oleo chemicals and nutraceutical businessof Adi has again got the momentum. It mainly focuses on improving manufacturing efficiencyyear-on-year. At the same time we must keep in mind that we are in a free economy andmarket forces will play their part. I am pleased to state that we are aiming at about 24 %to 25 % volume growth in terms of production during F.Y. 2017-18.

Following are the areas which would be the fulcrums that will drive future growth.

• Development of further products from raw materials derived from renewablesources:

A typical vegetable oils or for that matter any other natural product comprises of avery large number of different chemical molecules. Each molecule has specific application.In separation or purification of natural products for human consumption many of theundesirable molecules are removed. However in this process quite often some of theuseful molecules also get removed with the undesirable which are treated as waste orby-products. Your company specializes in extracting such molecules from the waste.Tocopherols is a classic case. Going forward we are working on

isolating other such molecules which have potential utility and their separation andpurification will further enhance value addition and profitability.

• To remain focused on Oleo Chemicals based products and their derivatives:

India produces and processes several oilseeds to manufacture oils for human consumptionas well as for industrial applications like Castor oil. This provides ample opportunitiesto manufacture a variety of oleochemicals from this resource. Your company is working ondeveloping expertise in processing as well as sourcing oleochemicals and we will continueto stay focused in this area.

• Work on process optimization and yield improvement:

Long term sustainability of our business is ensured by staying competitive on cost.Your company therefore works on process optimization to improve manufacturing yields aswell as to reduce the processing costs like power and fuel cost. This is achieved bybenchmarking operations to the best global practices as well as utilizing the best in theclass manufacturing plant and machinery.

• Explore further up-gradation of couple of existing finished products

At present we are isolating about 10 products from various waste that we process.These products are then purified and processed further to make value added Specialitychemicals like Dimer acid. Going forward we will work on further refining the existingproducts so that higher value is realized. Also blending ofdifferent products hasproduced mixtures which have useful properties in areas like animal feed. These effortswill provide opportunities for market diversification as well as growth.

In closing I thank you all for reposing trust in our leadership for years and lookforward to a continuing long term mutually beneficial association

With warm regards

From the desk of Managing Director

Mahesh Babani

My Dear Shareholders


I am very happy and excited to address you for the first time.

It has been a long journey of over two decades in bringing up Privi Organics from asmall-scale unit to its current size of nearly Rs.600 Cr in revenue 67% of which is fromexports to the developed world. Over the years I was fortunate to have learnt so muchfrom all my business associates - suppliers customers bankers investors and last butperhaps most important my colleagues at work. We have a very knowledgeable qualified andexperienced team which passionately follow the vision of becoming global leader in thefield of aroma chemicals.

In July 2016 Fairfax India Holdings Corporation acquired 51% equity of Privi by acombination of Primary investment and buying out some of the existing shareholders.Simultaneously we decided to merge aroma chemical business of Privi with erstwhile AdiFinechem Limited now Fairchem Speciality Limited.

Aroma chemicals made by your company are blended into fragrances which are used fordaily products like soaps detergents shampoos hand washes and fine perfumes.

Like most of the synthetic chemicals aroma chemicals are also made from petrochemicalbuilding blocks like benzene phenols C5-C6 cuts from crude oil refinery etc. Howeverabout 37% of the aroma chemicals produced by value are made from chemicals contained in apine tree. This makes aroma chemicals different than other specialty chemical molecules.

For your company pinene based chemicals are even more special about half of theoverall revenues and profits are generated from pinene based aroma chemicals. What is evenmore significant is that your company processes waste products from pulp mills (who usepine wood cut from the tree for making pulp & paper) to make building blocks which areconverted into aroma chemicals. Your company is the only company in the developing worldto have the technology and logistics abilities to procure these waste products from acrossthe globe and process it.

Your company places considerable emphasis on process development research. Processesfor the entire portfolio of over 40 products have been developed in-house. Further yourcompany is also engaged in advanced research for processing agricultural bio-waste intovalue added specialty chemicals by entirely natural means like fermentation. This conceptis referred to as Biorefinery. This work is done in collaboration with Institute ofChemical Technology Mumbai (formerly known as UDCT) India’s premier chemicaltechnology institute.

Financial year 2016-17 was one of the very rare times when your company didn’tregister growth. While the overall volume sales increased by 7% as prices of many of thefinished products particularly the pinene based products declined in 2016 revenuesdeclined marginally by about 2%.

I am happy to inform you that the prices of finished products have since stabilised andin a few cases are looking up.

We are working on achieving about 20% growth in volume and value sales during thecurrent financial year.

Going forward we are working on multiple new products for the fragrance industry. Weare also working on molecules which are processed from the byproducts which are formedduring manufacturing. This will improve the value addition and operating margins.

In closing I would like to place on record my gratitude to all of you for havingconsented the scheme of arrangement of merger. I would also like to thank all thestakeholder of Privi Organics Limited - suppliers customers and all the financialinstitutions to have agreed to the proposed merger.

Thank you & with best regards