At Vikas Ecotech FY 17-18 was a year of both accomplishments and unseen challenges.The organisation saw a slowdown in operations due to an inquiry by a government authorityin the last quarter of the year under review.
We weathered it to emerge resilient. I am happy to report that our business performancewas stable during the year - delivering continued value across the stakeholder ecosystem.In fact our commitment towards accelerating growth for our customers safeguardingstakeholder interests conducting business responsibly and enhancing the sustainability ofour planet became firmer.
I share with you our performance highlights of FY18 and the key trends and initiativesthat will be fundamental to our next phase of growth. I am confident that you continue toshare our excitement about the future prospects of the company and believe in ourpotential to optimise opportunities.
FY18 was a year of paradoxical performance at Vikas Ecotech. our profitability marginsreached historic peak levels. we expanded the global reach of our offerings by enteringnew geographical regions and our industryleading position was strengthened by progressivegreen innovations.
During the year we recorded superior performance in the first three quarters. Thefourth quarter however witnessed a slowdown in operations due to a survey of our tradingactivities by a government agency. our short-term performance was hence affected. with80 percent of our raw materials being imported and exports constituting 50 percent of ourrevenues the company was subject to certain examination. Consequently our fourth quarterperformance decelerated by approximately 70 percent. However the silver lining was thatour annual performance remained stable despite this temporary hurdle.
our net revenues during the year came in at INR 366.16 crore as compared to INR 372.80crore in FY17. our net profitability levels stood at an all-time high of INR 28.61 crore -recording a growth of over 20 percent over the last year. The robust profitability growthtranslated into better earnings for our shareholders - the earnings per share (EPS)registered a 12 percent increase during the year.
we delivered a positive performance and improved profitability metrics. It reflects ourstrong business fundamentals and a resilient governance framework. I am happy to sharethat our revenues increased by over 160 percent in the first quarter of FY19 in comparisonto last quarter of FY18. In addition we successfully posted healthy profits during theperiod - undoing the losses registered in the preceding quarter.
our ability to bounce back in the subsequent quarter of the disruption is testimony toour vigour and conviction. With the trials behind us we are upbeat and optimistic aboutthe future. Today we are better poised than before to capitalise on the opportunitiesoffered by India's emerging position as the global hub for specialty chemicals.
The Eye of the Tiger
During the last fiscal the global supply chain of specialty chemicals witnessed severeconstraints owing to environmental compliance-related clamp down on Chinese productionunits. The trade war between China and the USA added to the supply stress. In thiscontext India is in a ripe position to benefit from the situation and emerge as theglobal hub for specialty chemicals. Its popularity is underpinned by increased consumptionin domestic end-
user industries which in turn are benefiting from India's consumer story and aresponsive green-oriented policy framework. Further the country's skilled manpower andenhanced production capacity for specialty chemicals afforded by economies of scale areattracting large-scale domestic and foreign investments.
Beyond these inherent factors India's specialty chemicals sector also benefits fromthe eco-friendly industry charter innovative competencies and ability to deliverinternational quality of products. Further our country's governance framework especiallyregulations related to taxes and IPR protection make it the preferred destination forR&D- intensive early technology lifecycle production. In 2017 India's specialtychemicals industry market size was pegged at USD 52.1 billion . The industry is set todouble its current market size by 2025 - growing at 10 to 15 percent annually.
As India's leading homegrown specialty chemicals company with an eco-friendly focusVikas Ecotech is a front-runner in benefiting from the country's emergence as amanufacturing hotspot. Over the last five years we have acquired export customers thatare some of the best players in the world. Last year we added Mexichem theLatin-American global leader in PVC pipes manufacturing to our clientele. During FY18 westarted exporting our flagship Organotin PVC heat stabilizers to the USA. The country isthe world's largest market for Organotin - with its market size being approximately 10times that of India.
Harnessing Opportunities for Success
What are the factors that determine the success of a company?
According to warren Buffett Chairman and CEO of Berkshire Hathaway successfulbusinesses are "economic castles with unbreachable moats around them". Economicmoats are competitive advantages of a company that protect its long-term profits andmarket share from competing firms. As the global economy unfolds its next phase of growththe rules of success are fast-changing. I believe that Vikas Ecotech has four economicmoats that will enable it to thrive in the context of an economy led by disruption andpublic policy-led environmental friendly regulations.
The Sustainability Moat
With sustainability becoming mainstream increasing environmental consciousness in thestakeholder value chain is imperative to a successful business. A recent survey by aleading consumer firm estimates the global market for sustainable goods to be around USD2.65 trillion. Accordingly the need for organisations to prove their social andenvironmental commitment is more pronounced in emerging markets. The report also statesthat effectively marketed sustainable goods could represent a USD 1 trillion opportunity.India's specialty chemicals opportunity holds great potential owing to its inherentcompliance-driven sustainability thrust. Unlike China our policies are rooted in thegreen promise and long-term view.
At Vikas Ecotech sustainability is a key pillar of our growth. We are steering thefuture of India's specialty chemicals industry through green leadership. The company isamong the world eight and India's only manufacturer of methyl tin mercaptide (MTM)stabilizers. Also know as Organotins these are non-toxic safe alternatives to lead-basedstabilizers. They are used in the manufacture of products made from polyvinyl chloride(PVC) -mainly pipes and films.
During the last fiscal we launched our new range of Calcium-Zinc (CaZn) heatstabilizers for PVC which are the eco-friendly alternative to toxic metal-basedstabilizers. With this offering our competencies to leverage the opportunities offered byIndia's changing policy landscape are further fortified.
The Innovation Moat
The specialty chemicals industry thrives on innovation.
For instance Germany's Merck KGaA invented liquid crystals more than a century ago;when they had no real- world application. However the technology brought in unprecedentedresults following the advent of flat screens. Today the business boasts of operatingmargins at well over 40 percent .
The specialty chemicals industry has many such anecdotes. However breakthroughinnovations often take years to show commercial potential. Surviving the contemporaryhypercompetitive milieu requires organisations to garner greater productivity from theirR&D spend. Consequently specialty chemical manufacturers have reined their focus onsmaller innovations that make a big immediate impact.
At Vikas Ecotech we follow a dual R&D strategy. Firstly our team focuses onleveraging immediate opportunities through a robust pipeline of small innovations. Duringthe last fiscal year for instance we innovated the vulcanised rubber gaskets used forPVC pipes fittings. The small tweak in the traditional product offers customers thebenefits of both flexible and rigid properties. our offering solves the challenges facedduring fitment and joining of PVC pipes. It has become popular in end-user applications ina short span since its launch. Alongside our team also works on blockbuster innovationsthat can change the growth trajectory of the organisation in the IPR-led global specialtychemicals industry.
The Responsiveness Moat
In my letter last year I had mentioned how organizations are rendered helpless in theface of geopolitical and economic vagaries. Little has changed since then; although theglobal economic performance is gradually returning to pre-crisis levels the largerlandscape continues to be marked with increasing uncertainties. For instance the clampdown on Chinese chemical production houses affected the global supply chain during thelast fiscal year.
The sudden curb had an undermining effect on Vikas Ecotech. we source 2-EthylhexylThioglycolate (2-EHTG) a solvent chemical and a key material in the production oforganotin from China. while our operations were not hit badly we needed to ensureuninterrupted supply of the raw material in view of the anticipated domestic and globaldemand for organotins.
Today we are in the process of setting up India's first 2-EHTG manufacturing plant atour new production facility in Dahej Gujarat. our nimble-footedness and the ability torespond to changing business needs in an agile manner gives us an edge over larger players
The Culture Moat
Lastly I would like to reiterate the focus on integrity and governance at VikasEcotech. It is our commitment to doing the right thing that has driven our success. ourability to withstand challenges reflects our resilience integrity and perseverance. ourefforts are supported by a culture of cohesiveness that drives us to be united amid tryingcircumstances. The wisdom of the members of our Board and the Advisory panel goes a longway in enabling us to drive 'win-win' solutions during such times.
Together we are steering towards a better future. We are steadily picking up pace totransform our positioning as leaders of India's sustainable specialty chemicals segment.Since our inception we have consciously strived to deliver solutions across thestakeholder ecosystem and be responsible towards our planet. In the long run we believethat the prosperity of the stakeholder value chain will translate into profitable returnsfor our shareholders.
I would like to thank our employees for their efforts our customers for their trustour vendors for their cooperation our regulators for their oversight and our investorsfor their confidence in our abilities. These are the pillars that will drive our successas we set out to become a better greener and stronger organisation.
|Vikas Garg |
|Managing Director |
|Vikas Ecotech Limited |