Anupam Rasayan

The company has a diverse product portfolio, which includes specialty chemicals such as agrochemical intermediates, specialty intermediates and pharmaceutical intermediates. Given the strong growth outlook for the chemical sector, Anupam Rasayan is all set to tap further potential.

Anupam Rasayan is a leading specialty chemical company based in India that produces a wide range of products for various industries such as pharmaceuticals, agrochemicals and specialty chemicals. The company has a strong focus on research and development and is known for its innovative and sustainable solutions. Founded in 1977, Anupam Rasayan has grown rapidly in recent years and has become a trusted partner for many multinational companies. The company has state-of-the-art manufacturing facilities in Gujarat with a total production capacity of over 23,000 metric tonnes per year. 

It has a diverse product portfolio, which includes specialty chemicals such as agrochemical intermediates, specialty intermediates and pharmaceutical intermediates. One of the key strengths of the company is its focus on sustainability. It has implemented various initiatives to reduce its environmental impact, such as using renewable energy sources, reducing water consumption and minimising waste generation. The company’s success is largely due to its strong research and development capabilities. It has a team of highly qualified scientists and engineers who are constantly working to develop new products and improve the existing ones. 

Anupam Rasayan’s research and development efforts have resulted in the development of several innovative products that have helped the company gain a competitive edge in the market. It has also been recognised for its excellence in various areas. In 2020, the company was awarded the ‘Most Promising Company’ award at the 5th edition of the India Chem Awards. Anupam Rasayan was also ranked among the top 10 Indian chemical companies by revenue in 2020 by Chemical Weekly. With its focus on sustainability, strong research anddevelopment capabilities and diverse product portfolio, it is poised to become a leading player in the global specialty chemicals market.

Sector Overview

The Indian chemical industry is a vital and growing sector that is highly skilled and capital-intensive. It plays a critical role in meeting India’s basic needs and raising the standard of living. The chemical industry encompasses a wide range of products, including petrochemicals, fertilisers, paints, varnishes, gases, soaps, fragrances, toiletries and medications, among others. With over 80,000 commercial items, the sector is the foundation for the nation’s industrial and agricultural growth, and many downstream industries rely on it, including textiles, paper, paint varnish, soap, detergent and pharmaceuticals.

India and China are the world leaders in capital investment intensity in the chemical industry. India’s chemical industry attributed 23.3 per cent of its PAT to capex compared to 32.6 per cent in China. The aggregate capex incurred by the 31 largest chemical businesses in India climbed at 17 per cent CAGR between FY15 and FY20 and 9 per cent CAGR between FY10 and FY20, reaching ₹95 billion in FY20, up from ₹39 billion in FY10. The proportion of capital to revenue in FY20 was the highest in a decade at 9.6 per cent. India’s chemical exports have increased by 106 per cent between 2013-14 and 2021-22, rising from USD 14.2 billion to a record high of USD 29.3 billion. 

Organic, inorganic, agro-chemical, dyes and dye intermediates and speciality chemicals have all contributed to this growth in chemical exports. The ‘Make in India’ campaign has played a significant role in helping India’s chemical sector become a significant player in the world arena and a major exporter for the country. India is the sixth-largest chemical manufacturer globally and the third-largest in Asia. The country is ranked 14th in the world for chemical exports. The Indian chemical industry is a crucial sector for the country’s growth and development. The sector’s steady growth coupled with increasing capital investment and rising exports highlights its importance to the Indian economy

Government Initiatives

There have been several government initiatives that have helped the chemical sector grow, such as: Petroleum, Chemicals and Petrochemical Investment Regions (PCPIRs)

The Indian government wants the PCPIR clusters to be places where investors can find welcoming policies and facilities. PCPIRs have top-notch infrastructure and provide a vibrant market that aids commercial businesses. Four PCPIRs have been established by the Ministry of Chemicals and Petrochemicals, one in each of the states of Andhra Pradesh, Gujarat, Tamil Nadu and Odisha. An estimated investment of ₹7.63 lakh crore is required to fully realise the PCPIRs.

Chemicals Promotion and Development Scheme

In order to support the expansion and development of the chemical and petrochemical industries, the Chemicals Promotion and Development Scheme (CPDS) was created. Its goal is to produce knowledge products through studies, surveys, data banks and promotional materials, etc. and disseminate the knowledge through holding seminars, conferences, exhibitions and other events.

Production Linked Incentive (PLI) Scheme

The National Programme on Advanced Chemistry Cell (ACC) battery storage Production Linked Incentive (PLI) scheme was approved by the Government of India with a budgetary outlay of ₹18,100 crore. Its goal is to improve India’s manufacturing capabilities by achieving a manufacturing capacity of 50 Giga Watt hours (GWh) of ACC. The national government is focusing on increasing domestic value-addition in order to achieve this goal while ensuring that India’s battery production costs are competitive on a global scale. The strategy predicts a monetary investment that will support domestic manufacturing, promote the growth of stationary storage and battery storage demand, build a completely domestic supply chain, and attract foreign direct investments to the country

Financial Highlights

For the quarter ended December 31, 2022, the total revenue of the company rose by 43 per cent from last year’s same quarter to ₹388.8 crore. The EBITDA level of the company witnessed a growth of 35 per cent from the December 2021 quarter to ₹80 crore. The net profitability of the company shot up by more than 44 per cent from the corresponding quarter last year to ₹54.4 crore. The company generated cash flow from operations, which is higher than the PAT for this quarter. Recently, the company announced that it has signed a letter of intent (LOI) worth ₹984 crore for the next six years with a leading Japanese company to supply new-age advance intermediates for life science active ingredient. This product will be manufactured in their existing as well as upcoming multipurpose manufacturing facilities. Sales realisation for this molecule will be one of the highest for the company. 

This molecule is based on fluorination chemistry, which further validates their strategy of expansion in fluorination. On March 22, it signed a memorandum of understanding (MoU) with the Gujarat government to invest ₹670 crore to set up three new plants. These would focus on manufacturing fluorochemicals to service the demands of existing and potential clients in the agrochemical, polymers and pharmaceutical sectors in the US, Europe and Japan. The company has a strong pipeline of products to be commercialised during Q4. It plans to launch five products in Q4 and a majority of them will be in the segment of fluorination chemistry. It has witnessed strong interest from various customers on the fluorination side.

The company therefore expects more conclusion of LOIs for new products and conversion of LOIs into contracts in the coming quarters, which would further increase its revenue visibility for the coming years. It expects strong growth in the coming quarters and years on the back of a robust pipeline of products, the restart of Unit 6 during the quarter and expansion in capacity to cater to this demand. In the last nine months, it has invested over ₹100 crore in various capex projects, including brownfield expansions, research and development facilities and solar projects. This would provide enough capacity for growth over the next 3-4 years.

Outlook

Global trade disputes, particularly between China, the US and Western Europe, have led to tariffs being imposed on imports and exports. In response, many countries in Western Europe have imposed tariffs on Chinese products. The economies of the US, EU and China are all expected to suffer from these tariffs. As a result, many international companies that formerly depended on China for their chemical supplies may seek to diversify their supply chain. This presents an excellent opportunity for Indian companies to expand their market share and maintain their position as global industry leaders, supported by the Indian government.

To expand its business development, Anupam Rasayan has added 11 individuals with past experience of working in different multinational companies across key geographies and target companies. The company has a robust pipeline of products which it plans to commercialise during Q4 with five products set to launch, primarily in the fluorination chemistry segment. However, it is important to note that we believe the current stock price already reflects these positives. At present, the stock is trading at a PE ratio of 51.1 times, EV and EBITDA of 25 times and PS of 7 times, making it relatively expensive. Additionally, heavy buying activity has driven the stock up by over 30 per cent in the past month. Hence, we recommend HOLD.