Dear Shareholder''s
Over the years, we selected to grow methodically: we would not engage
in considerable investments in unrelated growth areas; on the contrary,
we would invest in adjacent business spaces so that the end-product of
one business would represent the raw material of the other. We would
not stretch our Balance Sheet through large investments; instead we
would leverage our accruals combined with debt to grow our business.
Over the years, the combination of scale and integration has translated
into a competitive advantage reflected in our margins and revenue
growth which are higher than the industry average.
More than just an enhanced viability, we are now a reference point in
our sector the world over. We have successfully expanded from a couple
of products to nearly a dozen through the prudent leverage of our
carbon management competence on the one hand and have become one of the
few companies to have successful multi- product industrial complexes at
a single facility.
The advantage
This progressive integration has strengthened our de-risking.
Over the years, Himadri Chemicals widened its risk from an excessive
dependence on a couple of products to a number of products.The Company
leveraged the growth coming out of a handful of sectors to a point
where its growth is being driven by the downstream potential of a
number of sectors.
What enhances our prospects is that we are not dependent on
conventional products; our prospects are linked to
an enhanced life quality. For instance, automobiles represent a
superior lifestyle proposition for most people across the world; a
majority of carbon black is used in the manufacture of tyres used in
the production of automobiles and aircraft. The higher the standard of
living, the stronger the consumption of carbon black.
This rationale extends to the manufacture of coal tar pitch used in the
aluminium sector. Aluminium is a new-age metal; it is replacing a
conventional material like steel on account of its lightness,
durability and receptivity for diverse applications.
A similar logic underlies our presence in the manufacture of carbon
material used in the manufacture of lithium ion batteries. These
lithium ion batteries represent a fitting proxy for a modernising
world, reflected in their consumption in laptops and mobile handsets.
This prudent selection of products and spaces represents the basis of
our success story. The Company is more than just a producer of
industrial products; it is a proxy of a modernising world. The Company
is more than a manufacturer of commodity products; it is a proxy for an
enhanced lifestyle quality.
Process advantage
At Himadri, we do not just enjoy an advantage of a greater market
share; we are also advantageously placed, which provides us with a cost
edge – one end-product represents the raw material for another product.
This integration makes it possible for us to manufacture products at a
cost that is lower than if these products were conventionally
manufactured.
Enhanced investment
Given this optimistic background – application and cost - we at Himadri
are confident that there is an optimistic future ahead for coal tar
pitch and distillation byproducts.
Given this reality, there could have been two ways of addressing the
marketplace opportunity. One, to wait for the markets to rebound and
then embark on the investment to manufacture those products, thereby
missing out on the most lucrative part of the recovery cycle. Two, to
invest slightly ahead of the recovery cycle so that one would have the
incremental capacity ready for the marketplace as soon as the recovery
transpired, making it possible for the Company to enter into new and
enduring customer relationships, translating into revenues for the
moment and for the foreseeable future.
Outlook
It is with this perspective that we selected to strengthen our core,
invest in additional capacities and create a stronger Company even as
shareholders may question our foresight in a particularly weak industry
environment.
For all those shareholders who may be apprehensive, I have a comforting
thought: as an organisation, Himadri Chemicals has invested a number of
times during downtrends. While these decisions may have been questioned
for their timing, they inevitably generated high returns during market
recoveries and resulted in high returns on invested capital, enhancing
value in the hands of those invested in our company.
Sincerely,
D. P. Choudhary
Chairman, Himadri Chemicals & Industries Limited
