China's 2-week shutdown will help Indian cos: Aarti Ind

China has ordered 255 Shanghai-based industrial facilities ranging from power and petrochemical plants to logistics firms to shut down between August 24 and September 6, ahead of the G20 summit in Hangzhou. Rajendra Gogri, the CMD Aarti Industries, one of the leading suppliers to global manufacturers of agrochemicals, pharmaceuticals chemicals, maintained that the shut-down order will help many Indian companies, including his by reducing availability and increasing price of some products.  The facilities will remain shut for 14 days to reduce pollution and around 6-7 percent of the total volume produced by the Chinese companies will get affected, he added. The company exports around 50 percent of its products and saw a decline of 6.7 percent in FY16 but doesn't expect any such cuts this year, he added. This year, the company is neutral to crude price volatility, he maintained. Below is the verbatim transcript of Rajendra V Gogri's interview with Reema Tendulkar and Nigel D'Souza on CNBC-TV18. Nigel: Various reports indicate that China has ordered nearly 250 plus Shanghai Industrial facilities to shut for around 14 days or so. Does Aarti Industries have any exposure to China that’s question number one. In case these facilities are shuts, does it give you any kind of incremental opportunity or Indian based manufacturer for that matter? A: We don’t have any manufacturing in China, but like we export to China as well as some of the products we compete internationally with China and shutting of these plants definitely will help us as well as other Indian industries that it will both reduce availability as well as some price spike will be seen in some of the products. Reema: What could be the extent of a shortfall because these facilities will only be shut for about 14 days, so say in a one month’s period what percentage of the global supply would come from China just in a way to ascertain what the impact will be? A: Yes, as you say basically it’s a 14 days, so it’s not going to be a huge impact in that sense. So, overall if you analyse it is only about 6-7 percent, but still couple of percent benefit in margins in some of the products and somewhere the volumes both will be seen. Nigel: Last year there was a dip on your exports. This year what exactly is your projections that’s for FY17 and also crude prices they have bounced by 70-75 percent from the lows earlier this year. What’s your take, what kind of impact does it have on your business? A: Last year overall crude price on an annualised basis were lower than the previous year, so that’s why there was a dip in top line both local as well as exports. Even though the volume increase was there and this as such we are neutral to crude volatility, so this crude increase basically will help increase top line, but overall as per the volumes are concerned and absolute earnings before interest, taxes, depreciation, and amortization (EBITDA) we don’t see any big impact in this rebound crude oil.