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Last Updated : Jan 05, 2017 03:33 PM IST | Source: CNBC-TV18

Will be debt free by end of the year: Vinati Organics

The company has passed on crude price movements to customers, says Vinati Saraf Mutreja, ED of Vinati Organics.


The company has passed on crude price movements to customers, says Vinati Saraf Mutreja, ED of Vinati Organics.


She further added that acrylamido tertiary-butyl sulfonic acid (ATBS) accounts for 45 percent of the total revenue and makes up for 50 percent market share.


Speaking to CNBC-TV18, she said second half of FY17 will be in-line with the first half. The company will be debt free by end of the year. However, it will look to increase promoter stakes, she added.

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 Vinati Organicis will be investing Rs 500 crore in para-amino phenol (PAP) products, said the ED.


Below is the verbatim transcript of Vinati Saraf Mutreja’s interview to Nigel D’souza & Reema Tendulkar.


Nigel: First things first, we have a couple of big moves that are happening globally. One being that brent crude prices have been moving up so does it impact your business in any way and also, in terms of exports, we have the dollar index that is doing all sort of things. So, could you explain to us the moves in crude as well as in the dollar index, how does it affect your business?


A: Our raw materials are crude oil derivatives. We purchase them mostly from refineries. So, as crude moves up and down, our input prices also move up and down. But, fortunately for us, in all our products, we are able to pass down that price movement, increase or decrease to our customers because we have long-term contracts, formula based contracts, so our price changes in line with our input prices which change in line with crude prices. So, it really does not affect our margins in dollar per kg.


The same thing is applicable to the dollar-rupee movement also; 80 percent of our revenues are coming from exports, most of our revenues are US dollar based, but because our inputs are also priced in dollars, even the inputs that we are purchasing locally, are priced in dollar values, so it does not affect our margins. If whatever is the surplus of exports minus the imports, we also take dollar denominated loans. So, net-net, we are neutral to the exchange rate movement as well.


Reema: You right now have leadership in two products. One of them is used for water treatment chemicals in shale oil recovery and the second one, Isobutyl Benzene (IBB) which is an intermediate for ibuprofen, right? What would be your market share?


A: That is right. IBB is our first product. We have about 70 percent market share. It is use to make the painkiller, ibuprofen. We are the world’s largest producer of IBB. It accounts for about 25 percent of our revenues. Acrylamido tertiary-butyl sulfonic acid (ATBS) which is a larger product, it accounts for 45 percent of our revenue. We are again the largest producer of ATBS in the world. We have about 50 percent market share - that is used in water treatment polymers as well as to make oil and gas polymers, acrylic fibre, personal treatment, etc.


Reema: What kind of growth rate you enjoy in IBB and ATBS because there is a risk of concentration? 75 percent of your revenues on the whole, come from these two particular products. What is the growth rate that you have enjoyed in the past and that you expect in the future?


A: IBB is a mature product because ibuprofen as a drug has been around for quite some time. We experience about 3-5 percent annual growth rate in IBB, in fact, our dependence on IBB as a product has been going down over the last five-six years. Initially, it was about 40 percent of our revenue mix; today it is close to 20 percent.


ATBS, on the other hand, has a very growing market on account of its applications. Its applications are increasing; it is used in enhanced oil recovery as well as water treatment and personal care polymers are increasing. So, ATBS, globally, grows at about 10 percent and our revenues in ATBS grow at 15 percent.


Nigel: What does all this mean in terms of your second half of the year? In the first half of the year you have done Rs 310-320 crore? In the second half of the year, can we see some kind of growth coming in? What is your target over there? Margins, you have always been very conservative. You were telling us about 25-26 percent off-late, but in the last quarter itself, you have done more than 30 percent. Is that sustainable? And also, tell us what your current capacity utilisations are. Do you have a chance to scale it up?


A: Our second half is going to be in line with the first half. So, as far as revenues and profitability margins go, so we should be able to maintain that.


Nigel: Also tell us your capacity utilisations currently, what is your new launch pipeline? Could you give us some details over there because as of the halfway mark, you are not doing any growth in terms of revenues? Yes, your profitability is improving but how does FY18 look?


A: Our capacity utilisation, as of now, is about 80-90 percent and having said that we are planning a lot of expansion or rather new product launches in the next two-three years. In fact, with our results last quarter, we announced an investment close to Rs 700 crore. Rs 500 crore is going to be towards introducing a new product, para-aminophenol (PAP), which is like how IBB is used for ibuprofen, PAP is used for paracetamol.


We will also be making an investment of Rs 160-200 crore to make butylated phenols which are made from phenols and isobutylene. This will add about Rs 350 crore in revenues, but these two products will come on stream in FY19. In FY18, you will see revenue growth by virtue of ATBS growth as well as the new products that we started this year which include two customised products as well as P-Tert-Butyltoluene (PTBT), P-Tert-Butylbenzoic Acid (PTBBA), Tert-Butylamine (TB Amine), etc.


Reema: You are betting a bit on PAP which you said is an intermediate for paracetamol. Would that also not be a mature market like ibuprofen? And second, if you could also throw some colour on the capex plans? I believe you have planned a capex cycle of Rs 900 crore. How will it be funded? So far you have enjoyed a debt-free status.


A: Paracetamol is a mature market. Now, the play there is the technology that we have. We have worked on this, we have developed a novel process along with NCL who has a patented technology and we have an exclusive licence for it. So, it is a new process, more cost effective and environment friendly process. So, we feel we should be able to replace at least about 22,000 tonnes of PAPs imported into the country from China. We feel we should be able to replace that on account of a superior process.


Your next question was on how we will fund the capex. We will be finding it through internal accruals as well as through debt. We will be debt-free by the end of this year, so we will take on some more debt to fund the capex.


Nigel: You have been buying from the open market close to around 1 percent in this fiscal. Are you looking to take it to around 75 percent?

A: Yes, that is the plan.



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First Published on Jan 5, 2017 02:31 pm
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