Behind this business transformation lies a lower reliance on trading revenue and broadening of its client base and product portfolio.
The food and beverages colour industry - a niche segment of the dyes and pigment industry---not only benefits from growth in the end market (FMCG sector) but also has significant barriers to entry, due to its highly regulated business. As a result, the industry has an oligopolistic structure, where only a few companies are up the scale in terms of technical knowhow and quality control.
While Vidhi Specialty had undergone debottlenecking of existing plant capacity in 2018, Dynemic Products received environmental clearance for new capacity in the quarter gone by
While both companies are key beneficiaries of environmental compliance and favourable supply-demand dynamics in their respective segments of dyes and colour industry, their focus on vertical integration and capacity expansion provides impetus to earnings growth.
Delay in getting the environmental clearance adds to uncertainty. Further, once they get the clearance then it would take about one year or so for the new plant to get operational.
Vidhi Specialty seems well placed to increase market share as it embarks upon capacity expansion in 2018.
Industry has an oligopolistic structure wherein a few companies are up the scale in technical knowhow and quality control which help in offering a palette of colour solutions vetted by necessary regulatory requirements in different geographies and client approvals.
Brokerage house Firstcall Research is bullish on Vidhi Dyestuffs Manufacturing and has recommended buy rating on the stock with a target price of Rs 52.00 in its research report dated August 12, 2015.