“The strong performance that the Company has displayed in recent years is not just a one-time affair. A combination of deep commitment, robust business model and investments in long-life assets will continue to provide sustainable and profitable growth.”
I am privileged to report yet another successful year that saw us outperforming industry across all parameters while we continued to deliver more value to our customers and shareholders. In a matter of just few years we have significantly matured as an organisation; growing multi-fold in capacities and financials, spreading to newer geographies, adding more products and developing strong brand goodwill. With the kind of traction we are witnessing, improved industry scenario and capacity expansion programmes that we have planned out, we believe that our future is more sustainable than ever.
2016, manifested by several unpredictable outcomes, has been yet another challenging year for economies across the globe. While crude prices strengthened and nearly doubled from its lowest levels at the beginning of the year, the UK’s referendum to exit European Union and Mr. Donald Trump’s election as the President of the USA added to investor anxiety. Despite various issues, the year ended on a positive note giving way to revitalizing manufacturing, improving trade and market scenario among various economies, and stabilizing interest rates. Driven by these factors, the global economy is expected to rebound strongly and grow by 3.5% in 2017.
Closer home, the scenario was much different. Indian economy continued to remain buoyant amidst global despair. Though the growth rate declined from 7.9% in 2015-16 to 7.1% in 2016-17, led by slowdown from demonetization, the country continued to be the fastest growing major economy. The fundamentals of the country amidst stable political climate, reducing repo rates, strengthening foreign exchange reserves, healthy inflation levels and likely implementation of Goods and Services Tax (GST) remain strong. India’s GDP growth for the years 2017-18 and 2018-19 is projected at 7.2% and 7.7% respectively.
Globally, the pigment industry is estimated to witness a robust compounded growth of 5.4% during 2016-2023 driven by stringent growths in the textiles and food & beverages industry. In India, the dyes and pigments is at an important inflection point. While domestic demand is showing positive trend with textiles industry projected to grow at a CAGR of 10% over the next five years, the vital development of reducing government support to the manufacturers and tighter pollution control norms in China have impacted their competitiveness, even leading to several shutdowns. China being the largest dyes and pigments manufacturer in the world, the trickle-down effect of this development is likely to favour Indian manufacturers who are more environmentally compliant and cost competitive. It is estimated that the production of dyes and pigments in India would grow at a CAGR of 11.4% during the five years leading to 2019. Export during the same period is likely to grow at an estimated CAGR of ~15%.
During the year under review the performance of your Company has been outstanding with sales volumes rising 6% to 7760 MT. Besides, with supply constraints in the market and rising crude prices, the average prices of dye intermediates during the year increased by nearly 55% enabling us to earn better margins. Total revenues increased by 38 % from Rs. 18770.61 lakhs in 2015-16 to Rs. 25965.21 lakhs in 2016-17, while share of exports increased from 82% to 90%.
Profitability during the year grew even stronger as expansion of capacities undertaken in the past along with effective cost management initiatives facilitated in better overhead coverage. In absolute terms, the EBITDA and PAT increased 147% and 212% respectively to Rs. 7948.40 lakhs and Rs. 5191.88 lakhs respectively. In margin terms, the EBITDA and PAT margins increased 1344 and 1113 basis points respectively to 30.61% and 20%.
With massive growth opportunities lying ahead of us, we have embarked on several strategic capacity expansion and backward integration program expected to be materialized over next 15 months at an estimated investment of Rs. 175 cr. The expansion plan includes adding 2,280 TPA of CPC Green, 1,800 TPA CPC Blue, 1,200 TPA H-Acid and 10,000 TPA of precipitated silica capacity. This shall allow us to meet demand of existing as well as new customers.
We have also undertaken the strategic decision of entering the Specialty Chemical business by commencing with the manufacture of Precipitated Silica which is widely used in rubber and tyre industry. This shall diversify our business offerings while enabling us to earn better margins.
In our existing dye intermediate business, we have added H-Acid which shall facilitate us to increase offerings to existing customer for further strengthening customer relation.
In the past five years we have also made investments amounting to Rs. 10 cr towards process upgradation and environment management that has enhanced our competitiveness in the industry. One such investment in the past year was towards acquiring Brine System which has enabled us to enhance control of process steps resulting in better pollution control and capacity utilisation by reducing load of ETP.
We have also filed for trademarking of our Company’s (AKSHARCHEM) and product’s (ASAFLOW) name to safeguard and promote our brand.