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| The
Speciality Chemicals Industry - Above The Ordinary |
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What
would one say about the prospects of an industry where the
promoter entities are queuing up to increase their share in
the listed companies? The answer, in one word, would be "promising".
And indeed, for most of the leading companies in the speciality
segment, the future is indeed promising.
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On
the domestic front, with the reduction in tariffs, Indian
companies with strong systems and organised operations have
benefited in the liberal environment. Globally, the easing
of GATT regulations by 2005 will mean free trade and greater
opportunities. Companies with competitive advantages, like
having competence in the areas of high value-added chemicals,
conforming with international quality standards, have translated
this as a growth opportunity to establish a dominant presence
in both international and domestic markets. These will do
well going forward.
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Ciba
Speciality Chemicals has seen the overseas parent's shareholding
increase to 89 per cent from 40 per cent, which was executed
through an open offer. Domestic major Jubilant Organosys has
also seen an increase in promoters by 3.3% since July 2001,
through the creeping acquisition route from the open market,
in line with Sebi`s guidelines and regulations. The promoters
have gone on record saying that further increase in stake
is a possibility. Such an attitude is a telling comment on
the outlook for the industry as well as the entrepreneurial
commitment.
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| Overview
and Profiles |
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In
general, this industry has seen a lot of volatility, largely
due to merger and acquisition activity in the international
markets, which has spilled over to the MNC segment in the
local market. For instance, Ciba Speciality Chemicals is a
spin-off of the merger of the global behemoths Ciba and Sandoz,
the other creation being the pharma giant Novartis. Similarly,
Schenectady International, through its Indian affiliate, has
increased its stake in Dr Beck and Company (which has resulted
in the company being rechristened Schenectady Beck) and the
Duncan group's Herdillia Chemicals (which is now Schenectady
Herdillia Chemicals). Let us look at the profiles of some
of the prominent players.
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The
speciality chemicals field covers a wide swathe and as such
it is not practically possible for any single company to cover
the entire spectrum. However, Jubilant Organosys (formerly
Vam Organics) certainly tries to do just that. Today, as the
largest Speciality Chemicals Company in India, it is the leading
manufacturer of acetyl products, pyridines and pyridine derivatives,
fine chemicals, animal feed, additives and other chemicals.
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The
company is amongst the global leaders in manufacture and development
of pyridine and pyridine derivatives. The Corporate Headquarters
are at NOIDA (near Delhi). An international subsidiary in
USA and a marketing office in China support the company. Exports
go to over 50 nations. The business is organised into three
sectors namely Organic Intermediates- Speciality and Fine
Chemicals, Performance Chemicals, Plant Health and Animal
Nutrition. Revenues stood at over Rs.8000 million for 2001-02,
impressive for a field where medium-sized companies and limited
product portfolios are the norm. Speciality chemicals contribute
57% of this. The company has grown from a single-site operation
to a three-site operation. It has gone in for the merger of
group companies Vam Leasing Ltd and Vam Investments Ltd with
itself.
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Ciba
Speciality Chemicals, as noted earlier, was incorporated in
January 1997, following the global merger of Ciba Geigy and
Sandoz to form Novartis. The speciality business of Ciba-Geigy
was demerged into this company. Today the Indian arm has annual
revenues of Rs.4800 million. It has also gone in for further
restructuring, selling off its performance polymers division
to the private equity arm of Deutsche Asset Management two
years back, and taking up a 50% stake in Indo-Swiss Textile
Chemicals Ltd (with which it subsequently amalgamated). It
also absorbed another company, Pigment Specialities India
Ltd, into itself.
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Pidilite
as a company needs little introduction. It is one of the largest
players in the synthetic adhesive market with a market share
of 60 %. The Fevicol brand is synonymous with synthetic adhesives.
However, the company has over 40 brands and is not a single-product
entity. The year gone by saw some more products launched under
the umbrella brand of Dr.Fixit.
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Pidilite
has a strong retail focus and to that effect has a gigantic
distribution network, with over 1,000 stockists, 33,000 dealers
and around 300,000 retail outlets. The company has a conscious
policy to reach out to its target segment and already enjoys
a strong recall value among the carpenter and cobbler fraternities.
This year, it acquired the electrical insulation brand Steelgrip
from Bhor Industries, a strong brand in its own right. With
this, Pidilite now plans to make itself equally popular with
electricians.
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Let
us look at the core sector supplier Schenectady Beck India
Ltd. Formerly, Dr. Beck & Co (India), it was promoted in 1956
by Mahindra & Mahindra in collaboration with Dr. Beck AG (a
100% subsidiary of BASF AG, Germany). In 1997, when Schenectady
International Inc (SII) entered into a purchase agreement
for the global business of Dr Beck AG, Schenectady (India)
Holdings acquired 51% of the equity of the Indian arm. The
company manufactures a wide range of products in electrical
insulation and construction chemicals at two plants, and most
of its customers come from areas like defence production,
railways, telephone industry and heavy electrical industry.
It also has an export presence in insulation and a portfolio
of private sector customers.
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Schenectady
Herdillia Chemicals Limited is one of the largest domestic
basic chemical manufacturers. Besides phenol, it has products
like acetone, phthalic anhydride, phthalates, heat transfer
media, and other basic chemicals, industrial solvents and
plasticisers in its sales mix. While basic chemicals account
for 50% of the sales, which stood at Rs.2600 million in 2001-02,
industrial solvents contributed more than 25%. The company
has a wide export market for its products. This company was
earlier a Duncan Goenka group company till Schenectady increased
its stake to 81 per cent from 61 per cent via a preferential
allotment. Last year was a bad year for the company and the
fund infusion is expected to help fund its expansion and modernisation
plans.
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