53rd Annual Integrated Report 2023-24
53rd Annual Integrated Report 2023-24
Deepak C. Mehta
Chairman & Managing Director
We are delighted to present our 53rd Annual Report for the Financial Year 2023-24, showcasing Deepak Nitrite’s consistent performance in a challenging operating environment, driven by our manufacturing prowess, integrated infrastructure, R&D expertise and nimble operations. Our focus remains on making strategic investments and building a resilient business model through strong integration.
FY 2023-24 was a pivotal period for Deepak Group, with key milestones achieved such as MoUs with the Government of Gujarat, binding Term Sheet with Petronet LNG and our entry into fluorination. To solidify our position as a leader in India’s burgeoning market, we are strategically investing in both forward and backward integration projects. This means developing cutting-edge facilities, introducing new products and optimising our processes. Through this comprehensive approach, we will fuel our expansion and establish ourselves as a truly distinct player in the high potential Indian markets. Over the next five years, we plan to establish a world-class integrated complex, to drive domestic growth, meet global demands and position Deepak Group as a leading player in the chemical industry.
Looking ahead to 2025, the global economic outlook is strengthening as uncertainties diminish, prompting major Western central banks to consider interest rate cuts. This move is poised to enhance capital flows to India, stimulating private investment and exports. Although inflation concerns may persist into the latter part of the next fiscal year, the Asia-Pacific region remains a stronghold, driving 60% of global growth. Factors such as robust domestic consumption in ASEAN nations, significant public investments in China and India and flourishing tourism in Pacific Island nations continue to bolster the region’s resilience despite geo-political challenges.
India has demonstrated adeptness in navigating recent economic disruptions, solidifying its position as one of the world’s fastest-growing major economies. In FY 2023-24, GDP surged to 8.2%, exceeding the initial forecasts. The IMF has raised India’s growth projections stand at 6.8% for FY 2024-25 and 6.5% for FY 2025-26, up from earlier estimates. With inflation hovering near the target of 4% and expected to decline further, consumer spending is anticipated to drive economic momentum. India’s proactive economic reforms, substantial public investments and a robust consumption outlook underscore its promising growth trajectory in the coming years, supported by enhanced global engagements and demographic dividends.
The global chemical industry surged to USD 6.0 Trillion in 2023, despite several challenges. It is poised for robust demand driven by products supporting the energy transition and bolstered by Government policies. The sector’s evolution towards sustainable solutions aligns with global environmental goals.
India’s chemical sector is pivotal to the economy, contributing approximately 7% to GDP and ranking as the sixth-largest producer globally. It is projected to reach USD 304 Billion by 2025 at a CAGR of 9.3%, benefiting from increasing domestic consumption and demand across diverse industries. Government initiatives like ‘Aatmanirbhar Bharat’ and ‘Make in India’ aim to reduce import dependence and bolster domestic manufacturing, further strengthening the sector’s growth trajectory.
Despite challenges such as volatile raw material costs and infrastructure limitations, India’s chemical industry is positioned for significant expansion through capacity enhancements, investments in R&D and export opportunities. Favourable Government policies, competitive labour costs and a strategic focus on sustainability and innovation, position India as a key player in the global chemical landscape. On the demand side, several factors are propelling growth like surge in domestic consumption, growing appetite for sustainable products and continuous advancements in technology.
Entering FY 2023-24, we encountered a complex business environment marked by challenges like Chinese dumping, destocking and geopolitical tensions, alongside economic slowdown in the EU zone and high interest rates globally. Despite these hurdles, we effectively managed our supply chain, ensuring seamless service for our clients.
Amidst evolving customer demands and adjustments by Chinese suppliers, we optimised our operations, achieving record production levels and enhancing efficiency across key product lines. Leveraging strong partnerships and brand equity, we stimulated growth through increased volumes and substantial cost savings in yield and energy.
Our consolidated efforts yielded robust results, translating to volume growth, enhanced plant efficiencies and successful commissioning of our fluorination plant at Dahej. Expansion initiatives, such as the Research and Technology Centre and strategic partnerships, further strengthened our business proposition.
Looking ahead, India’s chemical sector offers immense growth potential. Our focus on operational excellence, byproduct valorisation and strategic investments positions us well to capitalise on emerging opportunities in India and global markets. With a vision for integrated operations and foray in high-value speciality products, we are poised to lead amidst industry challenges, driving ambitious growth strategies in the years ahead.
Deepak Nitrite is pursuing strategies to integrate backward and start from basic building blocks on one side and to integrate forward to come close to selling performance products. This would not only enhance profit margins but would also make our product value chains more resilient. In particular, through our ongoing capex programmes, we are creating the following:
Leadership in Nitration: Our projects for backward integration to make our own Nitric Acid for all our nitration products, our own benzo-tri-fluoride for our specialities, will add sustainable resilience to these businesses. Additionally, this is also expected to reduce carbon emission by more than 75% in logistics movements of these inputs.
High Value Solvents: Similarly, forward integration to make Methyl Isobutyl Ketone (MIBK) and other solvents from our product, Acetone will further add value and increase our bouquet of Solvents for the pharmaceutical and agrochemical industries.
Deepak Nitrite is charting a transformative path by establishing an integrated facility towards manufacturing building blocks, intermediates, speciality chemicals alongside high-performance polymers, advanced materials and effect chemicals. These strategic initiatives underscore our commitment to the India-first narrative by offering innovative and high quality products in a sustainable manner.
Our vision encompasses building global scale plants to serve the rapidly-growing domestic market while leveraging access to building blocks and adopting most optimal processes and technologies. We also aim to create a competitive speciality business for both domestic market and select export markets, by integrating knowledge-intensive capabilities with our robust research and development competencies. This dual focus allows us to harness large volumes and address the demand-supply gap for intermediates in India while striving to become strategic partner for global and domestic customers.
To progress on this growth path, Deepak Chem Tech has signed two MoUs with the Gujarat Government, totalling ~₹ 14,000 Crores investment outlay, including a previous commitment. During FY2024, we entered into a binding Term Sheet with Petronet LNG for supply of critical RMs over a long-term period from their proposed facility at Dahej, which will help us mitigate key risk for future operations.
A dedicated project execution team has been established and preparations for a special project subsidiary are underway. In the next few years, we will add new verticals in material science, particularly speciality polymers and their compounds. This expansion will enable us to serve new high-value segments in growth sectors such as automobiles, electronics, semiconductors, healthcare, etc.
New polymers that we plan to manufacture are:
Polycarbonate (PC) resin: This is one of the fastest-growing engineering polymers with end use in electric vehicles, electronics, semi-conductor, mobility, medical devices, defence equipment - to name a few.
India is 100% import-dependent for its PC requirements and we are targeting to become the first domestic player to reduce India’s import dependence.
Methyl methacrylate (MMA) along with its Polymer Polymethyl methacrylate (PMMA): In addition to manufacturing of PMMA (which finds applications in industries such as electronic components, automotive, healthcare, furniture etc.), MMA also finds major application in acrylates-based paints & coatings. Here again, India is 100% import-dependent and we are committed to improve self-sufficiency by setting up country’s first MMA/PMMA facility.
Both the above projects integrate well with our target of doubling our PhenolAcetone capacity in the near future. As a part of this growth agenda, we are also planning to set up India’s first Bisphenol-A (BPA) plant, which is key intermediate for producing PC as well as Epoxy Resins.
As we continue to progress on these growth projects, to take our vision forward, we are building new state-of-the-art research and development (R&D) facility at Savli, Vadodara, slated for completion within this financial year itself.
We have already commenced production of our fluorination asset in Dahej, enhancing our backward integration for crucial agrochemicals and opening up of various newer avenues of manufacturing opportunities. Various developments such as these will support the domestic market, highlighting the importance of meeting local needs while selectively expanding internationally.
Additionally, DNL has increased its stake in Deepak Oman Industries LLC (SFZ) (DOIL) to 51%, making it a subsidiary. This strategic investment aligns with our goal of strengthening our market position and expanding our operational capabilities.
Over the next five years, we anticipate a blend of opportunities; some will enhance our topline, while others will bolster our resilience by improving competitiveness and value addition. Deepak plans to cover the entire spectrum of petrochemicals, engineering polymers and speciality and performance products, often holding the first-mover advantage in the Indian market. Our targeted investments in downstream of phenol/acetone, as well as focus on operational excellence, integration and value addition to produce speciality chemicals are strategically positioning us to create sustainable competitive advantage.
Our ongoing forward and backward integration projects are central to our vision, strengthening our position across the product value chain. By setting up global-scale plants for India’s flourishing market, we aim to meet the rising demand for intermediates while becoming a preferred partner for global clients seeking reliable supply of quality products in specialised chemistries.
India stands at an inflection point, presenting immense opportunities amid turbulent times in the chemical sector. Recognising this, we have meticulously crafted value chains to ensure sustained growth in revenue, profitability and resilience against international challenges. Our strategic investments over the next 4 to 5 years will expand our capabilities, including ventures into material science with a focus on speciality products and compounds.
Despite challenges, we are steadfast in growing our market share and enhancing our competitive edge. Our commitment to broadening our product offerings, fostering client relationships and driving innovation underscores our readiness to seize opportunities both domestically and globally.
We have approved an ESOP plan to reward and retain key talent, aligning their efforts with the Company’s long-term success.
With a robust financial foundation and a clear vision for the future, Deepak Group is poised to lead the chemical industry by delivering superior value for all the stakeholders and pioneering advancements that define the next era of growth and excellence.
I sincerely thank all our stakeholders, including shareholders and investors, for their unwavering support. The dedication and hard work of our employees have been vital in achieving our ambitious goals and realising our vision. The invaluable guidance of our esteemed Board members has been a source of wisdom, steering us through every challenge and opportunity. Thanks to the collective efforts of our entire team, Deepak Nitrite and Deepak Phenolics Limited have consistently delivered exceptional value on a global scale.
Looking to the future, we are optimistic about the numerous opportunities that lie ahead. Our commitment to growth is matched by our determination to stay agile, allowing us to adapt swiftly to the constantly changing landscape of our industry. This adaptability ensures that we can continue to innovate, excel and lead in our sector.
In conclusion, I extend my deepest appreciation to everyone who has been part of our Company’s incredible journey. Your support has been instrumental in our success and we are honoured to have you on board. Moving forward, we are committed to pursuing sustainable growth and creating enduring value, guided by a shared vision of excellence and progress. Thank you for being an integral part of our narrative.
Best Regards,
DEEPAK C. MEHTA
Chairman & Managing Director
