Business

Dyestuff Makers Will See Revenues Rise Of 40-50% This Year

Dyestuff makers in India have caught the fancy of stock markets. The share price of nearly two dozen dyestuff manufacturing companies have witnessed a rally of 10-57% in just one month since the beginning of March. Companies like Shree Hari Chemicals, Kiri Industries, Bhageria Industries, Ishan Dyes and Chemicals, Chromatic India, Aarti Industries, Vipul Dyechem, NOCIL, Nitta Gelatin, Poddar Pigments, Asahi Songwon and Narmada Gelatines among others have witnessed a sharp up move in share price in just over a month. Manish Kiri, Managing Director, Kiri Industries, said, "There are multiple things which are coincidentally happening at the same time in favour of the company." Indian dye manufacturers used to face strong competition from Chinese dye companies. However, in a recent move to control pollution, the Chinese government has cracked down on some companies, which has led to the shutdown of a major dye manufacturer in China, which was contributing nearly 30% of global dye production. "Closedown of the Chinese unit has led to shortage of products in the markets and prices of some of our products have increased sharply," said Kiri. There has been a dramatic change in market situation of some dyes intermediates due to closure of a leading manufacturing plant in China, Hubei Chuyuan.

The average price of H.Acid, which has been ranging from Rs 300 to Rs 360 per kg during the previous financial year, has now shot up to about Rs 900 to Rs 1,000 per kg, Kiri Industries said. And the average price of Vinyl Sulphone, which stood at Rs 160 to Rs 180 per kg during the previous financial year, has risen to about Rs 240 to Rs 275 per kg globally, the company added. H. Acid and Vinyl Sulphone are intermediates (raw materials) to manufacture dyes which are used in different industries such as textiles. Kiri Industries has installed capacity to manufacture 7,200 million tonnes per annum (MTPA) of H. Acid and 18,000 MTPA of Vinyl Sulphone. Kiri said it would take some time for the Chinese players to reach the compliance level and reopen their plants. "We are looking at a topline of Rs 1,300 crore with 20% EBITDA margin in FY2017, if this situation continues for the first quarter at least," he added. For FY2016, Kiri Industries is expecting to report revenue of Rs 1,000 crore and EBITDA (operating profit) of Rs 160 crore. Kiri also said that the company has brought down its debt by more than 50% in FY16, which will result in significant reduction in interest of the company for FY16. Kiri Industries' debt now stands at Rs 411 crore, down from Rs 853 crore earlier.

Kiri Industries is not the only one to have benefitted from the closure of China's Hubei Chuyuan. Vinod Bhageria, MD, Bhageria Industries expects chemical prices to go up up 80-100%. He expects a 40-50% revenue growth in FY17 and expects the same growth in net margins for the coming fiscal. However, this revenue growth will purely be on the back of price increases and not volume growth, he added. Hubei Chuyuan manufactures about 2,000 tonnes of chemicals that accounts for about 30% of the world manufacturing. The shutdown is expected to result in a shortage of about 1000 tonnes of chemicals globally. H-acid is the most polluting industrial effluent, it is toxic and non-biodegradable, so capacities cannot be increased immediately, with the result that the industry will continue to experience high prices and margins for at least a year.