Dear Stakeholders,
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.
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.
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.
GLOBAL ECONOMIC LANDSCAPE AND INDIA'S RESILIENCE
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'S ECONOMIC GROWTH TRAJECTORY
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.
CHEMICAL INDUSTRY OUTLOOK
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 ASCENDANCE
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.
NAVIGATING CHALLENGES IN FY 2023-2024 : EMBRACING MARKET SHIFTS FOR
SUSTAINABLE GROWTH
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 e_iciencies 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.
EXECUTING PROJECTS TO IMPROVE RESILIENCE
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.
MAKING RIGHT MOVES : OUR FIVE-YEAR STRATEGIC VISION
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-su_iciency by setting up
country's first MMA/PMMA facility.
Both the above projects integrate well with our target of doubling our
Phenol-Acetone 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, offen
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.
FORGING A PROMISING FUTURE
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 cra_ed
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.
VOTE OF THANKS
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 swi_ly 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