@ankit_tripathi since I have not seen the presentation you are referring to, cannot comment on it… will be happy to look at it if you can share a link…but yes, you could be right, that the current production / supply of Chemcons products may be larger than demand… having said that, that does not necessarily mean that a company cannot expand its business, or should not expand its capacity. That will be taking a very narrow view of the given data. Let me elaborate on this, and for this I will paste some lines from my very first post on this thread.
- As per Frost & sullivan report, HMDS demand in India is projected to grow at CAGR of 5.6% in next 3 years. India is currently net importer of HMDS, with 52% of its demand in 2018 met by imports, mainly from China. Chemcon is the only HMDS manufacturer in India. Hence, by substituting imports and catering to India’s HMDS market, Chemcon has an opportunity to grow at a CAGR of ~20% between 2018 and 2023 in the HMDS Segment.
- India and China are the ONLY 2 countries in the world to make CMIC. India has 45% market share, and China has 55% market share of global production.
- India has the largest demand for CMIC, with 65% of global consumption. This demand is growing very fast. CMIC is critical input for HIV / Hepatitis B life-saving drugs.
- As per Frost & Sullivan report, global demand for CMIC is predicted to grow at CAGR of 12.5% between 2018 and 2023, with demand in India expected to grow at 14% CAGR in the same period. Currently, India is a net importer of CMIC, with 50% of its demand being met through imports from China.
Please refer to the above points… There is strong growth projected in these products, not just in India but globally too. Now, its possible that projection for growth could go totally wrong, so lets just ignore them for now… In both these products, India is a net importer by a massive margin. This despite Chemcon being India’s ONLY producer of HMDS and 8th largest globally… and India’s largest producer of CMIC and 2nd largest globally. Given its market leadership position within India, and given all the anti-china rhetoric in recent past (and the china + 1 strategy) expanding market share aggressively through import substitution should be well within its reach.
What stops it? Current capacity utilization. Capacity utilization in FY19 for HMDS is 93%, for CMIC is at 95% and for Bromides is at 57%. If this data is true, then capacity expansion is the only logical way ahead. Besides, the IPO event is barely 4 months old… so if the company did not have plans to expand, why would it launch an IPO with one of the stated objectives for fund raise being capacity expansion? Hope this clarifies.