ValuePickr Forum

Chemcrux Enterprises - A dark horse?

Yes, once equity capital reach 10cr+ then they can move to normal BSE segment with no limitation of minimum purchase quantity. There are two ways of it -

  1. Equity dilution through FPO or rights.
  2. More shareholder friendly way is bonus share issue. Many SMEs did that. Given the current reserves and surplus of Chemcrux, it won’t be a difficult task.

I don’t know when that happen, but sooner or later happen for sure and then the stock will command proper valuation.

Exactly, they carefully choose some import substitute niche products. Maybe this is the reason, factory manager (Vipul) told me that he never faced any demand concern or slowdown in enquiry. The challenge seems with the expansion not with the market demand.

No idea about them, but one interesting observation is, out of 49 Lacs odd shares, 73% is with promoters, 2% with me, 5% with my very close circle HNIs since 2017, another 3% closely held, leaving only 17% odd approx 8 Lacs shares, not sure out of that 8 Lacs shares how much is closely held! Wider equity base is required both for BSE main board migration and proper valuation. I will bat for bonus in the upcoming AGM.

They did expansion in FY19 within the existing premise. More than EC approval, I am betting on prudent product mix which was the growth driver for the last many years. I know, after some point, any company can’t grow topline merely prefering higher value added products but still besides EC approval and further capacity expansion, I am hopeful about growth due to prudent product mix and value added products

Sanjay Marathe and Girish Shah - they are the driving force of the company and all key decision makers. Apart from them, in my view, all remaining employees are in normal payroll (as of now). Few employees are associated with the company for decades but they are neither decision maker nor have ownership interest.

The company is too small for separating R&D division or any such. One of the promoter, Sanjay Marathe has in-depth technical expertise, R&D and product selection might entirely coming from his brain. Another promoter Girish Shah also has in-depth technical know how but mostly oversee marketing, customer relation and all other matters.

Another point I like to share is that, I had interacted with a lot of SME companies in the last 3 years and found Chemcrux management (Mr Girish Shah) is the only one that consistently “UNDER PROMISE - OVER DELIVER” while other SME promoters always promise tall! If you follow post FY18 management commentary (check BSE announcement during May 2018), you will find they talked about 30% growth guidance in FY19 due to expansion. However, they outscored their own guidance with approx 75% topline growth in FY19. Further, in last year during company visit, Mr. Girish Shah told me don’t expect similar 75% growth in FY20, rather guidance was no such growth in FY20. However, in FY20 topline registered 4.5% growth with 14% jump in net profit! Again in FY21 guidance they mentioned about the probability of impact in profitability due to COVID-19 lockdown and all. Let’s see whether once again they can outscore their guidance.

As per my experience, it is next to impossible to predict growth correctly for any small business (not talking about large companies) due to the ever changing business dynamics. I can’t say with assurity how much my own business can grow in the coming years as there are always a lot of moving variables. So, apart from large established business (like RIL, TCS, Infy etc), guidance from any small company should not be considered seriously. However, while a small company like Chemcrux always outscoring its own guidance, it requires serious attention and offers testimony about the management quality!

Disc - Invested since 2017


I won’t hold my breath. Some managements are minimal. I don’t see the transition to the main board happening in the next few months. For that matter, I don’t expect even the current lot size to change (unless mandated by SEBI rules or exchanges). I could be wrong but this is my belief.

This forum and everyone’s contributions have been very useful in me reaching the decision to invest in Chemcrux.

As a shareholder, I plan to email the company with a few questions gathered from this thread:

If someone would like to add to the questions or suggest modifications, please reach out to me for edit access or tell me via the forum or PM.


Newbie to valuepickr & investing here. I have been following this thread closely for a month and trying to gather as much data as possible. During the process, the share price skyrocketed to ~190 levels from 130. Tried to enter with faith around 150, but the order was not executed due to limited sellers. (Still not invested). The two things i worry most in this company is the expansion plan execution. As someone has mentioned here, the technical expertise mostly comes from one of the founders. It’s too much of a reliance in a single person and hopefully they nurture a team to take the company ahead. Also i am not familiar how a process driven expansion will span out, and constant switching of products as per market need will scale out. Another matter of concern is the limited information on raw materials and customer profile. Reading through the thread, they seem to have sufficient pricing power.


Environment Clearance

The question of environmental clearance is an important one for Chemcrux (since as ayush rightly mentions in an earlier post, EC rejection would result in capex being delayed by 2-3 years at least). I dug into this in some detail today and there are some very interesting findings:

  1. I started by going through the environment clearance website going over all requests filed in all years in Gujarat for project type “Industrial Project 2” the type which chemcrux filed their EC request under. No requests have been approved since 2019. In the district Bharuch (where ankleshwar is) itself, 3 requests are pending. This gives us some idea about the state of environment clearance in Gujarat.
  2. This seemed to be a bit surprising to me (No EC in last 1.5 years) and hence I googled a bit about Ankleshwar a bit. A few good readings that I found on the subject are summarized in the following points:
  3. Bharuch district and ankleshwar in specific has been a place caught between tug of war between industrialists and the NGT (National Green Tribunal) and Gujarat Pollution Control Board (GPCB). It has been this way for some years at least, with the Indian Drug manufacturers Associated creating a presentation in 2015 demonstrating what steps they had taken to reduce the pollution in Ankleshwar, requesting GPCB to lift the ban on expansion/diversification of APi manufacturers in Ankleshwar.
  4. In 2018 when NGT via its report published the CEPI (Comprehensive Environmental Pollution Index) for highly polluted zones in India. Ankleshwar was 88/100 (above 60 is considered to be dangerous) was one of the worst polluted places in India.
  5. As per this TOI article in sep 2019, bharuch district and ankleshwar in specific has been a place caught between tug of war between industrialists and the NGT (National Green Tribunal) and Gujarat Pollution Control Board (GPCB). The NGT report in 2019 had ankleshwar’s CEPI score at 80 (which is a reduction from the 88 last year) but the score was still above the NGT recommended level of 60.
  6. As per this recent July 2020 article in Business Today this kind of a tussle between industrialists and NGT has been happening all over the country. Supreme Court was hearing a case involving MOEF on one side and NGT on the other. The case involves a May 14, 2002 circular issued by the Ministry of Environment and Forests (MoEF) allowing “ex post facto” (retrospective) environmental clearances (ECs) to polluting industries. About the 2002 circular, the Pune bench of the National Green Tribunal (NGT) first held in January 2016, that it “is illegal, void and inoperative”. The MoEF and the affected industries challenged the NGT order in the SC. The top court’s April 2020 order upheld the NGT’s ruling that the circular granting ex post facto environment clearance is “unsustainable in law”. The apex court declaring “ex post facto” environment clearance illegal is just one part of its order. It struck down two other key orders of the NGT: (i) revocation of green clearances and (ii) immediate closure of the polluting industries (three pharmaceutical companies operating in Gujarat). Why? It said: “The directions of the NGT for the revocation of the ECs and for closure of the units do not accord with the principle of proportionality.”
  7. As per what I can see online, the AQI for ankleshwar is not that bad. It is at 55. It has been similarly low for about a month. This reduction could possibly be due to the lockdown (it is likely most industries are operating at < 100% capacity utilization). One will have to monitor this over the next few months to understand how the situation is on the ground in terms of pollution levels.

the TL;DR is that this is a highly complex issue with ankleshwar at the center of it. As an aside, I had observed earlier how Chemcrux had adopted the Green color very much for their AR since FY19. In fact environment and energy conservation find special mention in their AR in last few years. This is (as far as I can tell) representative of the management’s focus on ensuring full compliance with all environment regulations.

Based on my findings, I’ll appropriately modify the questions I seek to ask the management.
As of right now I won’t modify my investment. Chemcrux is a good company for investing in. This specific capex might face EC headwinds, but it is difficult to stop a small company which wants to do capex from expanding. The long term investment thesis is still valid, this investigation just highlights the focus that current systems have on being environment friendly and how companies need to adapt in order to comply with existing regulations.


i would like to add that

  1. As per EIA notification of 2006 which lays down the process for obtaining an EC. A project is issued a ToR ( terms of reference ) by expert appraisal committee for which a project needs to prepare a EIA draft.
    a EIA report is used for conducting public consultation with the communities who would get affected by the project. The concerns raised during the consultation are incorporated into the EIA report.along with mitigation measures for those concerns before finalizing the report.
    Any project needs to carry out the public consultation process as per the EIA notification, which consists of two elements- conducting an onsite public hearing and inviting written responses from other stakeholders. The list of public hearings are on the GPCB website.
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The recent update about chemcrux on GPCB
Minutes_498th_SEIAA_Meeting chemcrux.pdf (62.4 KB)


Hi All, What does “Terms of Reference” order means?

ToR, in this issue is the concerns mitigated by the local community while preparing the report.
This is basically the pros and cons as per the public view in approving the project.
This is prepared by an on site public hearing by the EAC ( Expert Appraisal Community).
Hope I’ve answered your question.

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@karanthharsha999 Thanks very much for reply. I have one further question.

When does the ToR order comes in the EC approval cycle. Does it come in the beginning of the process or during the final stages?

The application from the pollution board had been taken up and during lockdown has been given to note any terms of reference points which forms the final report of approval or rejection based on whether the company’s expansion plans does

  1. Not violate the rules and regulations of the board
  2. Not harm the local community in any way by means of water pollution, air pollution or in any other way.
  3. if so, measures taken by the company to compensate it. Keeping this in preview, the board makes sure to keep deposits worth lakhs from the company before approving the EC.

These form the terms of reference.


I have a question and made some assumptions with respect to the process driven products of the company.

How much does the process driven products of the company based on demand, attract new customers with respect to time?

Time - clients- profitability- future competition.

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I had sent my queries to the company few weeks ago. Got the replies today. I quote directly:
" Dear Mr. Sahil,

Hope you are keeping well. With reference to your queries, I am advised to answer as below :

  1. Could the company please share specific examples of their process-driven culture? Would it be possible to share examples of specific production transitions from lower value-added to higher value-added which resulted in company sales to increase even when capacity utilization was near 100% in the past?

Answer: The Company’s production is organised around certain chemical processes. Due to all in house developed processes, process change over in the same chemistry is easy. As an example, suppose we are making para nitro benzoic acid, and ortho chloro benzoic acid is going well, it is easy to reduce production of one and increase the other.

  1. Ankleshwar in specific and Bharuch district in specific have been at the center of a tug of war between the NGT and GPCB on one side and the industrial bodies on the other side. Given the highly polluted nature of Ankleshwar (CEPI of 80+ as per NGT), the EC for the new capex management is seeking to do in Ankleshwar looks uncertain. Is it possible for the management to do the capex in some other location instead (where pollution concerns are not that high)?

Answer: We are hopeful of getting clearance at our existing site this year. However, as abundant caution, we have looked for other sites.

  1. On a related note, what is the status of the planned capex? From the balance sheet in the Annual Report for FY20, it appears that the land and buildings have already been acquired (Going through note 12 of the balance sheet in AR 2019-20). Is this correct?

Answer: A 1000 sq m plot was acquired for warehouse and R&D centre. Warehouse from the current site has been moved to the new site. This is to free up space at existing site for the planned capex.

  1. Could the management please talk about some of their largest clients? This information does not appear to be on the company website.

Answer: We have large domestic and MNC pharma companies as clients, and a few dye companies. We would not like to reveal the names.

  1. Would the new capex being done preserve the process-oriented nature of the company’s operations?

Answer: Yes, the new plant will be built with the same philosophy.

  1. Regarding the manufacture of some of the specific molecules like Lasamide, it appears that at least some processes are patented by chinese innovators. Does the company pay royalties to the said patent holders or does the company follow a process for manufacturing which is not patented by anyone?

Answer: We are not paying royalties to any company & company follows its in-house process."

I found the answers to be quite satisfactory. I’m glad the management is looking at alternate sites for the capex.


Thanks Sahil.

Appreciate your effort in getting these answers for the investor community.
On their EC approval, they seem to be very confident from their answer. Yes, good that management is keeping all the options open just in case.

As regards to their Clients, if i am not mistaken, one name that i came across in some reports is Sanofi.

Yes that is correct.

As posted by saurabh in the very first post, these are the clients. IIRC saurabh and others found these names by talking to some of the employees face-to-face.

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Useful insights, thanks for sharing. Given the tailwind for API sector, the cash flows and return ratios this company generates, it makes sense for them to go for one more site and undertake larger capex. Look forward to attend AGM.


Even I had posted few questions couple of weeks back. Following are the responses:

With reference to your queries and as suggested by management, please take note :

Regarding expansion plan

We already have received TOR & EC approval application is under process by Ministry of Environment, New Delhi, and we are hopeful to get the EC approval in the current FY.

Procurement of raw material

There are no impediments in procurement of raw materials whether domestic or imports.

Outlook for this year

There would definitely be impact of shutdown / partial resumption of operations , due to the pandemic on the production, turnover and profitability of the Company, but not with material / drastic effect. We are hopeful to mitigate the impact mostly in this FY as the demand in pharma sector is likely to improve in domestic and global markets.

Backward integration plans

There are no such Plans as of now.

Growth Plans

Yes, once we get the EC approval, shall work on strategy, in view of the current situation, as international scenarios are fast changing. Achieving 3 digits in this year is not likely, however, management is striving & working towards achieving in next FY.

Disclaimer: Exited with some good ST profits last week. Since I am not the shareholder now, request you all to attend the AGM and put up your observations. Very optimistic and interested in this, might re enter later.


Hi Saurabh…

Many thanks for sharing with us the detailed response…just one query my side…when you said achieving 3 digits this year…you meant the turnover…is that correct?

Best regards

Hello All,

Is anyone attending the Co’s AGM next week? If so, appreciate your updates post the event. Thanks.