Building on the thoughts and questions raised by the collaborators.
How much will Dynemic be backwardly integrated after this expansion?
I went to the website and listed down all the food and D&C (FD&C) colours they manufacture. From Dynemic’s, Neelikon’s, and Vidhis’ recent EC filings, I listed the RMs required to manufacture each of these FD&C colours. Here are some of my findings-
- There are some very common RMs like Carbon, Sulphuric Acid, Ice, Sodium Chloride, Sodium Nitrite, Soda Ash, Hydrochloric Acid, etc that are used in all these FD&C colours and can be easily sourced domestically.
- Each FD&C Colour has its own uniqueness and requires some unique RM(s). In total, there are ~45 such unique RMs. There are around 30 RMs that are missing and Dynemic would still have to procure.
From what I could gather till now, Dynemic has very strategically done backward integration in those molecules where a lot of domestic players are not present and has left those chemicals where there is enough domestic presence. There are a few high chemistry molecules which either have no domestic players or very few present, and hence, will have to be imported. The chart below does not have the common RMs.
Since 60% of the Dye Intermediates (DI) will be sold commercially, what is the competition like in the Dye Intermediates Dynemic has proposed to manufacture?
There are 22 DIs that Dynemic has proposed to manufacture. What is interesting to notice is that most of these DIs have only 4-5 credible domestic manufacturers and only a few companies manufacture more than 4-5 DIs from this list. I could not find any listed player that is manufacturing even 3-4 DIs that Dynemic has proposed. Some companies that manufacture more than 5 DIs that Dynemic has proposed are- Emco Dyestuff, Pravin Dye, Macson Colour, Anjanee Chem, Excel International, Ambuja Intermediates, Shriraj Ind, and Himalaya Chem.
I urge valuepickr members to tap into their network and see if we have friends and family in these companies so we can understand the Dye Intermediate industry better as this will be a major growth factor going ahead.
Are the proposed Dye Intermediates commodity in nature?
We have already established that there is limited competition in a lot of the DIs proposed by Dynemic. Let’s have a look at what’s the nature of some of these DIs.
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Para Cresidine- From Atul’s EC filing-
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EBASA- V India Chemcical’s EC Filing
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EBASA- V India Chemcical’s EC Filing
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EBA- ISCPL is one of the only credible manufacturers of EBA. A snapshot from its website.
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Alpha Naphthol- Again, there are very few companies producing this and it has a varied application.
- There are multiple DIs whose proposed quantities are small like PANA, Quinaldine, NW Acid, Cleave’s Acid, Quinizarine but have very limited players present in the domestic market. We need to establish how specialised these are.
What about the RM that will be required for the manufacturing of Dye Intermediate proposed?
Dynemic is doing backward integration but will require RM to manufacture those dye intermediates. Dynemic’s EC document has mentioned the RM required to manufacture each of these DIs. I listed the RMs required to manufacture each of these DIs. Here are some key highlights-
- Here again, there are some common RMs like ODCB, Soda Ash, Catalyst, Sulphuric Acid, Caustic Lye, HCL, Nitric Acid. These can be easily sourced domestically.
- Each DI requires a different set of RMs and in total there around 30 such RMs. Out of these, around 20 can be easily sourced domestically. There are no or very few domestic manufacturers for the remaining. I have skipped the common RMs in the chart below.
Conclusion:
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Dynemic has very strategically done capex into RMs that can’t be easily sourced domestically (apart from a few) and has left out others where there are plenty of domestic manufacturers.
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Dynemic will not be 100% backward integrated. They will still need to procure a few Dye Intermediates and RM to manufacture proposed Dye Intermediates but most of these RMs are easily available domestically.
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Dynemic will still have to import certain RM but that is now very small in number. Some key RMs that will still need to be imported are- Naphthalene, Beta Naphthanol, Paraldehyde, Lead Dioxide, DMAS, PAAB, Meta Xylidine, EDTA etc.
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60% of the Dye Intermediate capacity will be sold commercially. Most of these DIs (>70% of proposed 12,800 MTPA) are manufactured by only 4-5 other companies. Some of them have been categorised as specialty chemicals by the players already manufacturing it. We need to establish if there is enough demand for these DIs and if they have applications other than FD&C colours then Dynemic won’t find it difficult to sell these since many of these will be import substitutes.
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Dynemic has proposed to manufacture certain chemicals like- ANA, EBA, Para Cresidine, and Quinaldine, that don’t go directly into making food colours but are RM for manufacturing Dye Intermediates.There are very limited players manufacturing these in India.These form around 40% of the total 12,800 MTPA proposed DI capacity. Then there are products like Michler’s Hydrol and Fluorescein for which I could not find any credible domestic manufacturers.
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There are some ECs that I could find by companies like Macson Group and Paraswanath Intermediates that are coming up with capacity in the dye intermediate space and have some common products that Dynemic has also proposed. Sign of rising demand?
Further course of action-
- Get in touch with a dye intermediate industry expert and figure out what the demand and market is like for the proposed DIs that have limited domestic competition.
- Collect Import data for the proposed DIs. Could use some help here from the data experts.
- I plan to do a similar exercise for their proposed Bulk Drug and Intermediates.
I am attaching the raw excel sheet which was used to create these tables.Dynemic Intermediate (1).xlsx (63.7 KB)
Disclosure: Invested.