Astec life
FUTURE GROWTH TRIGGERS
1…we want to increase our EBITDA
margins from 20% to 25%. We want to grow at the rate of 20%compounded.
2…New herbicide plant
=Now reaching close to
completion of the construction of the plants and we want to inaugurate the plant in the third week of February 2021 , so the full impact of the revenues will come in 2 years of the
commissioning.
=The herbicide plant is being used for contract manufacturing,
= ICRA notes the company’s planned efforts towards diversification with the ongoing capex towards setting up an herbicides manufacturing facility, which is expected to commence operations in FY2021.
3…new R n d setup
… Furthermore, it is making
investments for setting up a new R&D facility, which is expected to result in a significant boost to its R&D
capabilities and will facilitate its new product development plans.
=At the moment, we are not really doing early stage research. Our new R&D center, which is
going to be commissioned next year will be at a scale where we can start doing the contract
research part as well. Currently we are so busy with doing process development and bring
products online that we do not have the bandwith to do basic research.
=We come at a stage where there is either a product without a technology, we just have to do the process
development or there is a tech available and then we take it and take it forward
=. So those are the two models at the stage, the development of the molecule, we are not involved for the
moment, this is the plan for the future.
=Furthermore, the company’s investments in the new R&D lab are expected to
provide a significant boost to R&D capabilities, enabling it to develop new products and also benefit from the opportunities that the global demand shift from China may present for the Indian entities.
…we want to increase our EBITDA
margins from 20% to 25%. We want to grow at the rate of 20% compounded.
= So we need to develop the capability, which attacks the higher margin
products, so what are we doing in the new R&D facility
=, we are going to be developing
capabilities through
-fluorination as you know Navin Fluorine, SRF have a monopoly on
this, we are going to develop the capability for this.
- Organometallic chemistry,
- chiral chemistry,
- high pressure chemistry,
- flow chemistry, hydrogenation, some biochemistry
these are just the short list the kind of things that we will be developing in the new lab,
4…Backward integration
=A new plant to manufacture the intermediates was commissioned during 2018-19 at mahad and is performing as per
expectations. This has led to improvement and stability in margins and less dependence on China.
=This is not only helping the Company in reducing its reliance on
China, but is also aiding in margin expansion.
= Astec’s operations are
supported by its backward-integrated operations, providing a steady supply of raw materials at cost effective rates, thus reducing the reliance on Chinese imports to some extent and aiding in profitability improvement.
=We import 70% of our total purchases, of that 75% comes from China.
=Yes, the good news is that we have commissioned one product, 50% of our purchases from
China of one particular product and we have commissioned that plant, we have the position
to make as much as we need, so depending on the price from China, we are the make or buy
from there, so that immediately brings our total purchases from China down from 50% of our total purchases to 25% if you chose to do that , so we do not have a specific number, but
as far as possible we want to minimize the dependence on China and that is ongoing
activity.
5…expansion of manufacturing capacity of certain
existing products
= Measures taken by the company for adding capacities
by way of new manufacturing plants as well as de-bottlenecking existing capacities through process improvements augur
well for the business amid growing demand in India due to supply disruptions in China and high utilisation of existing
capacities.
6… china derisk strtegy
=Disruption in the supply of agrochemicals from China
places India at a sweet spot with international firms, as the latter are looking at partnering with Indian
manufacturers for contract manufacturing business.
=This provides a long-term revenue visibility to the Indian agrochemical companies.
=As global companies look for alternate manufacturing locations outside China, the opportunity available to Indian manufacturers including your Company
will be huge. Organizations with deep technical capabilities of technical or intermediate chemistries are likely to gain from this shift / diversification of the manufacturing base.
7…The Company has
made substantial investment to bring Environment,
Health, Safety (EHS) standard to international levels. The
Company is therefore optimistic of making substantial
strides in developing this business segment and
developing new products.
8…new molecule
=next financial year about 2 to 3 molecules
and every year we want to launch at least 2 molecules.