Valiant Organics - High ROCE, debt free

[KushalKasliwal]

Vinati Organics

Q1FY19 Conference Call Notes: Notes in Italics are emphasis mine. 1st call after 5 years. ATBS Largest product with 50% of sales. FY18 finished with strong growth due to increased usage as applications of this product is growing. Used to make polymers that go into water treatment, EOR and personal care products. Lubrizol’s exit helped us as well. ATBS grew at 35% in value terms and 25% in volume terms in FY18 over FY17. Overall market size is growing. In FY19 we command global market share o…

@hack2abi

New products beyond PAP

For us to commercialize one product we have to study 10-15 different products at various stages of the RME pipeline. At any given time, we are working at 15-20 products, developing new chemistries, one ex. is that we could further integrate from BPs to make anti-oxidants. It is too premature to talk about any of them. This is what keeps us busy. Our products have a limited market size so to keep growing we need to keep adding new products.

Our criterion for new products is beyond revenue potential, we have set rules:

1. we look for 20% ROI,
2. it should be a clean and green process,
3. there should be a barrier to entry through a unique process, or there is an integration for us with our existing products.

Right now our biggest endeavour is to close on PAP, one way or the other. Once we decide that, then we will make a pilot plant for the new product and go from there. So any new product is at least one year away from the announcement.

Vinati Organics

It’s a blessing in disguise that Pap is not being commissioned as the product level Roce profile isn’t more than 14-15% (some correction) [Screenshot 2020-07-03 at 1.42.34 AM]

Vinati Organics

Both Valiant and Aarti Industries are Indian suppliers of PAP, although majority is imported from China. Synthesizing PAP isn’t a problem as there are conventional methods available. Deepak Nitrite may also get into it as their Phenol plant may help them produce it cost effectively. However, Vinati Organic’s strategy is different. They want to produce it in a greener and much cost efficient way via the catalytic hydrogenation of Nitrobenzene. This pathway isn’t new as well as there are at-le…

Looks like Vinati organics has tried to manufacture PAP using a different chemistry since 1998 (really!!) but has been unsuccessful till date.

Importantly for Valiant, for PAP - looks like margins, wc terms are much lower vs. existing business.