Vishnu Chemicals - Is Growth sustainable?

How does the picture look now? Any better?

Disc - Evaluating to invest

AGM FY19 Notes

  • Jt. MD Siddarth is focused focused on international marketing & strategic initiatives of the company
  • Exports
    • The company currently exports to 52 countries
    • The company is concentrating on export markets
  • Products
    • The company is planning to add following products - chrome plating salts, chrome metal to be used in aircraft
    • The company has also created sulfate product which is used in detergents etc., this is dedicated product for Colgate Palmolive
  • Barium subsidiary
    • 106Cr sales, 11cr PAT
    • The company expects to earn PAT of 15Cr in FY20
    • Barium products find their end usage in construction (Bricks etc.), Caustic Soda, water purification.
    • Bankers refused to issue NOC for merger of Barium subsidy due to -ve net worth.
  • RM
    • The total chrome ore consumption of the company is ~ 1L tonnes
    • The company has entered into contracts to get chrome ores on long term basis from South African players
    • 60-70% of RM will be sourced from long term contract & rest will be sourced from spot market
    • The OPM margins of the company came down from 17-18% to 13%, primarily due to chrome ore price rally
    • The products are produced only in 5-6 countries & sold in 80 countries. The logistics cost is an important aspect due to this & the company is negotiating logistic cost as well for RM
  • Currency
    • Since the company is net exporter, it is not hedging everything
  • Loans to related parties
    • Shareholders questioned the resolution to give out loans to related parties
    • The company claimed that it is using R&D facility of Vishnu Life Sciences on lease
    • For Infra company, the company claimed that there is no business activity as of now & the company has not taken on any guarantees
  • Cumulative Redeemable Preference Shares
    • The company has reduced the rate from 7% to 1% till 2033
    • The bankers were treating this as debt instead of equity
  • Anti-Dumping Duty (on Sodium Dichromate ?)
    • The company was not successful in getting ADD because it was fighting the lone battle
  • Competition
    • It is not possible to link the output product prices with chrome ore prices due to competition. The end product prices will be market driven.
    • Sisecam Chemicals, Turkey is one of the big competitors & it had some advantage due to Turkish currency
    • There is another competitor in Kazakasthan as well
    • Lanxess, Argentinian competitor went out of business & company was able to capture market share in exports in FY18
    • Elementis is the competitor based out of US
    • For Chinese players, GST for chrome products is not refundable & hence they are not present in export markets. China is self sufficient in chrome chemicals.
    • The company claimed that they are operationally strongest but financially weakest
  • End Industries
    • Currently company gets 40% revenue from natural leather industry, 20% from pigments, 20% from electroplating & rest
    • The company is focusing on electroplating market & expects to take the share to 30% over medium term
  • Capex & Capacity
    • The company is not planning for any capex for next 2 years except for maintenance capex which is 2% of topline
    • Current capacity is 70kT & utilization is 50kT
  • Debt
    • The company is planning to bring down the cost of debt from 12% to 10% in FY20
  • Entry Barriers
    • The end industries are growing at 2-3% which discourages the newer players from entering
    • Huge capex requirement is another entry barrier - e.g. it costed company 100mn$ to put up a plant of 70kT. Lanxess got 135mn$ for their plant.
  • The company aspires to reach 20% EBITDA margin by FY21

Disc - token investment in company to attend AGM, not a buy or sell recommendation, not a SEBI registered analyst


Vishnu are doing better as compared to their precarious situation earlier.

They are doing well with their Dichromate production and they have also resolved their Chrome Green production issues. After several years of closure, they are starting their Bhilai (East Central India) plant.

Concerning Barium Carbonate which is in our area of activity, some more detailed input for your understanding:

Operations: Availability of Baryte no longer an issue. They can produce upto 3000 tons per month of product.


  • Domestic market stagnant at 40,000 tons per year
  • Caustic soda market experienced strong de-growth for Barium Carbonate. (Current requirement 15,000 tons per year in India)
    Some producers switched to membrane process, others have improved the input salt quality so the requirement for BaCO3 has come down to 30% of past levels.
  • Vishnu allows small scale to fight for the caustic soda market.
  • Vishnu focus on Ceramic market in India, which is growing.


  • They are focused on the glass and ceramics market for growth in India and globally.

  • They are making good inroad to the export markets, they undercut the Chinese too and have very good quality, so they can make meaningful penetration.


Mr Murthy is a technocrat to the core.
His son who has joined him is an engineer by training, but currently focused on international market development.


Is anyone still follows Vishnu Chemicals?

High debt in Balance Sheet is a real concerning factor. Does anyone has any insight on why such huge borrowing? Is it for any capex / production we expansion? I can’t find any vision from management about when to reduce the debt

excellent results. The company is through with much of its expansion and debottlenecking. It has also achieved good results on the export front despite high freight rates

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Really surprised at how inactive this thread is.Company has been doing very well recently and EBITDA margins have expanded all the way to 15% in Q3.Vishnu is one of the rare chemical companies that has been able to fully pass on logistic and freight costs.

The 50% higher Barium capacity will come online in Q4 and the backward integration plant has already started.In it’s Q2 call management had guided for 500 bps margin expansion post backward integration and even higher expansion,given the prevailing Soda ash prices.It is also worth noting that volumes in Q3 were hit due to heavy rainfall in southern states.Otherwise revenues would’ve been better.

Even assuming a similar 300 cr run rate in Q4,company will end the year with over a 30% growth in revenues.In their call company guided for a 20% volume growth in both chromium and barium segments for few years to come.They have plans to expand Chromium capacity to 100k from the current 70k over time.With additional Barium capacity one should see good growth in Fy23 alongwith decent margin expansion.Company has expanded it’s product basket a lot in recent years and is able to toggle well b/w better performing end user industries.

Post Q3 stock has been on a tear in an overall weak market.After some cool-off,I feel this still offers good upside potential on earnings growth alone.

Disc.: Invested.Views are biased.


Good points. Surprisingly such a big wealth creating cos thread has been totally in active.

Co seems to be walking the talk as is visible from recent results & indication given in Q2 concall.

Is the company into Commodity business with no pricing power or sp chemical with pricing power ? any competition in India & who are in abroad? Whats the moat co enjoys?

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I think their biggest moat will be backward integration plant which will increase their EBITDA margins by 4 to 5%. Also this will give them pricing power.

They have 4 international competitors in chromium segment.


Vishnu Chem reported a strong set of numbers in Q4.

Margins expanded even on a qoq basis inspite of various headwinds faced by chemical cos. & many other industries.Concall highlights:

→ Chromium util at 90%,Barium at 85%. Chromium capacity to rise to 80k in Fy23 via debottlenecking.Barium now at 60k,mgt expects 40% kind of volume growth in Barium segment.

→ 120 cr. capex in FY23.90 cr of this will be towards a new import substitution opportunity: Barium Sulphate.Product is used as filler in Paint industry.India mkt size is 25 k MT and this product is completely imported.Global mkt size=130-40 k MT. Import contribution from China=70%,rest 30% is from Italy.Company sees a strong opp here since logistic costs are creating issues in imports.Expect to be as high quality as Italian imports.This capacity will be over & above the 60k barium capacity and will start contributing to topline from Q1FY24.

→ Russia was strong in Chromium segment.80k MT capacity is offline due to sanctions,etc.This has opened up a larger market for Vishnu.Growth is coming from both existing & new clients.

→ Q4 Barium segment EBITDA margins were hit since production in Q3 was delayed.So company had to honour Q3 prices in Q4 as well.From April this has normalized and expect 15-20% EBITDA here in FY23(vs. ~10% in Q4)

→ Backward integration plant will contribute in full flow from Fy23.Expect 400 bps kind of margin improvement in Chromium segment.

→ Seeing no slowdown in demand or inquiries from customers inspite of interest rate hikes,etc.Company remains confident of strong growth and industry leading RoCE.

Overall company seemed very confident of sustaining volume growth & improving margins.Debt/Equity will stay <1:1 even post capex.I don’t think there were any questions on pledging this time.

Disc.: Invested.Views are biased.


Well drafted notes indeed !
Are you aware of any domestic peer of this company?

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your notes are comprehensive. do keep posting them

any concern on debt? another capex due of 120 cr in fy 23. by when will it reduce?

kacholia has started reducing his holding after holding for long n seen big troughs in price

Sir seeing as how you were yourself a participant in the concall and asked some insightful questions,it will be great to have a more elaborate view from you on Vishnu Chem. Also given your large experience(over 3 decades) in markets your insights will be even more useful.


I like the story & hv been invested offlate.

-Capex coming online & good demand for the products augurs well.

-Co has come out of tough times & ROCE has improved nicely to 24%

  • Cos which are leaders in segment & where segment itself is expanding fast creates big wealth. Vishnu is a leader in chromium based chemical segment.

The company seems to be changing their credit rating agency frequently. They used to be rated by Ind – Ra in the past which was changed to CARE somewhere around 2016-17. In 2020-21 they have moved again from CARE to Infomerics Ratings. How should investors view this, and how credible is Infomerics?

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Courtesy Sreenidhi

Vishnu chemicals #VISHNU

Blockbuster Q1FY23![:ok_hand:

Delivers as per the promise Amazing set despite power issues in Vizag for Q1

Rev at 361cr vs 197cr

PBT at 47cr vs 16cr Q4

PBT at 39cr PAT at 34cr vs 11.5cr

Q4 PAT at 28cr

Q1 EPS at 28.5rs vs 9.7rs

FY22 EPS was 68rs

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The number of related party transactions seems to be higher for me. Can anyone more experienced in reading the annual reports confirm if there is something to be concerned about these transactions?

VCL_Annual-Report-2021-22.pdf (2.9 MB)

The promoters are drawing low salaries (1.3 crores combined) so I think the lease amount paid by the company to the KMP is fine. I am not sure how to interpret some of the other transactions. Eg: 3 & 8

Disc: Invested with minimum position sizing due to higher debt and promoter pledging.