Star SME: How Alkyl Amines Chemicals is tapping local, global demand

Large capacities and efficient use of capital have been key to Alkyl Amines Chemicals' profitable growth

From being the first company in India to make amines to adding research and development (R&D) facilities and widening its product portfolio in the wake of liberalisation — all these factors have helped Alkyl Amines Chemicals (AAC) to get where it is.

The company, led by Chairman and Managing Director Yogesh M Kothari, is now a global supplier of amines and amine-based chemicals to the pharmaceutical, agrochemical, rubber chemicals and water treatment industries.

A lot has changed since AAC commissioned its first plant in 1982 at Patalganga to make ethylamines with technology from Leonard Process Company, USA. Later, capacity was expanded to manufacture other amines with technical know-how from Acid Amines Technologies, USA, and the site now hosts two multipurpose amines plants with a capacity of over 25,000 metric tonnes (MT) a year.

In 1995 the company’s Kurkumbh complex, where various amines and amine derivatives are currently being manufactured in nine production plants with annual capacity exceeding 70,000 MT, began operations.

In 2018, AAC started work on its Dahej site, where 35,000 MT of amines a year are being manufactured. The company now has three manufacturing sites with 12 production plants, related utilities at Patalganga and Kurkumbh in Maharashtra and Dahej in Gujarat, and a R&D centre at Hadapsar, Pune.

Over the last decade, the company has added several new product processes developed at the R&D centre to expand its product range.

Scaling up capacities to tap demand from user industries and efficient use of capital have come a long way in driving profitable growth for the company.

“Profitability improved in the last couple of years as volumes added to the bottomline,” says Kirat Patel, AAC’s executive director.

Patel says that the company’s return on capital employed (RoCE) — a measure of how efficiently a company uses capital to generate profit — is vastly different from its peers, because it is careful in deploying capital. RoCE has increased from 23.9 per cent in FY18 to 43.5 per cent in FY20. 

AAC has delivered a compounded annual growth rate of 57 per cent in net profit and 26 per cent in sales over the last three years. For FY20, profit after tax jumped 133 per cent and net sales grew 17.3 per cent, compared to the previous year.

Despite the challenges posed by Covid-19, AAC has continued posting decent growth in sales and profits in the last couple of quarters. Total income is up 25 per cent year-on-year in Q3FY21, and 11 per cent when compared with the July-September 2020 quarter. Likewise, net profit is up 10 per cent year-on-year in Q3FY21 and 29 per cent sequentially.

The company has been helped by robust demand from pharma and agrochemicals customers that account for 70 per cent of its revenues. Pharma companies, which have been in the vanguard of the global battle against the pandemic, are key customers of AAC.

Analysts expect the company’s rising domestic share, its impending capacity expansion for acetonitrile and the production linked incentive scheme to boost its long-term volume growth.

Gross margins rose to a record high of 60.9 per cent (up 550 basis points year-on-year) in Q3, on the back of benign raw material prices and a better product mix, courtesy the robust pharma demand. Backed by high gross margins, operating leverage and well-rounded performance by all products, the EBITDA margin shot up to 38 per cent in Q3.

Ethylamines and its derivatives performed well in Q3 and helped drive realisations. The tight supply of acetonitrile in the global market continues to aid realisation, and analysts expect the currently elevated prices to endure over the near- to medium-term.

Further, in anticipation of increasing demand in the domestic and export markets, AAC’s board has approved an investment of Rs 300-350 crore to increase aliphatic amines capacity at Kurkumbh and Patalganga by 30-40 per cent.

In its FY20 annual report, the company said that it expects its investments in FY21 in various projects to add to both its topline and bottomline. It said it will continue with its efforts to improve its bottomline by expanding the product range, while revisiting its business strategies and models wherever necessary.

“Though we continue our efforts for improving efficiencies and margins, the results for the year 2020-21 to a great extent will depend upon after-effects of [the] ongoing Covid-19 pandemic,” it said, adding that it expects continued demand from the pharma sector for its products.