We are looking to launch new products, says Vinati Organics MD and CEO

Vinod Saraf was struggling to arrange funds to start his maiden venture in 1989 — a plant to make a chemical that no one made in India at that time. 

Saraf, founder and chairman, Vinati Organics, had pumped in his entire personal savings of Rs 57 lakh, borrowed from friends and family, and even took a personal loan from a government-backed venture capital firm. It was a Rs 14-crore project backed by multiple entities to set up a 1,200 tonne per annum (tpa) plant to make isobutyl benzene or IBB, a raw material used to make the popular painkiller ibuprofen. Indian ibuprofen makers were importing IBB and paying 110 per cent customs duty. Only two companies made it globally, one in the UK and the other in the US, both of which eventually exited. 

Vinati Organics invested in innovative technology to make products at affordable prices and this helped it drive competition out of the market. Its first big break came in 2007, when US-based Chevron Phillips stopped making IBB. “The entire US demand shifted to us. Prior to this we were selling in the domestic market and China,” Vinati Saraf Mutreja, managing director and CEO, Vinati Organics, says at the company’s headquarters in Mumbai’s Bandra Kurla Complex. 

Today, Vinati Organics makes 25,000 tonnes of IBB, which contributes 15 per cent of its turnover. More importantly, it enjoys a 65-70 per cent share of the global market for this product. 

Wharton graduate Mutreja had joined her father’s business in 2006. She has always taken keen interest in chemistry and says that her father, a business graduate himself, had prodded her to take up chemical engineering. 

Saraf, a gold medallist from BITS, Pilani, worked at a textile unit for 12 years, where he picked up the nitty gritty of the shop floor. From there he moved on to the Aditya Birla Group and learnt all about chemicals during his six-year stint at the group. 

The second turning point in Vinati Organics’ journey came as late as January 2018 — when its largest competitor, Lubrizol, stopped making ATBS (2-acrylamido 2-methylpropane sulfonic acid), a chemical that finds use in the water treatment industry, apart from oil and gas and the personal care sectors. Vinati was selling ATBS for $3 per kg, while Lubrizol’s product was priced around $7-8 per kg, Mutreja claims. 

“We had started with 1,000 tpa in 2007 for ATBS and are making 26,000 tpa right now. Next month our new line will come on stream, taking the total capacity to 40,000 tpa,” Saraf says, adding that the company is flush with orders. In 2011, the company also set up a backward integration project to make isobutylene, which is used in manufacturing ATBS. About 90 per cent of its isobutylene production is captive. 

The firm’s golden run started after its ATBS sales spiked — in FY19 its profits nearly doubled to Rs 282 crore, and the operating profit margin jumped from 29 per cent in FY18 to 39 per cent in FY19. Mutreja knows that this rapid growth is not sustainable unless the company keeps adding new products. Vinati Organics is focusing on coming up with more innovations in process R&D to launch new products. It is also setting up a plant to make butylphenol, and will be the first manufacturer of the product in India. This chemical goes into the making of perfumes, resins and plastics, and is mostly imported. 

Butylphenol is Vinati’s next growth engine and Mutreja feels that the company could double its turnover in the next three to four years. Saraf is clear: “I do not invest in any project that does not offer a 15 per cent return on investment.” This, he says, he learnt from Aditya Birla, when he was working for him.

There are always many projects in the works, and many die on the way, Saraf says. He adds that he was clear from the onset that he wanted to be in a “clean and green” chemical business. “If we get a clean technology to make ibuprofen we can look into it,” he says. “When one invests in a polluting technology, one not only harms the environment, but also spends more on raw material costs, as a lot is wasted in the form of effluents,” he explains. 

Saraf’s enterprise has paid off. With a 74 per cent stake in Vinati Organics, which has a market capitalisation of over Rs 10,000 crore, Saraf today is a dollar billionaire.