Whitening agents to brighten Deepak Nitrite's business prospects

The Vadodara-based Deepak Nitrite Ltd (DNL), a leading manufacturer of chemical intermediates, is banking on its new fluorescent whitening agent (FWA), or optical brightening agent (OBA), product range to double its revenue in the next three years. The company, which has nearly doubled its revenues in FY14 to Rs 1,271 crore from Rs 661 crore in FY11, is aiming for Rs 2,000 crore turnover in FY16.
 
Deepak Nitrite fully commissioned its new OBA plant on May 20, 2014 at Dahej (Gujarat), which is expected to substantially contribute to its turnover. “For OBA, we are targeting Rs 250 crore in revenue this year. With ex-OBA businesses (ie, existing businesses excluding OBA) expected to continue their robust growth of more than 15%, we expect to post strong performance during this year, said Umesh Asaikar, Executive Director, Deepak Nitrite Ltd.
 
Deepak Nitrite’s first objective is to stabilise its OBA business for this year and is aiming for a break-even in OBA business in the fourth quarter of FY15. FWAs are widely used in detergents, printing & photographic paper, and textile industries. While the global capacity of optical brightening agents is about 1,20,000 tonnes, the market in India is estimated at 12,000-15,000 tonnes. Deepak Nitrite’s FWA plant has 20,000 tonnes capacity, with exports accounting for about 75-80% of its OBA business.
 
While Deepak Nitrite aims to record a turnover of about Rs 250 crores from optical brightening agents business this year, the company expects to clock Rs 450-500 crores in the next 2-3 years. “This is possible because we have the advantage of being the world’s only company having fully integrated plant to make optical brightening agents. This provides us cost advantage over our competitors,” said Sanjay Upadhyay, CFO, Deepak Nitrite Ltd.
 
With economies of developed countries such as the US and Europe showing signs of improvements, Deepak Nitrite is bullish on exports (which accounted for 40% of sales in FY14) for its overall business. Most of the exports demand of DNL is driven by US and European markets, which together accounted for 77% of the total exports in FY14. While European economy is no longer showing negative growth, the US economy has turn around last year and is estimated to grow about 1.5-2% this year.
 
Being a supplier of chemical intermediates to wide range of sectors such as agrochemicals, water treatment, fuel additives, dyes & pigments, the company is in position to mitigate risk even during challenging external environment. “Overall, our product and application portfolio is such that risks have been mitigated of any violent shocks to the company,” said Upadhyay.
 
Only, Rupee volatility, especially high Rupee appreciation, may pose a challenge to Deepak Nitrite as exports account for 40-45% of its turnover.
 
India has been a beneficiary of the global trend of shifting of manufacturing from high cost developed countries to cost competitive quality focused markets in Southeast Asia. More companies are expected to invest in India as global majors are looking at alternate production site in Asia with cost of manufacturing chemicals going up in China. This is likely to translate into huge benefit for companies such as Deepak Nitrite, which are already suppliers to some of the leading global chemical manufacturers, in future.