The Indian chemical industry accounts for about 2.11% of the country’s GDP with an estimated market size of $160 billion. And the specialty chemicals segment accounts for around 20% of the total size. Specialty chemicals are used in different end use industries like paint coating, construction chemicals, colorants, Active Pharmaceutical Ingredients, personal care chemicals, flavours and fragrances. Indian specialty chemical companies are quite strong in the export market with colorants, dyes and pigments being the key export-oriented products. The key reason benefitting the country’s export markets is low cost manpower in addition to a cheaper cost of production. There is a major plus point for the country that it has always ensured to be abreast of global regulations and competitive manufacturing practices and these measures have enhanced the cost-effectiveness of the manufacturers like Clariant Chemicals India Ltd in the domestic market. It is a leading specialty chemicals company and a major player in pigments, textile chemicals and leather chemicals. The product range includes a wide range of chemicals for pre-treatment, dyeing and finishing, production of pigments for paints, plastics, inks, cosmetics, detergents and special applications. High performance pigments are produced to meet the demands of the automotive and the coil coating industries. Chemicals (India) Ltd is a multinational public listed company with 51% of the shares held by Clariant International and its group companies. The company has manufacturing units at several locations in India, spread across Vashere and Roha in Maharashtra; Cuddalore in Tamil Nadu; Rania, Nandesari and Kalol in Gujarat; Nagda in Madhya Pradesh; Bonthapally in Telangana and Edayar in Kerala. Last year, the company inaugurated its new greenfield Healthcare Packaging production plant in Cuddalore, Tamil Nadu. It reported profit before tax of Rs 21 crore for the quarter ended September 2019 compared to profit before tax of Rs 7.6 crore for the quarter ended September 2018, showing a growth of 177%. The company reported sales growth of 6.1% at Rs 272 crore for the quarter ended September 2019 as against Rs 256 crore for the corresponding quarter in the previous year. Profit before tax stood at Rs 39.5 crore for the half-year ended September 2019 compared to profit before tax of Rs 22.9 crore for the half year ended September 2018 at a growth rate of 72%. Shares of Clariant Chemicals went up by 12% to reach Rs 356 on the stock exchange this week after the board approved a restructuring plan for the sale of its master batch business to PolyOne Polymers for a sum of Rs 426 crore. The amount of revenue contributed by the master batch business unit is Rs 283 crore for the financial year 2018-19 which is 29% of the total revenue with the unit contributing earnings before interest and tax of Rs 4.57 crore for the last financial year. PolyOne Polymers is a premier provider of specialised polymer materials in the country. The sale transaction of the unit is aligned with the global strategy of the parent company of Clariant and should get completed in the next 4-6 months’ time frame. Some analysts are bullish on the Clariant stock as on a market cap of around Rs 800 crore, an equity capital of Rs 23 crore and sale consideration of around Rs 350 crore (after capital gains, etc ) this might translate into earning of Rs 150 per share. There could be a big dividend or strategic investment acquisition announcement by the company early next year. Hence, portfolio investors can look at accumulating the Clariant Chemicals stock currently quoting at Rs 366 for a 20% price appreciation in the next one year time frame.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.