Potential turn arithmetic growth into quantum growth
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Potential to turn arithmetic growth into quantum growth

12:10 PM, 11th November 2019
Maulik Mehta, Whole Time Director & Group President (Performance Product), Deepak Nitrite Limited
Maulik Mehta, Whole Time Director & Group President (Performance Product), Deepak Nitrite Limited.

In an interview, Maulik Mehta, Whole Time Director & Group President (Performance Product), Deepak Nitrite Limited mentions how the Indian chemical industry is uniquely positioned to tap into large domestic & international opportunities and how the country has a key advantage in the fast-growing chemical intermediates segment.

By Shivani Mody

Micro & macro factors impacting the chemical industry.

The chemical industry is going through a seismic event where entire supply chains are being reassessed because of trade tensions. Secondly, the impact of environmental pollution is now factoring into decisions at the most senior level. The Indian chemical industry is poised toward standout growth if it keeps global cues and environmental concerns at bay and will play a significant role in India’s aspirations toward becoming a $5 trillion economy.

Potential for the Indian chemical industry worldwide.

The Indian chemical industry is uniquely positioned to having large international and domestic opportunities. Most countries like Vietnam, Thailand and Taiwan depend on international events and consumptions, while others like the USA depends on its domestic market for growth. Finally, Indian companies have high respect for the rule of law and intellectual property, making it fertile ground for global countries to set up shop here. If this potential can be supported by infrastructure and minimizing red-tapism, then we can expect to turn our arithmetic growth into quantum growth.

Indian chemical industry to compete in the global market.

Indian companies must think of becoming not just national scale but world scale. Significant economies of scale open up at these levels. However, this requires key steps in support by the government, including land and port infrastructure, further development of PCPIR regions like Dahej, and easier access to finance. Indian companies are expected to compete with global peers with double or triple the interest rate and yet we are prepared to do so if we get this kind of support from institutions.

Global trends in basic chemicals and chemical intermediates.

A major global trend is the volatility of crude oil, despite the OPEC+ countries’ efforts to curb production to prop up prices. The second trend is volatility in international shipping thanks to crude oil prices, but also stricter emission norms. Finally, a trend that continues despite the gurus’ claiming it would not is the global dependency on the US dollar as a haven. Great value can, therefore, be unlocked by using basic chemicals as entry barriers and then going downstream into value-added intermediates. The longer your presence in the value chain, the greater your resilience and profitability.

Potential for xylidines, cumidines, oximes & colour intermediates.

Xylidines, cumidines, toluidines, and oximes go downstream into agro and dye intermediates- both fast-growing segments in which India has key advantages. As newer molecules are developed with better performance, their reliance on key raw materials and companies that can manage these hazardous chemistries at scale remains the same.

Sectors showing rise in demand for chemicals.

Agrochemicals, personal care, dyes & pigments and pharmaceuticals all show increased demand for chemical intermediates- CAGR is linked to improving GDP. For agrochemicals, there is a further drive towards fighting regulations and resistance with smaller & smaller arable areas.

Chemical market dynamics for developed vs emerging markets.

Basic and intermediate chemicals do not distinguish between developed and emerging markets- in many cases, the same product we made is sold to customers in Europe, USA, China, and India for the same application. The same may be said for market potential, with the caveat that developed nations have more stringent regulations for new production but have the advantage of cheaper capital.

Company business and roadmap for the future.

Deepak aims to broaden its portfolio into new intermediates and further downstream. We are big believers in the concept of ‘verbund,’ creating sustainable advantages by developing upstream, downstream and sidestream products which help us rationalize overheads and process competencies. Future products will take full advantage of these strengths.

Towards R&D and innovation for various products.

Deepak has a significant interest in R&D and process improvement investments. Our research is in two directions: making new products, and making existing products more efficiently (better yield, faster processes, lower effluent etc). We have made strides into developing world-class technologies in processes that we are familiar with.

Further, we have tie ups with world-renowned academic institutions to accelerate our R&D capabilities. Currently we collaborate with the National Chemical Laboratory (CSIR-NCL), Pune a constituent laboratory of Council of Scientific and Industrial Research (CSIR) and the Poornaprajna Institute of Scientific Research (PPISR) in Bangalore, to enhance our R&D. Apart from that we are also interacting with professors from UICT, Matunga Mumbai and IIT Bombay on a need basis. Moreover, Baroda-based MS University’s Applied Chemistry Department recently recognised Deepak Research and Development Centre as a Phd (doctorate) research centre.

Adopting digitization for overall plant operations.

We place great emphasis on digitization, and this has allowed us to challenge the limits of what was considered impossible. For example, our phenol plant makes 7 times the volume within 1/5th of the space as our next largest competitor. This is done by aggressively digitizing not only the plant construction but allowing much higher plant and pipeline density than normal, by replacing corridors for people with sensors that monitor material movement, temperature, pressure etc. Our R&D and piloting similarly is done using in-house systems that ensure security- for example, a program on our R&D computers is such that if it notices if someone is holding up a smartphone to take a picture, it instantly turns dark and in turn takes a photo of the offender.

Catering to industry standards for sustainability.

Deepak Nitrite is accredited with Responsible Care, and thus belongs in an extremely select club. Similarly, it is also a signatory of Nicer Globe and Together for Sustainability: all of which makes us ideal partners for multinationals. Minimizing solvent use, water consumption and effectively reusing energy at different pressures are all considered during set up of any new plant.

Having an edge over industry peers.

Deepak Nitrite has been recognized by world class companies as a partner of choice because it has proved its ability to supply responsibly even during turbulent times. We place a high value on our people, recognizing excellence at every level. Besides, we have quality management systems that help us optimize our costs and effectiveness. Deepak’s R&D has an aspiration to be world class, and we are backing it up with the correct people, processes and analytics. Finally, as a fiscally prudent company, we ensure that we have enough firepower to take advantage of any and every opportunity that comes our way.

Challenges faced by chemical manufacturers.

Today, basic and intermediate chemical manufacturers have many challenges, ranging from environmental concerns, logistics and infrastructure, trade and tariff barriers, low entry barriers and negligible product differentiation. Success in this industry comes less from flashy packaging, and more from hard, nose to the ground technological improvement and producing at scale.

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