Exploring expansions to further expand margins and ROCE in FY 23-24: Ch. Krishna Murthy, Chairman and Managing Director, Vishnu Chemicals

  • June 16, 2023

Vishnu Chemicals spent approx. Rs. 100 crore towards growth Capex on a consolidated basis to expand its Chromium chemicals capacity by 10,000 tonnes per annum and a brownfield expansion to introduce a niche speciality chemical in Barium Chemicals

2023 global trends in Chromium and Barium chemicals portfolio?

The extent to which Chromium and Barium chemicals are used in the production of everyday items is astonishing. Our products are a critical ingredient across the pharmaceuticals, consumers, and industrial sector. From acting as strong oxidants in pharmaceuticals to creating a shining and reflective surface in tiles and ceramics or the silver finish on faucets, towel holders, hardware – door knobs or handles, Chromium chemicals add to the aesthetic appeal of any vehicle that gives a good feel be it the shining logo, stylish front grills, premium leather seats or sturdy engines and pistons or be it colours, that don’t fade away.

Chromium chemicals find their way in the production of super alloys by the world's most complex manufacturing powerhouses, which allows jet engines to operate in high-temperature, high-stress, and chemically oxidising environments. In addition, it is further used in aircraft to protect seal components against galling, corrosion, and wear, which is catalysing the growth of the industry.

The demand for Chromium and Barium chemicals is robust as it is a critical input in 12+ applications. Markets across Asia Pacific, Europe, and North America are aided by the growth in the construction and infrastructure industry, which is boosting the demand for Barium chemicals.

How has Vishnu Chemicals performed during FY 2022-23? Plans for Barium and Chromium portfolio in FY 2023-24?

FY 2021-22 was a successful and eventful year at Vishnu Chemicals as we crossed an important milestone of Rs. 1,000 crore in sales. It is even more satisfying that we delivered good growth in both Indian and International markets. Over the years, Vishnu Chemicals has nurtured the chemistry and mastered complex chemical processes by overcoming the gestation period of stabilisation. Deep process knowledge enables the company to track how a reaction unfolds and speed up execution to achieve greater operational excellence.

We feel good about our ability to deliver growth based on our historical performance. Over the years, our product portfolio has expanded and so has our customer base. We are focused on the fundamentals of improving efficiencies and optimum utilization of capacities which should enable us to deliver robust performance. Going forward it will essentially make our initiatives RoI (Return on Investment) accretive and deliver the benefits of finest quality of specialty chemicals to our global customers.  

Our unwavering focus on manufacturing has led the company to be one of the most efficient producers in our chemistry. In FY 2022-23, we have entered the prestigious club of companies with more than Rs. 100 crores of profit after tax. With one quarter to go, our 9M FY 2022-23 consolidated PAT is Rs. 101 crores, already 24% higher than previous fiscal FY 2021-22 PAT.

Since FY 2016-17, we have delivered a PAT CAGR of over 50% by meaningful capacity addition and improving our manufacturing processes that combine environmental and economic benefits through comprehensive use of resources and ability to handle complex reaction media. In FY 2023-24, we have bold targets set for production and in both chemistries, we aim to produce the highest volume ever in FY 2023-24.

Revenue mix is 50:50 with respect to outside India and within India. Do you see any change in revenue mix in FY 2024-25?

We are focused on balancing our sales mix geographically to continue mitigating the market risk. We also like to maintain a 50:50 mix of sales across India and international markets as it gives us access to world’s leading markets like Japan, Australia, Spain, New Zealand, USA, and more.

Vishnu Chemicals manufactures specialty chemicals and is a dependable supplier for customers across industries like pharmaceutical, sports surface paints, automobiles, ceramics, tiles, glass, refractory, and wood preservatives. The company's products and processes conform to global standards, which is a testimony of product quality and reliability. We look forward to maintaining the same revenue mix in FY 2024-25.

The company is focused on backward and forward integration initiatives leading to self-sufficiency and improved operating leverage. How will this initiative help in Barium, Chromium, and any new portfolio?

Our key tenet has been to manufacture high performance specialty chemicals that stand the test of time and quality, which instils huge confidence in our global customer base. With manufacturing being the core focus, we constantly study data from customer inquiries to create our production plan. Our forward integration helps us to reinvent and innovate to cater to a new range of applications and consequently, enhance our business prospects. Similarly, our backward integration facility gives us the ability to effectively use co-products and generate raw materials for indigenous consumption. A major step towards sustainability was the commissioning of backward integration at our flagship plant in Visakhapatnam.

Capex invested in FY 2022-23 and projects where investment was made? Capex plans for FY 2023-24?

From a total capacity of 1,10,000 tonnes per annum in FY 2020-21, we will operate at 1,70,000 tonnes per annum in FY2023-24, making us the largest producers in India in our chemistry. In FY 2022-23, we spent approximately Rs. 100 crore towards growth Capex on a consolidated basis to expand our Chromium chemicals capacity by 10,000 tonnes per annum and a brownfield expansion to introduce a niche speciality chemical in Barium Chemicals. In FY 2023-24, we will be open to explore organic and inorganic expansion to further expand our margins and ROCE.

The company is focusing on brownfield expansion to aid Barium portfolio diversification and it is expected to be commissioned in H1 FY24. How will this expansion help Vishnu Chemicals?

The ongoing brownfield expansion will aid portfolio diversification in our Barium chemistry. We will be the only producers of this chemical in India giving us a first mover advantage to tap existing customers who are currently relying on imports for their material needs. This will help us gain market share in India, Europe, and North America, which is generally a growing market for these products. 

Upon commissioning, we will be the largest producers of Barium chemicals in India giving us an opportunity to meet Indian consumption needs while tapping our existing network of international clientele for export sales. From 40,000 tonnes of capacity in Barium chemicals in January 2022, we will operate on an installed capacity of 90,000 tonnes.

On the R&D front, the company is focusing on launching newer grades and compounds for newer applications. Explain?

The company's improvisation strategy is underpinned by a strong commitment to research, development, and innovation. The company has built a world class infrastructure and emerged as ‘a company of choice’ in the industry owing to constant learning and continuous improvement.

Chromium chemicals are key to manufacturing superalloys required for critical applications in the aerospace, defence, land-based gas turbines to name a few. We are the producers of a range of Chromium chemicals and have pivoted into a variety of grades to meet the requirement of our customers globally. Led by addition of Chromium derivative products into its product portfolio since 2019, Vishu Chemicals average capacity utilization has increased from around 60% in FY16-18 to around 80% since FY19.

There is an ongoing expansion plan to introduce ‘Precipitated Barium Sulphate’ with a capacity of 30,000 TPA which is expected to be commissioned by H1 FY24. Globally renowned researchers have created the world’s whitest paint using Barium chemical. This paint has entered the Guinness Book of World Records for its ability to reflect 98.1% of sunlight. Hence, it cools outdoor surfaces by more than 4.5°C thus cutting down the consumption of electricity and use of energy. Climate change is a real thing today and this innovation is path-breaking as it delivers results to homes and offices in the most cost effective manner.

We are really excited about this development as we ourselves are currently expanding to manufacture the best quality Precipitated Barium Sulphate under our Barium Chemicals portfolio. Our product is an inorganic compound and is a high-purity, synthetic additive that is produced in a carefully controlled manufacturing process. And, it contains almost no impurities, the whiteness is higher than natural Barium Sulphate so it can be used as the filler of pure white powder coating, and the finish glossiness can reach 95 degrees.

Initiatives taken by Vishnu Chemicals for enhancing process safety across all facilities to make operation intrinsically safe?

People are at the heart of our business. Their health, safety and well-being have been and continue to be a top priority for us. With safety at the workplace being paramount, health and safety standards are continuously assessed, identified, and uplifted. With an intensive focus on safety, we have achieved a decline in Total Recordable Injury Rate (TRIR). We firmly believe that we can progress only as fast as the successful implementation and acceptance of our safety programmes and initiatives. Our aim is to build a more mature and sustainable safety culture that will allow us to increase our productivity and operational discipline and facilitate highly competitive organic growth.

Sustainability roadmap of Vishnu Chemicals and key sustainability initiatives?

Sustainability is at the centre of all business processes at our company. The company considers it is essential to protect the Earth and limit natural resources as well as the health and wellbeing of every person especially employees/workers of the company. The company strives to achieve safety, health and environmental excellence in all aspects of its business activities. Acting responsibly with a focus on safety, health, and environment to be part of the company’s DNA.

In line with the ‘Go Green’ philosophy, the company is continuously adopting new techniques to eliminate and minimise environmental impact. Various projects have been implemented by the company to use alternate sources of energy wherever possible.

The company does not just talk about ‘Sustainability’, it follows in true letter and spirit; sustainability is about how we operate. We strive to promote a circular economy and deliver societal value. Vishnu Chemicals approach is to innovate, collaborate, and educate communities.

The company takes required measures to mitigate impact to various environmental aspects like air quality, water, and noise. The company focuses on conservation of natural resources: minerals, water, and energy. Our philosophy for sustainability stems from individual action and collective responsibility. The company’s plants are equipped with modern machinery operated with sustainable practices. Our teams regularly conduct awareness programs and impart training to all employees on sustainability practices.

In 2022, the flagship plant was integrated to capture and recover flue gases and use it as a vital input for its production in a sustainable eco-friendly manner. We are only one of the few companies globally to have this infrastructure.

Major CSR initiatives being undertaken by Vishnu Chemicals in FY2022-23 and plans for FY 2023-24?

We believe society is an inseparable stakeholder in our journey. Our CSR vision is aimed at achieving progress and value creation for all. In furtherance of our efforts to have long term impact on large communities in general, the company spent majority of its CSR funds on an initiative to build old age homes by Krishna Foundation to transform lives of elderly through care and support. The facility provides nutritious food, hygienic and comfortable environment, recreation activities among others. In FY 2023-24, we will continue to spend the CSR towards community service and providing economic independence and shelter to the needy.