Investment commitment of Rs. 8,000 crore in developing facilities: Vikram Handa, Managing Director, Epsilon Carbon

We are working on the investment to set up a 300,000 ton coal tar distillation plant with downstream units to produce specialty chemicals

  • June 20, 2024

Epsilon Carbon and Epsilon Advanced Materials are on an aggressive expansion spree. What is the project wise total Capex planned for both entities till date? 

Currently Epsilon carbon is under capital expenditure cycle, focusing on both greenfield expansion in Orissa and brownfield carbon black expansion. We are targeting a capex of Rs. 2,000 crore over the next two years to build out these capacities. Moreover, Epsilon's strategic vision extends beyond domestic expansions. We're venturing into advanced materials, with plans to establish multiple graphite anode facilities, commencing with operations in India and the US. In the next three years, our investment commitment stands at close to Rs. 8,000 crore in developing facilities in both regions India and the US.

Last year Epsilon announced a US $650 million battery component and anode plant in the USA. What factors promoted you to set up the plant there considering you are a strong advocate of local manufacturing? What is the latest development on this facility? 

We prioritize local manufacturing and customization for diverse/various clientele. Hence, we selected North Carolina’s Brunswick County site for setting up a manufacturing facility in the US. Brunswick county is one of the fastest growing counties in the NC with developed infrastructure, skilled workforce and welcoming environment for business.

Presently, there is a promising opportunity with prominent/larger US-based customers seeking to establish large-scale giga factories. Consequently, our focus is on establishing a facility in India initially, tailored to their needs, followed by the establishment of a plant in the US, particularly in North Carolina, to cater directly to US customers while ensuring compliance with IRA regulations. Currently, our US facility is in the permitting phase, with advanced engineering stages underway. We aim to commence construction early next year and complete the facility within the next 18 months. 

Epsilon Carbon plans to establish Rs. 9,000 crore graphite anode facility in Karnataka. Please elaborate? 

Epsilon Carbon announced this investment of Rs. 9,000 crore in Karnataka last year. The aim is to build a 100,000 ton per year graphite anode facility to cater to both Indian and global customers. This facility will produce synthetic graphite at some of the lowest carbon footprint in the world at about 80% lower than what is produced in China today. Our first phase will be to start off with a 30,000 ton facility and we'll have about a Rs. 3,500 crore investment to build that plant.

Epsilon Carbon also plans to set up a Rs. 10,000 crore Integrated Carbon Complex in Odisha. What will be its salient features, manufacturing capacity, and completion date of this project? 

Epsilon Carbon plans to replicate the integrated carbon complex that has been built in Karnataka over the last 10 years, where we have different businesses of specialty carbon, carbon black, and our advanced materials as well. We are working on the investment to set up a 300,000 ton state-of-the-art coal tar Distillation Plant with downstream units to produce specialty chemicals that are today not manufactured in India. We hope to replace imports with our production capacity there. This plant will cater to local aluminium smelter demand and also export to the Middle East. Our goal is then to continue the journey of setting up a carbon-black plant and advanced materials plant to create this, to become one of the World's largest integrated carbon complexes.

The company has announced an investment of Rs. 1,200 crore in polymetallic nodule plant. What is the current status? 

We've recently signed a Memorandum of Understanding (MOU) with the metals, the metals company to develop this onshore nodular processing facility. Currently, the metals company is waiting for the offshore permit in the US from the EPA. So, we continue to study this project but not much development is happening over here.

What is the big opportunity in the battery industry? Where does Epsilon fit into the battery ecosystem?

Today India relies heavily on imported battery materials.  In 2018, we imported around US$ 1.23 billion worth of lithium-ion batteries, which accounted for more than half of the country's demand. To address this, the Indian government launched the Production Linked Incentive (PLI) scheme for the Advanced Chemistry Cell (ACC) battery to boost domestic manufacturing. This scheme reduced dependencies on imported battery materials and accelerated the rate of innovation within the country. This had a significant impact on the country's battery material industry, which was valued at US$ 1.66 billion in 2020 and is projected to reach US$ 4.85 billion by 2027, registering an impressive CAGR of 17.23 per cent during the forecast period of 2022-2027.

This unprecedented growth was amplified due to India’s strong manufacturing ecosystem, in innovation and a large pool of technical and engineering talent. The industry has gained significant momentum in recent years and has put us in a position of strategic importance in the global battery materials market. 

The magnitude of demand for batteries is high, with the number of GWh (Gigawatt Hours) required increasing from about 700 GWh in 2022 to around 4.7 TWh (Terrawatt Hours) by 2030. Additionally, there are looming concerns about supplies of key battery materials like cobalt and lithium that are pushing the search for alternatives to the standard lithium-ion chemistry. 

This is where India has a major advantage as a leader in the chemical industry to address this challenge. The chemical industry is a crucial contributor to the battery material supply chain, providing essential raw materials to produce batteries.

In 2019, the Indian chemicals industry stood at US$ 178 billion and is anticipated to reach US$304 billion by 2025, registering a CAGR of 9.3%. It is one of the fastest growing sectors in India and is currently the 10th largest chemical trade partner for the US which is estimated to scale up to 7th by 2030. Herein, lies an opportunity for India’s booming chemical industry to take lead and convert minerals into battery materials and reduce the dependence on China.

China has really focused and dominated on developing this material processing industry while minerals continue to be mined in Canada, Australia, and Africa. But the processing industry of both anode and cathode is located in China and this is what we as Epsilon think we can build in India and globally also with our mature technology that we have developed over the last five years. So, we see ourselves being a battery materials company to support energy transition and contribute both to Indian companies and global companies. 

What strategy should India adopt to become a global manufacturing hub for Battery Chemicals and products? And, what role does Epsilon Group see for itself in making India a global manufacturing hub? 

The challenge in battery chemicals today lies in the necessity of achieving a certain scale when constructing these facilities. Currently, India is an emerging market in terms of self-production. Many companies, such as Reliance, Amaraja, and JSW, are investing in manufacturing facilities, but they require time to reach optimal scale. Our industry also needs to match this scale. So, we see an advantage of building these facilities in India to cater to larger facilities that are being built in the U.S. 

As India expands its scale, we are prepared with a cost-efficient, well-established company capable of meeting both global and domestic demand. Our aim is to localize our operations entirely in India and to support PLI winners and other companies in establishing a robust supply chain to meet India's energy transition requirements.

What are the challenges faced by the battery industry in terms of sustainability and recycling? Role of Epsilon in this direction?  

It is very important to understand the process of battery material production, particularly when transitioning from battery minerals to active materials like anodes or cathodes. At Epsilon, we prioritize sustainability by utilizing 90% renewable power and implementing zero discharge facilities. Moreover, we focus on maximizing value through the utilization of byproducts generated during the battery material manufacturing process. This approach not only enhances our cost competitiveness on a global scale but also facilitates the production of more sustainable materials. 

Epsilon firmly believes in the future of a circular industry. We also are into lithium-ion battery recycling, and we anticipate significant growth in this sector within the next three to four years, once our virgin anode and cathode businesses have expanded. By integrating recycling processes into our operations, we aim to create a truly circular business model. This involves reclaiming materials from end-of-life batteries and production scrap, reprocessing anode and cathode materials, and reincorporating them alongside our virgin materials. Today globally this is a necessity, and Epsilon is proud to be at the forefront of advancing this technology and promoting circularity.

Some of the major challenges we face in India for recycling in battery industry are as follows:-

• Lack of organised collection of battery waste

• Lack of education and awareness amongst the population in comprehending the criticality of the minerals found in lithium-ion batteries

• Absence of defined processes or guidelines for lithium- ion battery recycling, 

• Unscrupulous recyclers misusing the system for monetary gain with no accountability

• Dearth of lithium- ion batteries found in the country 

• Exhausting process to import batteries from abroad

Epsilon's performance in FY 2023-24 and what's your expectation from FY 2024-25? 

The company continues its growth. We clocked in at about a Rs. 3,000 crore top line last year. As I mentioned earlier, we are in a large CAPEX cycle this year and anticipate surpassing Rs. 6,000 crore in revenue after the completion of our CAPEX cycle at Epsilon Carbon. At Epsilon Advanced Materials, we have set a short-term goal of reaching a turnover of approximately US$ 700 to 800 million within the next three years as we expand these large facilities.

Epsilon became the first Indian company to export liquid coal tar pitch. How do you see the growth opportunity in the global coal tar pitch market and what is your strategy to tap this?

We believe that India has a huge opportunity to cater to global demands when it comes to these various products, especially coal tar pitch. Coal tar itself is a diminishing commodity in Europe, Japan, and the US. As coal tar production increases in India, we see the opportunity to cater to the Middle East. Currently, the Middle East imports approximately 500,000 tons of coal tar pitch annually and is actively seeking supply chain changes. India is viewed as a potential great supplier in this regard. This is where Epsilon has made investments in its own liquid pitch tanks in Mangalore, becoming the first company in India to export liquid coal tar pitch and support Middle Eastern companies.

Epsilon Carbon aims to become a global leader in carbon products. What strategies would you employ to achieve this goal?

We entered into the carbon black business approximately three years ago. We have been running at 100% capacity and due to the demand from customers, we decided to expand our capacity by adding another 100,000 tons.

In the next six months, we should become a 215,000 ton a year carbon black plant, positioning us as the third-largest capacity provider in India. With our expanded capacity and diverse product range, we are well-equipped to meet the demands of the local Indian tyre market and fulfil a substantial portion of the export market's need for high-quality carbon black. 

Currently, we estimate that our carbon footprint is approximately 20% lower than that of carbon black produced by other Indian manufacturers.

How would you approach the pricing and marketing strategies for Epsilon Carbon's products in order to remain competitive in the market?

As we navigate the competitive landscape for Epsilon Carbon's products, it's imperative to devise robust pricing and marketing strategies to maintain our edge in the market. Here are some additional thoughts and considerations:

Integration of Sustainability: Given the increasing emphasis on sustainability in the market, we ensure our pricing and marketing strategies reflect Epsilon Carbon's commitment to environmental responsibility. 

Data-Driven Decision Making: We analyze our sales data, customer feedback, and market trends to identify opportunities for optimization and refine our strategies for maximum impact.

Brand Building: Investing in building the Epsilon Carbon brand as a symbol of quality, innovation, and reliability. Consistent branding across all touchpoints, including packaging, advertising, and online presence, is reinforcing our positioning in the market and enhancing brand recall among customers.

Epsilon has recently secured Rs. 100 crore sustainability-linked funding. How do you incorporate sustainability and green elements in your project? 

In addition to our circular approach to managing utilities and by-products and sharing them among our specialty carbon, carbon black, and advanced materials businesses, we have outlined a roadmap for the next two to five years to enhance our ESG ratings. Internally, we benchmark all utilities, seeking ways to reduce power and water consumption, improve product yields, and secure sustainability-linked funding. This funding supports our additional capital expenditure and the deployment of necessary technologies to achieve these improvements. We aim to become a leading sustainable company globally, particularly in the production of various carbon products.


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