Plan to invest Rs. 3,000 crores in new chemical value chains and high potential products by FY 25: Rajendra V. Gogri, CMD, Aarti Industries

With the growing trend of China+1 and Europe+1 in the chemical industry, we believe that India is well positioned to attract long-term partnerships from global chemical firms

  • May 15, 2023

What are the key milestones achieved by Aarti Industries during FY 2022-23?

In 2022, Aarti Industries Limited (AIL) sharpened its focus on building a company that is increasingly agile, resilient, and future-ready. The company reached new heights and set aims for bigger milestones in the journey of becoming a world class company. 

Major milestones achieved during FY 2022-23 are: Catering to the third long-term contract, the company commercialized a new manufacturing unit at Jhagadia. The company anticipates plant expansion and production ramp-up in a phased manner as per the contract terms in the coming quarters. The company secured a binding 20-year term sheet with Deepak Fertilizers worth more than Rs. 8,000 crores, assuring a consistent and sufficient supply of Nitric acid, a crucial raw material used in manufacturing processes. This partnership will begin on April 1, 2023 and will eliminate the need for investment in concentrated Nitric acid backward integration. The company also demerged its Pharma division into a separate listed company called Aarti Pharmalabs Limited, enabling both companies to concentrate on their respective businesses and growth opportunities independently.

Capex investment in FY 2022-23 and plans for FY 2023-24. Projects where you are investing? 

In FY23, we invested Rs. 1,200-1,300 crores in new projects, scaleup activities, asset restoration, debottlenecking, site development, setting up pilot plants and sustainability initiatives. In FY24 and FY25, we plan to invest a total of Rs. 3,000 crores in new chemical value chains and high-potential products to increase the addressable market size and meet the growing demand of key customers. Our upcoming Capex projects include NCB (Nitro Chloro Benzene) capacity expansion and downstream product plants that are expected to start contributing from H1 FY24. 

Update on commencement of capacity expansion for NCB manufacturing facility at Vapi; Expansion cum asset upgradation for Acid Unit at Vapi; Expansion of Ethylation and NT capacities; and expansion, asset restoration, and sustainability Initiatives planned by the company?

Brownfield expansion of the NCB facility at Vapi and a few other Speciality Chemical blocks have been progressing well. These will become operational over the next couple of quarters and start contributing from H2 FY24. We have started the initial work around expanding the Ethylation capacity at Dahej SEZ by 3x with an investment of Rs. 200 crores. Further, with our NT capacities reaching over 90% utilisations, we have commenced the work related to debottlenecking of Nitro Toluene capacities. We target the capacity increase by about 50% with an objective to cater to certain high-growth applications in agrochemicals. We expect both these units to commercialize in H1 FY25.

Update on site development work initiated on 100+ acre land at Jhagadia (Zone IV) and when are you planning to commercialize it? Products to be manufactured?

The project development work at Zone IV is progressing well, with the pilot plant currently under development. We have received environmental clearance and the facility will manufacture more than 40 products related to the Chlorotoluene value chain which will be commercialized in three phases. 

Work for Phase - 1 has already begun. The project is expected to be commercialized from H2 FY25 and is likely to contribute significantly to the growth of the company. The project will provide a wide range of locally produced chemicals that are currently imported by the Pharmaceutical and Agrochemical industries. Around 50% of the products will be targeted for the export market. The introduction of new products will extend our value chain advantages further downstream. This will strengthen our relationship with existing customers and create new customer relationships. Additionally, the project will also enhance our chemistry and technology capabilities into newer areas that can be leveraged in the future to further expand product offerings.

The company is looking at growth through five pronged strategies - Introducing Chlorotoluenes Value Chain; Setting up Multipurpose Plants (MPP); Newer range of Value Added Products & Other Speciality Chemicals; Manufacturing Outsourcing/Strategic Alliances; and Custom Manufacturing Opportunities. How will these strategies transform AIL?

Earlier in our legacy Benzene value chains, we adopted a sequential approach of adding new products incrementally based on demand from existing or new customers. This meant making incremental investments in upstream and downstream capacities as and when needed. However, for the Chlorotoluene value chain, our strategy is a bit different wherein we have looked at the value chain holistically and planned product capacities in sync across the value chain. This will enable us to be Capex-efficient and facilitate faster ramp-up of capacities once commercialized. 

The upcoming multipurpose plant will enable Aarti Industries to enter into higher value-added products that will build on its traditional value chain-centric approach. It would also enable faster commercialization of new products and reduce time-to-market (product inquiry/conception to commissioning). Over the past five years, we have achieved considerable success with our manufacturing outsourcing and long-term contracts that not only provide stable business to the company but also introduce our team to new technologies and global best practices. With the growing trend of China+1 and Europe+1 in the chemical industry, we believe that India is well positioned to attract long-term partnerships from global chemical firms. This will enable us to expand our business and capabilities further while also contributing to the growth of the chemical industry in India. 

Initiatives for enhancing process safety across all processes? How are you collaborating with business partners to imbibe ESG practices? 

In order to enhance process safety and ensure zero deviation for sustainable growth, we have taken several initiatives. We have established a dedicated Process Safety team at our corporate and manufacturing locations, and have also set up a world-class infrastructure and research facility - Aarti Research and Technology Center. We have strengthened the Hazards & Operability study procedure by introducing different guidewords, and implementing applicable learning from external process safety incidents. Our process safety audits are conducted with external subject matter experts, and we have also introduced the concept of TACIT Knowledge sharing activities for learning and development.

Furthermore, we monitor daily process deviations, interlock bypass, and CAL mode on a daily basis, and have enhanced our Chlorine Handling System across AIL with the help of a Chlorine subject matter expert. We have a robust Hazard Identification and Risk Assessment procedure (HIRA) in place, which is done for each individual activity/step involved in Standard Operating Procedures (SOPs). Additionally, we conduct process safety studies for existing and new projects, including Thermal Safety Studies (DSC, TSu, RC1e) for all new and existing processes, and Powder Safety studies (MIE, MIT, LIT, Powder Resistivity, etc.) for all new and existing powder handling operations. We also validate process parameters at the pilot and commercial level, and conduct Criticality Class Study, SIL Study, QRA, and HAC study for all commercial plants.

We are committed to enhancing our sustainability performance in supply chain by engaging with suppliers on ESG practices. We have prepared a strategy for sustainable supply chain management, in which we screen all existing and potential suppliers on sustainability criteria to identify risk and ensure a sustainable supply chain. We also collaborate closely with our identified high-risk business partners to build their capabilities, strive to imbibe ESG practices in their operations, and encourage them to adopt best practices that align with our sustainability goals. We believe that by working together, we can create a sustainable ecosystem that benefits all stakeholders.

Sustainability roadmap of Aarti Industries and when are you planning to become Net Carbon Zero? Sustainability plans for FY 2023-24? 

Aarti Industries is committed to sustainability and has signed the Science Based Target initiative (SBTi) commitment. We plan to set targets at the earliest in order to become a Net Carbon Zero company. We have identified a number of initiatives to reduce our energy consumption, including energy efficiency improvement projects and energy loss reduction. In addition, we have invested Rs. 18 crores to source 147 MW/day of renewable energy which is a significant step towards reducing our carbon footprint.

Furthermore, we aim to reduce our carbon footprint by replacing conventional fossil fuels with biomass. Moving ahead in FY 2023-24, we have set our sights on various additional sustainability initiatives, including exploring new technologies for clean energy and continuing to invest in renewable energy sources. We also plan to improve our energy efficiency and reduce energy consumption to become an environmentally responsible company. Through our investments in renewable energy sources and exploration of new technologies, we are well-positioned to achieve sustainability goals in the coming years.

CSR initiatives being undertaken by Aarti Industries in FY 2022-23 and plans for FY 2023-24? 

At AIL, we continue to seek avenues to foster and support the aspirations of communities with a firm belief of touching and transforming lives of people around us. True to our belief that CSR projects must be robust and impactful to bring about transformational changes in the lives of our stakeholders, we collaborate with our trusted partners having strong grassroot presence for executing our CSR interventions. All our community actions are carried out through Aarti Foundation. 

We do this by focusing on the themes of healthcare, education, and environmental protection. Towards education and skill development, we associated with Shri KVO Jain Mahajan for a project. This project aims to provide interest-free loans, scholarships for higher education and medical aid to the underprivileged.  

In our endeavor towards upliftment of underprivileged clusters and communities, we have joined hands with Bhansali Trust and took up the Musher Integrated Development Project in Fatehpur, Gaya. This project focuses on education, health and hygiene, microcredit, and nutrition for the villagers. We also contributed to the reconstruction of the school building of Sheth M. P. Rashtriya Shala Trust in Mumbai to promote education. Additionally, we have assisted Matruvandana for the Navneet-Chandravallabh Mahila Arts College to aid needy girl students in completing their graduation and senior citizens in receiving better medical welfare, food, and milk. 

In FY 2023-24, we plan to continue supporting our current projects. We also aim to strengthen our efforts towards sustainable development. Moreover, we have planned to initiate new projects that align with the United Nations' Sustainable Development Goals (SDGs) and make a positive impact on our society. With a commitment to creating long term value for all our stakeholders, we will continue to strive towards achieving CSR goals and positively impact society. 

Other achievements in FY 2022-23?

As a testimony of our commitment towards sustainability, we received following recognition and certifications: Permission to use Responsible Care Logo for a period of 3 years from April 2022 - March 2025; Gold medal in EcoVadis CSR Assessment 2022; Best Environment Friendly Company of the Year at FICCI Chemicals and Petrochemicals Award 2022; Most Innovative Environmental Project Award at the CII National Award for Environmental Best Practices 2022; Platinum Title of 12th Exceed Environment Award 2022 in the category: Environment Preservation; “B” Rating in CDP Climate Change disclosure; “A-” Rating in CDP Supplier Engagement disclosure;  For our futuristic approach and readiness to thrive in the age of uncertainty, we were recognized as the Economic Times Future Ready Organisation 2022 in the ‘Large Category’; and we became the only Indian company to win the Best Supplier Relationship Management Initiative Award during the prestigious CIPS Asia Excellence in Procurement Awards 2022.

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