Vinati Organics: Why This Specialty Chemical Maker Expects High Growth In Q4

Vinati Organics Ltd. sees recovery to be on track for its various segments even as small risks to operations persist

With high export exposure to ATBS (2-acrylamido 2 methylpropane sulphonic acid)— used in water treatment, paint emulsions, paper coatings adhesives, detergents and oilfields, among others—and a recovery in global oil and gas activities, the company expects FY22 growth to be more than 20%, Managing Director Vinati Saraf Mutreja told BloombergQuint’s Niraj Shah in an interview. In fact, the demand for ATBS from the oil and gas segment has come back so strongly that the company has seen its capacities sold out until May 2021, she said.

That stages a rebound after muted demand for ATBS amid sluggish activity in the global oil industry and soft crude price during the pandemic caused Vinati Organics to underperform not just by its own estimates, but also its peers. The company, according to its website, claims to be the world’s largest manufacturer of ATBS and the only one in the country.

The company announced in February that it would merge Veeral Additives, which makes antioxidants for polymers, with itself, subject to approval from the National Company Law Tribunal.

Once the deal is completed, Vinati Organics will be among the largest and only integrated manufacturer of certain antioxidants in India, which gives it additional revenue potential and paves the way for a monopoly in certain product segments.

That’s because the critical raw materials required for making Veeral Additives’ products shall be sourced from Vinati Organics directly, creating an efficient backward integration. Veeral Additives’ antioxidants are used in segments where the wear and tear capacity of products are to be enhanced.

Analysts at Emkay Global expect the company to grow at 40% over the next two years. To this, Vinati Organics said it would under-promise and over-deliver, and instead commit to 20-25% growth. It’s also cautiously optimistic about doubling the company’s size in four years.

Saraf said the return of lockdowns in Europe isn’t affecting business as it’s largely a B2B player.

Phillip Capital expects sequential improvement across products/projects led by:

  • Demand recovery and expansion in ATBS.
  • The ramp-up in butyl-phenol capacity.
  • Commissioning of new projects for downstream of butyl phenol, but it factors in some margin underperformance for which it has fine-tuned its estimates.

Brokerages are optimistic on the medium to the long-term outlook of Vinati Organics, led by multiple expansions, new projects and an integrated product basket.

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