The shares of the leading manufacturer of chemical intermediates in India slumped by 4.6 percent to reach an intraday low at Rs. 2,514, during the trading session of Monday.
Stock Performance:
With a market capitalisation of Rs. 35,364.7 crores, the shares of Deepak Nitrite Limited (DNL) opened at Rs. 2,630.6, down by about 0.2 percent, as against its previous closing price of Rs. 2,636.35.
The stock has delivered positive returns of nearly 22.2 percent of returns in one year, as well as around 3 percent returns in the last six months. So far in 2024, the shares of Deepak Nitrite have given positive returns of about 4.7 percent.
Management Guidance:
DNL has signed an agreement with affiliates of Trinseo PLC to acquire the manufacturing assets and license its technology to manufacture 1.65 lakh tons of Polycarbonate (PC) resins, with a total investment of Rs. 5,000 crores.
These assets, with a capacity of 1.65 lakh metric tons, are currently located in Stade, Germany, and will be relocated to the Polycarbonate Manufacturing Facility in Dahej, Gujarat, and will be fully operational by 2028.
The initiative will also drive DNL’s upstream investments, ensuring full integration of the Polycarbonate plant with essential building blocks such as propylene and benzene. Notably, DNL has already secured a long-term contract with Petronet LNG for the supply of 2.5 lakh tons of propylene.
This facility will be the first in India to produce advanced polymers like Polycarbonate. The new facility is expected to reduce reliance on imports and help India become more self-sufficient in sectors like semiconductors, defence, electric mobility, electronics, construction, appliances, medical devices, and emerging industries like aerospace, aviation, and drones.
Deepak’s strategy is centered on increasing downstream integration, and the investment in Polycarbonate resins is a key part of this, enhancing the phenol value chain.
Further, the company plans to expand into new products, chemicals and applications. Its investment strategy includes Rs. 14,000 crores for projects involving specialty products, Bisphenol A, Polycarbonate resins, and Methyl Methacrylate (MMA). The company is also developing new platforms for processes like photochlorination, fluorination, cyanation, and more.
The company’s Acid Unit is expected to start operations in H2 FY25, while the MIBK/MIBC project and the Acetophenone project are both expected to be commissioned by H1 FY26.
The R&D Center in Savli is also scheduled to open by the second half of FY25. Other projects, including Photochlorination, Nitration, and Hydrogenation, are planned for commissioning in the second half of FY25, following the commissioning of the Fluorination block in Q4 of FY24.
Key Drivers:
DNL is in the process of setting up an advanced R&D Centre at Savli, Vadodara, with an investment of over Rs. 100 crores. This facility will focus mainly on Life Sciences, Specialty chemicals, and Application-based intermediates.
The global shift in supply chains, highlighted by the “China Plus One” strategy, is expected to benefit the Indian chemical sector. With ongoing geopolitical tensions, companies are increasingly looking to India for its strong advantages, such as large-scale production, advanced technology, access to raw materials, skilled labor, and supportive government policies.
The Indian government has introduced several initiatives to support the chemical industry, including chemical development schemes, plastic parks, and Chemicals and Petrochemicals Investment Regions (PCPIRs).
Additionally, Rs. 18,100 crores have been allocated under the Production Linked Incentive (PLI) scheme to boost domestic manufacturing and exports.
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Financials:
The company reported a significant growth in consolidated revenue from operations, experiencing a year-on-year increase of nearly 14 percent, rising from Rs. 1,778 crores in Q2 FY24 to Rs. 2,032 crores in Q2 FY25.
In contrast, during the same period, the company’s net profit decreased from Rs. 205 crores to Rs. 194 crores, representing a marginal decline of around 5 percent YoY. EBITDA for Q2 FY25 remained the same at Rs. 319 crores, while the EBITDA margins declined from 18 percent in Q2 FY24 to 16 percent in Q2 FY25.
Despite subdued demand in agrochemicals, the company’s strong domestic market presence, along with positive momentum in the phenolics business, has helped mitigate global challenges. The company achieved its highest-ever quarterly production and sales for certain agrochemical intermediates, as well as for some products in the Dyes and intermediates segment.
In H1 FY25, it recorded record sales of agrochemical intermediates to China and set new production benchmarks for Isopropyl Alcohol (IPA). While margins in Advanced Intermediates were lower, continued strong earnings in the Phenolics segment helped maintain overall profitability. Stable pricing in Phenolics, along with improved plant throughput, contributed to EBITDA growth in the segment.
Key Financial Ratios:
In terms of key financial metrics, Deepak Nitrite has a Return on Equity (RoE) of 16.4 percent and a return on capital employed (RoCE) of 21.6 percent. Additionally, the company’s debt-to-equity ratio stands at 0.17.
Shareholding Pattern:
As per the September 2024 shareholding pattern, the Promoters hold a 49.24 percent stake in the company, Foreign Institutional Investors (FII) hold a 6.68 percent stake, while Retail Investors and Domestic Institutional Investors (DII) hold a 21.79 percent and 22.3 percent stake in Deepak Nitrite, respectively.
About the Company:
Incorporated in 1970, Deepak Nitrite Limited, a prominent chemical manufacturing public limited company, is engaged in the business of manufacturing Basic Intermediates, Fine & Speciality Chemicals, Performance Products, and Phenolics.
The company has been the largest producer of Phenol and Acetone since 2018 in India and is among the top 3 global players for products like Xylidines, Cumidines and Oximes.
Written by Shivani Singh
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