During FY 2020-21, the Company undertook brownfield expansions to create headroom for growth. Further, Deepak commissioned its premium grade IPA plant with a capacity of 30,000 MTPA in April 2020 and delivered full utilisation within a month of launch.
Over last five decades of the Company’s operations, we have witnessed, various facades of socio-economic rigmarole – socialistic pattern of society including public sector industries, regime of the licences, India being signatory to the WTO, commencement of economic liberalisation followed by social liberalisation, augmentation of a new era when the country gradually started embracing capitalism amidst various global opportunity and debacle; probably the most amazing discovery witnessed by the World, the Internet. In this series of phenomenon, the country’s socio- economic warp & weft yarns have witnessed transformational change.
Today’s India is a new economic prowess in the World, has serious voice in global forums, at the backdrop where the Indian Corporations have been successful in their delivery helping the country’s economic abilities. And, we saw pandemic caused by COVID-19, stalling all sorts of normal activities across the globe, posing serious threat to our country as well – to its citizens, to its economy and society at large.
At Deepak, the 50th year of operations has been memorable. The Company commenced the fiscal in the midst of the nationwide lockdown resulting in all plants being shut down, all employees working from home, finished goods and raw materials in transit and customers remaining uncertain about production schedules. We swiftly adapted to the new normal work environment and strictly imposed all necessary health and safety procedures in the face of a global pandemic.
RESILIENCE IN ADVERSITY
The Company prioritised its human capital to ensure safety first. The priority was employees and their families, suppliers and vendors as well as the millions of citizens who live around the plants and operations. It offered medical testing for employees and families, ensured prompt and timely payments, widened medical coverage and also distributed medicines and food where required. The focus on Health, Safety and Environmental parameters was prioritised since any oversight in process, storage or logistics of materials could have catastrophic consequences.
The Company was rewarded by its employees and business partners who remained committed to the operations and ensured a seamless recovery upon relaxation of the restrictions. Most importantly, project and technical teams were able to commission the IPA facility in the midst of the lockdown in April 2020. This helped the Company to offer an essential product in a time of immense need thereby serving the Nation.
Despite the pandemic’s lingering effect on certain end-user segments, all teams have been proactive and agile thereby driving a steady revival in operational performance leading to return to pre- COVID levels of growth trajectory. This has enabled the Company to deliver a resilient performance during FY 2020-21, possibly the most disruptive year in living memory.
In the face of multiple challenges including shutdown of plants for 35 days during the first quarter, increased volatility in prices of raw material, sustained forex volatility, the Company maintained high standards of operational excellence.
The Standalone business has witnessed initial demand shocks in end-user industries and sharp fall in realisations of some key products. This was taken in its stride as the Company overcame the odds of first half of the year with a strong performance in the second half to post year-on-year growth in revenues and profitability. In fact, the Company has steadily increased PBT in each successive quarter this fiscal.
On the other hand, phenol business delivered stellar performance showing excellent plant efficiencies, registering capacity utilisation level at around 115% which resulted in higher revenue and EBITDA margins.
By leveraging its integrated manufacturing model and displaying high tactical awareness, the Company has capitalised on opportunities across various end-user industries and geographies that it serves.
The performance of the Company has been indicative of inherent expertise and strength across key product categories. We were able to seize opportunities arising from the sharp rebound in India’s overall economic activity following several months of lockdown - thanks to excellent teamwork, global-scale operations and robust marketing and distribution network.
UNWAVERING FOCUS ON GROWTh
During FY 2020-21, the Company undertook brownfield expansions to create headroom for growth. Further, Deepak Phenolics Ltd. commissioned its premium grade IPA plant with a capacity of 30,000 MTPA in April 2020 and delivered full utilisation within a month of launch. Efforts are underway to rapidly commission the second phase of IPA manufacturing which will double the capacity to 60,000 MTPA.
IPA is the first of a basket of downstream derivatives of phenol and acetone that will drive forward integration in the product portfolio of DPL. This will result in increased captive consumption of these commodity products and enable us to deliver value- added products to our customers.
The Company has commenced land development operations at the newly procured site in Dahej, and it is nearing completion on the 55-acre site, out of total 127 acres. With effect from October 9, 2020, the Company had also established a wholly-owned subsidiary ‘Deepak Clean Tech Limited’ (“DCTL”), to produce chemical and pharma intermediate products, interwoven with our existing products and process chemistry knowledge, also towards creating new platforms like fluorination and photochlorination.
EFFICIENT CAPITAL ALLOCATION
Deepak Nitrite apportions profits earned and cash generated during the year
into three primary uses – reinvesting for growth, reduction of debt and returns to shareholders. As has been shared earlier, the Company is undertaking expansion across multiple business lines to reinvest for growth. Due to its increased scale,
it is able to self-finance its calibrated growth plans.
The Company enjoys a stable position on the balance sheet front. It has steadily reduced debt in recent quarters and has emerged stronger through the pandemic on the back of the improved financial position over the last 12 months. Your Company achieved debt-free status, on a standalone basis, during this fiscal. Deepak Phenolics which has just completed around 2.5 years of operations since commissioning of its mega project and has invested in capacity to manufacture IPA this fiscal, pre-paid substantial part of its borrowing apart from honouring committed repayments. Consequently, the consolidated net debt to equity ratio is comfortable at 0.15x. The Company enjoys a robust liquidity position with cash and liquid investments amounting to nearly Rs. 220 Crores on a consolidated basis as of March 31, 2021.
CREDIT RATING IMPROVEMENT
Deepak Nitrite has a strong reputation and is a market leader in several product categories. This has resulted in consistently improving financial performance. As a result, ICRA has upgraded long-term credit rating from “ICRA AA-” to “ICRA AA” of Deepak Nitrite. The outlook has been revised from Positive to Stable. Further, they have re-affirmed short-term credit rating at “ICRA A1+”. CRISIL upgraded its long-term credit rating outlook, from “CRlSlL AA-/Positive” to “CRlSlL AA/Stable” and has re-affirmed Short-Term rating as “CRlSlL A1+”.
With respect to subsidiary, Deepak Phenolics Limited, ICRA has upgraded the long-term credit rating by two notches, from “ICRA A” to “ICRA AA-” and the short- term credit rating has also been upgraded from “ICRA A1” to “ICRA A1+”, which is the highest in the category.
Revised ratings have been greatly influenced by Company’s long-term business performance, economic sustainability across several product segments, diversified product offerings, continuous innovation and market efficiency.
DELIVERING VALUE TO SHAREHOLDERS
We firmly believe in creating shareholder value and in line with outstanding performance delivered by the Company.I am pleased to report that as a measure of recognition of the confidence reposed by our shareholders, the Board of Directors of the Company has recommended a dividend of 275% including a special dividend of 50% to commemorate Golden Jubilee.
Over the last five decades, Deepak Nitrite has wisely invested funds to improve its potential growth and continually enhance the financial health, all the while staying dedicated to the core values of people, planet, and profit. The Company has a robust platform in place and we are excited about the abundant opportunities that have emerged as a result of rising global emphasis on partnering with India.
On behalf of the Board of Directors & the management of the Company, I would like to thank all of you, our shareholders, for your trust and faith in the Company. We maintain a guarded optimism that Deepak will continue to offer long-term value to all its internal and external stakeholders.
Wish you all the best, stay safe.
Director - Finance & Chief Financial Officer