Chairman’s Message

Chairman’s Message

Consistency is an invaluable resource in unpredictable economic environment. Our ability to foresee shifts and respond to them with agility ensures our consistency and distinguishes us as a great organisation

Dear Stakeholders,

We are pleased to share our Fiftieth Annual Report for Fiscal Year (FY) 2020-21. On the back of marked success and excellence, we have achieved a milestone of 50 years supporting the Indian chemical industry. Our journey has been transformational from a small company in Vadodara with a handful of products and employees into an emerging conglomerate with over 4,700 employees and a comprehensive product portfolio catering to multiple industries globally. Having said that, our focus on import substitution throughout this period remains unaltered and we are proud to serve the nation. This in true sense is the fulfilment of ‘Atmanirbhar Bharat’.

I am glad we are on the right course with the support and guidance of all our stakeholders, investors, and employees. This Golden Jubilee Year could not have been better as it provided us a platform to demonstrate our capabilities and buoyancy amidst unprecedented challenges. We lived to our reputation and converted it into a landmark year, delivering strong operating efficiency which resulted in increased productivity and profitability. Alongside, we undertook calibrated expansion initiatives to set the foundation for future growth.

OUTLOOK ON THE WORLDWIDE ECONOMY

FY 2020-21 was largely dominated by the pandemic that hit economies globally. However, the vaccine rollout along with a reduced case load has spurred optimism of the pandemic’s end and a rebound in global economy. Accommodative policies by major economies further improve the outlook.

The International Monetary Fund (IMF) forecasts the global economy to expand at 5.5% in CY2021 and 4.2% in CY2022,despite the high level of uncertainty. Among the advanced economies, the US and Japan are expected to restore to end-CY2019 activity levels by the second half of CY2021, while Eurozone and the UK are expected to stay below end-CY2019 levels into CY2022. Among the Emerging economies, China has indicated a rapid rebound towards pre-pandemic levels of growth and economic activity. Its output is expected to grow 8.1% supported by effective containment policies with vigorous public investment response and liquidity measures from the central bank.

Several countries, particularly low-income developed economies, entered the crisis with high debt levels, that are projected to accelerate even further during the pandemic. The international community will need to keep working together to ensure that these countries have enough access to international liquidity.

For the Indian Economy, the growth projections for FY 2021-22, have been revised upwards to 11.5%, representing a 2.7 percentage point increase from the previous estimates, indicating a carryover from a stronger-than-expected rebound in FY 2020-21. As a result, India is the only major economy predicted to grow in double digits amidst the COVID-19 pandemic. While the overall outlook remains positive, recurrence of pandemic waves through new variants, especially in India which is facing a severe second wave may pose fresh challenges and impact recovery.

While the overall outlook remains positive, one cannot rule out recurrence of the pandemic through mutated variants, as we witnessed in India in April and May. This causes us to be cautiously optimistic on the prospects for a sharp rebound in economic growth and activity.

INDIA – A LUCRATIVE MARkET FOR ThE ChEMICAL INDUSTRY

Despite the challenges, India is poised to become a hub for global chemical industry. Contributing 3% to global chemical industry, the country ranks 6th Over the years, we have significantly diversified our portfolio, while enhancing processes, strengthening relationships, and introducing sustainability strategies to create shared value for all stakeholders. globally in terms of chemical sales, 14th in exports and 8th in imports. And this is excluding pharmaceutical products. Over 2 million people are employed in the Indian chemical industry and that serves as a key enabler, to achieve the estimated market size of US$ 300 billion in Chemicals & Petrochemicals in India by 2025.

The industry valued at US$ 178 billion in 2019, is projected to grow at a compounded 9.3% to US$ 304 billion by 2025. Factors like growing disposable income, urbanisation and rural consumer penetration and demand are likely to drive this growth. Higher demand for Chemicals and Petrochemicals is mainly driven by shift in global supply chains towards Asia as well as increased domestic demand. It is estimated that chemical products worth US$ 111 billion could be produced by 2023 for domestic requirements.

For India, a thriving R&D ecosystem, advantage of being a one-stop investment and an alternative chemical destination, production-linked incentive (PLI) scheme, and focus on sustainable chemistry and circular economy remain the key pillarsof its chemical industry roadmap. The Government is also keen on enhancing the industry’s competitiveness and its share in manufacturing. Its 2034 vision for the chemicals and petrochemicals sector focuses on exploring ways to increase domestic production, reduce imports and attract investments. It has also revamped the Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) policy to attract investments of Rs. 20 trillion by 2035.

EMBRACING LEGACY OF 50 YEARS – EXCELLENCE, ExPERTISE AND VALUE CREATION

Deepak is a well-known Indian multinational in the chemical industry due to its technical expertise, understanding of complex chemistries, efficient handling of technical processes, and a long-term commitment of building deep relationships with external stakeholders. We have been one of the first adopters of the ‘Make in India’ ideology. Over the years, we have significantly diversified our portfolio, while enhancing processes, strengthening relationships, and introducing sustainability strategies to create shared value for all stakeholders.

We have prudently invested funds to improve growth prospects and steadily strengthen financial position while remaining committed to the core value and objectives of people, planet, and profit. With our robust manufacturing platform and capabilities, we look ahead with excitement towards the numerous opportunities that have emerged because of increased global attention on India’s potential.
Furthermore, through planned introductions of newer products and ventures, we are laying the foundations for future development. We continue to experience uptick in demand from a myriad of end-user industries, and this trend is expected to continue, going forward.

TACKLING CHALLENGES

Years of experience and tactical acumen have equipped our teams to tackle challenges effectively. Despite the magnitude of second wave, we continued to maintain high efficiency levels across all manufacturing facilities while adhering to regulatory directives.

We prioritised man and material safety. Special financial incentives, expanded medical coverage to include COVID-19 care, free health check-ups, and supply of multivitamins under proper medical advice were some steps undertaken for welfare of employees and their families. We have already taken on the responsibility of vaccinating all employees and their spouses and continue to look for solutions to support the families that depend on us.

DNL FOR ‘ATMANIRBHARTA BHARAT’ – LIMITING CHEMICAL IMPORTS

In the international arena, Government of India’s effective vaccine diplomacy has enhanced the status and capability of Indian manufacturing sector. Its immediate effect has been an acceleration in chemical manufacturing shift from China to India. Emergence of the domestic market is the next-order impact. The Government is capitalising on this shift by incentivising India’s manufacturing sector with the clarion call of Aatmanirbhar Bharat and the PLI scheme, the impact of which is evident in the rising manufacturing volumes across sectors. This, coupled with global majors’ emphasis on India as an alternative supplier for their requirements, would enhance performance traction for India’s leading chemical companies.

DNL is ideally placed to become a key domestic chemical manufacturer given our deep chemistry knowledge, diversified product mix, manufacturing experience, scale, backward integration and R&D capabilities. Over the past five decades, we have successfully implemented an import substitution strategy for a wide range of products, such as sodium nitrite, nitrotoluenes, fuel additives, DASDA, OBA and phenol. Our recent venture into the Isopropyl Alcohol, downstream of Acetone, manufacturing with commissioning of 30,000 MT plant is another step forward. With this product, we have met the needs of domestic industries who otherwise imported it as well as served the country when most needed as it is a key raw material used in sanitisers. It has also strengthened our margins and minimised commodity price volatility exposure while setting a foundation for expanding into downstream products. Doubling of the IPA plant to further reduce the country’s dependence on imports has been taken up on a fast-track basis and should be ready in couple of months.

OUR TRIPLE BOTTOMLINE STRATEGY

People are our most valuable asset. We recognise their contribution towards our transformation, preparedness for future growth and every aspect of corporate management. A ‘People First’ approach has enabled us to operate all plants at high efficiency while adhering to all Government mandates and regulations.

As a result, we maintain high priority on educating and training our employees, as well as improving their skills and encouraging employee engagement. Our best-in-class human resource strategies ensures their development, safety and welfare. Goals and outcomes are identified to not only foster healthy individual competitiveness, but also serve as a team- building initiative to drive productivity and efficiency. This makes us an employer of choice.

We strongly believe in sustainable practices and has been honoured as a Responsible Corporate Citizen on a global scale. We are amongst the first Indian chemical companies to be awarded the ‘Responsible Care’ certification for our efforts to make the world a safer place. We are also a founding member of the Indian Chemical Council’s ‘Nicer Globe’ and a key representative of ‘Together for Sustainability’.

At Deepak, sustainability is one of the main factors contributing to our quality and environmentally friendly solutions. We are dedicated to ecologically sustainable chemistry, ensuring the safety of our employees and customers, as well as the well-being of the society. We are consistently innovating to meet the strategic demands of business, industry, community, and our planet.

India is on the path of steadily gaining market share in the global chemical industry, based on its manufacturing capabilities and track record. In FY 2020-21, Deepak delivered a profitable growth with gains across key product categories. Our consolidated revenue for the year was Rs.4,382 Crores with EBITDA of Rs. 1,269 Crores. PBT and PAT increased at a faster rate to Rs. 1,042 Crores and Rs. 776 Crores respectively.

We continued to operate at high utilisation levels at all facilities, especially the phenol plant which operated at around 115% capacity. India is indeed a lucrative market for the chemical industry, and Deepak is an ideal candidate to capitalise on this trend, thanks to its diverse product offerings and decades of manufacturing experience

VISION FOR A SUCCESSFUL FUTURE

Consistency is an invaluable resource in unpredictable economic environment. Our ability to foresee shifts and respond to them with agility ensures our consistency and distinguishes us as a great organisation.
Amidst the ongoing pandemic, we responded effectively to the new normal work environment and implemented all recommended health and safety protocols. We progressed towards becoming future- ready by investing in productive assetsand adopting development strategies, established keeping in mind an in-depth and risk-averse approach to capital growth.

Our responsiveness is complemented by our integrated business model serving varied end-user industries and robust research and development capabilities. Together, these strengthen our competitiveness and remain relevant to future needs, which is critical to our long- term success.

DIVIDEND

Premised on Deepak’s stellar performance during the fiscal, the Board of Directors recommended a final dividend of Rs. 4.50 per equity share, being 225% of the face value. Over and above the normal dividend, the Board has also recommended a special dividend of ` 1 per equity share, being 50%, to commemorate Golden Jubilee year of DNL. Therefore, the total dividend recommended is Rs. 5.50 per equity share, being 275% of the face value for the year ended March 31, 2021 on 13,63,93,041 equity shares of face value of Rs. 2/- each.

VOTE OF THANKS

On behalf of the Board, I am pleased to state that Deepak has consistently delivered value to customers around the world, attributable to our productive and efficient workforce, together with the continuous encouragement and unwavering support of our dedicated shareholders. We value your continued trust in Deepak’s resilience capabilities. We would also like to express our gratitude to all our employees for their diligent efforts in accomplishing our objectives and achieving our vision.

To conclude, I would like to take this opportunity to thank all stakeholders for being a part of our prosperous journey. Going forward, we are optimistic that we will soon become a diversified chemical conglomerate. We are also honoured to be associated with you as we embark on a path of long-term growth and value creation. While I am sure you all are taking requisite precaution, I take this opportunity to plead once again that, you exercise maximum precaution to remain in order to combat the pandemic together

Best Regards,

Deepak C Mehta

Chairman and Managing Director

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