Aarti Industries Ltd · NSE:AARTIIND
Aarti Industries — Investor Presentation (July 2019)
73 slides from Aarti Industries's investor presentation, Jul 10, 2019
Slide 1: Stock exchange cover letter
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Slide 2: Analyst Presentation Aarti Industries Ltd. June 2019
Analyst Presentation Aarti Industries Ltd. June 2019
Slide 3: Vision and Purpose
Our vision has strong emphasis on the customer Vision To be a Global Partner of Choice Purpose Right Chemistry for A Brighter tomorrow 2
Slide 4: Our Values
Our Values We care for our people, our We strive to maintain the highest We continuously raise the bar for customers, our suppliers, our assets ethical and moral standards. We our performance standards in safety, and our community. Care for our honour our commitments towards productivity and employe
Slide 5: Company Overview
Company Overview Overview Key Metrics A leading Speciality Chemicals company in Benzene based derivatives with integrated operations and high level of cost optimization Established by first generation technocrats in 1984 200+ 400+ 700+ Global Domestic Pharma operations spanning APIs, intermedi
Slide 6: Key Milestones with Adaptive Growth Strategies
Key Milestones with Adaptive Growth Strategies 1984 - 1991 1992 - 2011 2012 - present Growth Consolidation, Scale, cost competitiveness, SSI, Licensing, import substitution Productivity with Sustainability Strategies exports • Upgraded hydrogenation unit from batch • Commenced Calcium chloride • Sig
Slide 7: Strategically Located Plants
Strategically Located Plants Bhachau, Kutch Dahej Jhagadia Vapi Location within India Tarapur Dombivali Chemical Plants Mumbai Head Office Pharma Plants R&D Center • Over 100 acres of land available in Jhagadia for future development 6
Slide 8: Management Team
Management Team Technocrats Mr. Chandrakant Mr. Rashesh Mr. Rajendra Mr. Parimal Gogri Gogri Gogri Desai Chairman Vice Chairman & Chairman & M.D. Founder Director Emeritus M.D. Mrs. Hetal Mr. Renil Gogri Gogri Gala Director Director Finance Marketing Administration Mr. Shantilal Mr. Manoj Chheda Mr.
Slide 9: Independent Directors
Independent Directors Rich and Diverse Experienced Banking Mr. K.V.S Mr. P. A. Sethi Shyamsundar Independent Independent Director Director Legal Industry Mr. Vinay Mr. Lalitkumar Mr. Ramdas Nayak Naik Gandhi Independent Independent Independent Director Director Director Academia / Technical Chartere
Slide 10: Financials - Consolidated
Financials - Consolidated Robust Revenue Growth Strong EBITDA Growth Strong PAT Growth 965 492 INR (Cr) INR (Cr) INR (Cr) 4,705 699 333 654 316 3,806 572 3,163 257 2,908 3,007 466 206 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 Strong Operating Cash Flows Strong Return
Slide 11: Revenue Performance (Consolidated)
Revenue Performance (Consolidated) Revenue Export 2500 CAGR: 13% Deep engagement with Operating revenues have 1,977 grown on the back of 1,596 2000 global customers in 1,449 1,523 strong volume growth in 1,431 4,705 Speciality chemicals and 1500 key business segments and 3,806 pharma. In addition, p
Slide 12: EBIT Performance (Consolidated)
EBIT Performance (Consolidated) EBIT CAGR: 21% Higher growth relative to 932 revenue highlights value 615 663 addition delivered by AIL 542 447 FY15 FY16 FY17 FY18 FY19 Speciality Chemicals Pharmacuticals CAGR: 19% 819 CAGR: 33% 113 566 581 504 79 408 39 48 36 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17
Slide 13: Stock Performance and Shareholding
Stock Performance and Shareholding Aarti has outperformed broader market Sensex Aarti 39395 18,864 1,778 79 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Jun-19 Shareholding Pattern (as of 30 June 2019) Key Institutional Investors (As of 30 June 2019) Institutional 23.67 % Fund House % Holding in the co
Slide 14: Key Strengths
Key Strengths • Global Player in Benzene based Derivatives with Integrated Operations o Strong/Leadership position in key products and processes o Integrated operations across product chain of Benzene and Toluene o Ability to effectively use co-products and generate value-added products • Well Diver
Slide 15: Global Player in Benzene based derivatives with Integrated Operations (1/2)
Global Player in Benzene based derivatives with Integrated Operations (1/2) Benzene product chain A B C D E F • Integrated operations across product chain PNCB PNA PCA 35 DCA PFNB NCB MCB of Benzene and Chain ONCB ONA OCA 24 DNCB OFNB Toluene • Co-products /Isomer ODCB 34 DCNB OCPNA 34 DCA 33 DCBH O
Slide 16: Global Player in Benzene based derivatives with Integrated Operations (2/2)
Global Player in Benzene based derivatives with Integrated Operations (2/2) Toluene product chain Sulphuric acid product chain Sulphuric Acid Nitration Hydrogenation Others OLEUM 23% & 65% NOET Leen SO2 ONT OT SULPHUR 1000 OC SO2 Gas SO3 99% MEA Steam Di Methyl Sulphate MNPT Co Gen Power Plant Di Et
Slide 17: Well Diversified Across Multiple Dimensions
Well Diversified Across Multiple Dimensions High level of geographic diversification… …with a well diversified product portfolio, and low ROW dependence on individual products Japan 10% 4% Top 5 product contribution China Top 10 product contribution 3% 69% Europe Domestic 55% 52% 58% 14% 60% 36% 39%
Slide 18: We are proud to be associated with most of the major players
We are proud to be associated with most of the major players in the specialty chemicals domain 17
Slide 19: Simple chemistries of our products have a host of end uses
Simple chemistries of our products have a host of end uses.. In lightweight polymers of the aircraft In the medicines that keep you In the Agrochemicals which help In perfumes and flavours that tickle bodies healthy improve productivity of farms your senses In lightweight polymers of the aircraft In
Slide 20: Pharmaceuticals – Exposure to multiple segments & products
Pharmaceuticals – Exposure to multiple segments & products, with strong infrastructure in place End User Industry • Global generic pharma companies Pharmaceuticals • Innovator and large pharma MNCs • Branded generic Indian pharma companies Xanthine derivatives 61% Pharma Intermediates & Ingredients
Slide 21: Pharmaceuticals – Significant growth with diversification
Pharmaceuticals – Significant growth with diversification across products and geographies Pharma - significant top line and margin growth… …with diversification across products and geographies Revenue CAGR FY14-19 24% FY18 Revenue Split EBIT CAGR FY14-19 31% 15.6% Xanthine, 39% API, 61% 14.2% 11.3%
Slide 22: Strong Return Profile despite Significant Capex over Last 5 Years
Strong Return Profile despite Significant Capex over Last 5 Years Strong return profile despite significant capex spend Capex (Rs Cr) ROCE ROCE (exc CWIP) ROE 24% • Expanded capacity to scale base businesses (NCB and Chlorination) 23% 24% 21% 22% and downstream value added products 20% 23% 22% 21% 2
Slide 23: Well placed to benefit from sector tailwinds
Well placed to benefit from sector tailwinds – Global Speciality chemicals market has been shifting eastwards with China …India to benefit from China’s downturn benefitting significantly over the last 2 decades • Gradual erosion in China’s cost advantage, due to: Shift towards EM China was the key b
Slide 24: Offerings & Requirements
Offerings & Requirements What India offers What Indian Companies need to do Capex & Opex Cost Savings Strong Safety, Health & Environment Availability of Feed Stock Better Project Management Skilled Manpower Strong R&D Access to Ports Customer Relations Management Geographic De-Risking
Slide 25: Strong Focus on R&D & Process Innovation
Strong Focus on R&D & Process Innovation Process Innovation World Class Technology • Scrub NOx in Sulphuric Acid from • Adopted Swiss technology for MDCB plant to manufacture o Continuous Loop reactor for commercial grade Nitrosyl eco-friendly hydrogenation Sulphuric Acid World Class process • Direc
Slide 26: Upcoming Research & Technology Centre
Upcoming Research & Technology Centre A new 50,000 sq. ft. Research & Technology Centre is being set up in Navi Mumbai This R&D centre will have dedicated lab for: • Process Safety • Effluent Treatment • Flow chemistry • Kilo Lab • High-pressure reactors This R&D centre when at full strength will ho
Slide 27: Growth with Sustainability for a Sustainable Growth
Sustainability Our Strategy Growth with Sustainability for a Sustainable Growth Commitment Commitment Commitment Commitment to Safety and to towards to Energy Health Environment Society Efficiency 26
Slide 28: Strong Focus on Sustainability
Strong Focus on Sustainability Health & Safety Focused on Zero tolerance and Zero harm Process safety audits and Process of 'Learning from Incident' is established inspections from external Toxicologist on board for Occupational Health and emergency response INR 240 Cr experts Amount invested
Slide 29: Multiple awards in sustainability/HSE
We have received multiple awards in the area of sustainability/ HSE Gujarat Cleaner Production Award Forest and Environment Dept., Government of Gujarat presented the Gujarat Cleaner Production Award to team Jhagadia. SERB IGCW 2017 Award The Industrial Green Chemistry World Council (IGCW) presented
Slide 30: Multi-year contracts with global majors
Aarti has been trusted by global majors with multi- year contracts Contract #1 Contract #2 10-year supply contract 20-year supply contract with a with an agrochemical specialty chemicals conglomerate major for a key herbicide for a key speciality Chemical intermediate intermediate Total contra
Slide 31: Growth Strategy
Growth Strategy • Scale up of capacities in existing products • New markets and applications for existing products • New value-added products in existing value chains • Improving market position across isomers • Scale up of capacities in existing 1 products and related applications • Increase presen
Slide 32: QIP: Financial Sustainability, Institutional Participation, Investing in Growth
QIP of Rs 750 crs: Capital for an incremental growth… Reduced debt-equity ratio from 1.3x to below 1.0x with a Financial Sustainability 6.6% dilution in overall shareholding of the company. 01 Maintaining financial leverage over long- Promoter shareholding still retained above 49% term within th
Slide 33: Consolidated Financial Statements
Consolidated Financial Statements In Rs Cr FY15 FY16 FY17 FY18 FY19* Balance Sheet Property, Plant and Equipment 967 1,246 1,695 1,996 2,145 Capital Work-in-Progress 1,923 313 270 436 795 Intangible Assets 0.04 0 2 2 1 Investments 173 41 47 47 33 Other Non-Current Assets 103 132 168 225 306 Total No
Slide 34: Consolidated Financial Statements
Consolidated Financial Statements In Rs Cr FY15 FY16 FY17 FY18 FY19* Profit and Loss Revenue 2,908 3,007 3,163 3,806 4,706 EBITDA 466 572 654 699 965 Depreciation 82 99 123 146 163 Profit Before Tax 251 363 416 429 622 Tax 61 95 88 83 118 PAT 206 257 316 333 492 % EBITDA 16% 19% 21% 18% 21% % ROCE 1
Slide 35: Scheme Highlights
Impact of Scheme on FY19 Consol numbers FY19 (Pre approval of FY19 (Post approval of In Rs Cr Impact Analysis Scheme) Scheme) Profit and Loss – Key Financials Scheme Highlights Revenue 5,014 4,706 Demerger of HPC Undertaking into a separate Company namely Aarti EBITDA 971 965 Decr by 0.6% Surfacta
Slide 36: Multiple Awards for innovation, excellence in exports
Multiple Awards for innovation, excellence in exports, etc. Chemtech Foundation Award CHEMTECH Foundation accorded Aarti Industries with the ‘Outstanding Achievement for Innovation’ award for the company’s commendable efforts in conserving the environments as well as ensuring sustainable growth thro
Slide 37: Thank You
@) AARTI INDUSTRIES LIMITED f “| PRODUCTIVITY WITH SAFETY 1S OUR MOTTO SUA Hh MA Wal CA Aa S
Slide 38: Analyst Presentation Aarti Industries Ltd. June 2019
Analyst Presentation Aarti Industries Ltd. June 2019
Slide 39: Vision and Purpose
Our vision has strong emphasis on the customer Vision To be a Global Partner of Choice Purpose Right Chemistry for A Brighter tomorrow 2
Slide 40: Our Values
Our Values We care for our people, our We strive to maintain the highest We continuously raise the bar for customers, our suppliers, our assets ethical and moral standards. We our performance standards in safety, and our community. Care for our honour our commitments towards productivity and employe
Slide 41: Company Overview
Company Overview Overview Key Metrics A leading Speciality Chemicals company in Benzene based derivatives with integrated operations and high level of cost optimization Established by first generation technocrats in 1984 200+ 400+ 700+ Global Domestic Pharma operations spanning APIs, intermedi
Slide 42: Key Milestones with Adaptive Growth Strategies
Key Milestones with Adaptive Growth Strategies 1984 - 1991 1992 - 2011 2012 - present Growth Consolidation, Scale, cost competitiveness, SSI, Licensing, import substitution Productivity with Sustainability Strategies exports • Upgraded hydrogenation unit from batch • Commenced Calcium chloride • Sig
Slide 43: Strategically Located Plants
Strategically Located Plants Bhachau, Kutch Dahej Jhagadia Vapi Location within India Tarapur Dombivali Chemical Plants Mumbai Head Office Pharma Plants R&D Center • Over 100 acres of land available in Jhagadia for future development 6
Slide 44: Management Team
Management Team Technocrats Mr. Chandrakant Mr. Rashesh Mr. Rajendra Mr. Parimal Gogri Gogri Gogri Desai Chairman Vice Chairman & Chairman & M.D. Founder Director Emeritus M.D. Mrs. Hetal Mr. Renil Gogri Gogri Gala Director Director Finance Marketing Administration Mr. Shantilal Mr. Manoj Chheda Mr.
Slide 45: Independent Directors
Independent Directors Rich and Diverse Experienced Banking Mr. K.V.S Mr. P. A. Sethi Shyamsundar Independent Independent Director Director Legal Industry Mr. Vinay Mr. Lalitkumar Mr. Ramdas Nayak Naik Gandhi Independent Independent Independent Director Director Director Academia / Technical Chartere
Slide 46: Financials - Consolidated
Financials - Consolidated Robust Revenue Growth Strong EBITDA Growth Strong PAT Growth 965 492 INR (Cr) INR (Cr) INR (Cr) 4,705 699 333 654 316 3,806 572 3,163 257 2,908 3,007 466 206 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 Strong Operating Cash Flows Strong Return
Slide 47: Revenue Performance (Consolidated)
Revenue Performance (Consolidated) Revenue Export 2500 CAGR: 13% Deep engagement with Operating revenues have 1,977 grown on the back of 1,596 2000 global customers in 1,449 1,523 strong volume growth in 1,431 4,705 Speciality chemicals and 1500 key business segments and 3,806 pharma. In addition, p
Slide 48: EBIT Performance (Consolidated)
EBIT Performance (Consolidated) EBIT CAGR: 21% Higher growth relative to 932 revenue highlights value 615 663 addition delivered by AIL 542 447 FY15 FY16 FY17 FY18 FY19 Speciality Chemicals Pharmacuticals CAGR: 19% 819 CAGR: 33% 113 566 581 504 79 408 39 48 36 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17
Slide 49: Stock Performance and Shareholding
Stock Performance and Shareholding Aarti has outperformed broader market Sensex Aarti 39395 18,864 1,778 79 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Jun-19 Shareholding Pattern (as of 30 June 2019) Key Institutional Investors (As of 30 June 2019) Institutional 23.67 % Fund House % Holding in the co
Slide 50: Key Strengths
Key Strengths • Global Player in Benzene based Derivatives with Integrated Operations o Strong/Leadership position in key products and processes o Integrated operations across product chain of Benzene and Toluene o Ability to effectively use co-products and generate value-added products • Well Diver
Slide 51: Global Player in Benzene based derivatives with Integrated Operations (1/2)
Global Player in Benzene based derivatives with Integrated Operations (1/2) Benzene product chain A B C D E F • Integrated operations across product chain PNCB PNA PCA 35 DCA PFNB NCB MCB of Benzene and Chain ONCB ONA OCA 24 DNCB OFNB Toluene • Co-products /Isomer ODCB 34 DCNB OCPNA 34 DCA 33 DCBH O
Slide 52: Global Player in Benzene based derivatives with Integrated Operations (2/2)
Global Player in Benzene based derivatives with Integrated Operations (2/2) Toluene product chain Sulphuric acid product chain Sulphuric Acid Nitration Hydrogenation Others OLEUM 23% & 65% NOET Leen SO2 ONT OT SULPHUR 1000 OC SO2 Gas SO3 99% MEA Steam Di Methyl Sulphate MNPT Co Gen Power Plant Di Et
Slide 53: Well Diversified Across Multiple Dimensions
Well Diversified Across Multiple Dimensions High level of geographic diversification… …with a well diversified product portfolio, and low ROW dependence on individual products Japan 10% 4% Top 5 product contribution China Top 10 product contribution 3% 69% Europe Domestic 55% 52% 58% 14% 60% 36% 39%
Slide 54: We are proud to be associated with most of the major players
We are proud to be associated with most of the major players in the specialty chemicals domain 17
Slide 55: Simple chemistries of our products have a host of end uses
Simple chemistries of our products have a host of end uses.. In lightweight polymers of the aircraft In the medicines that keep you In the Agrochemicals which help In perfumes and flavours that tickle bodies healthy improve productivity of farms your senses In lightweight polymers of the aircraft In
Slide 56: Pharmaceuticals – Exposure to multiple segments & products
Pharmaceuticals – Exposure to multiple segments & products, with strong infrastructure in place End User Industry • Global generic pharma companies Pharmaceuticals • Innovator and large pharma MNCs • Branded generic Indian pharma companies Xanthine derivatives 61% Pharma Intermediates & Ingredients
Slide 57: Pharmaceuticals – Significant growth with diversification
Pharmaceuticals – Significant growth with diversification across products and geographies Pharma - significant top line and margin growth… …with diversification across products and geographies Revenue CAGR FY14-19 24% FY18 Revenue Split EBIT CAGR FY14-19 31% 15.6% Xanthine, 39% API, 61% 14.2% 11.3%
Slide 58: Strong Return Profile despite Significant Capex over Last 5 Years
Strong Return Profile despite Significant Capex over Last 5 Years Strong return profile despite significant capex spend Capex (Rs Cr) ROCE ROCE (exc CWIP) ROE 24% • Expanded capacity to scale base businesses (NCB and Chlorination) 23% 24% 21% 22% and downstream value added products 20% 23% 22% 21% 2
Slide 59: Well placed to benefit from sector tailwinds
Well placed to benefit from sector tailwinds – Global Speciality chemicals market has been shifting eastwards with China …India to benefit from China’s downturn benefitting significantly over the last 2 decades • Gradual erosion in China’s cost advantage, due to: Shift towards EM China was the key b
Slide 60: Offerings & Requirements
Offerings & Requirements What India offers What Indian Companies need to do Capex & Opex Cost Savings Strong Safety, Health & Environment Availability of Feed Stock Better Project Management Skilled Manpower Strong R&D Access to Ports Customer Relations Management Geographic De-Risking
Slide 61: Strong Focus on R&D & Process Innovation
Strong Focus on R&D & Process Innovation Process Innovation World Class Technology • Scrub NOx in Sulphuric Acid from • Adopted Swiss technology for MDCB plant to manufacture o Continuous Loop reactor for commercial grade Nitrosyl eco-friendly hydrogenation Sulphuric Acid World Class process • Direc
Slide 62: Upcoming Research & Technology Centre
Upcoming Research & Technology Centre A new 50,000 sq. ft. Research & Technology Centre is being set up in Navi Mumbai This R&D centre will have dedicated lab for: • Process Safety • Effluent Treatment • Flow chemistry • Kilo Lab • High-pressure reactors This R&D centre when at full strength will ho
Slide 63: Growth with Sustainability for a Sustainable Growth
Sustainability Our Strategy Growth with Sustainability for a Sustainable Growth Commitment Commitment Commitment Commitment to Safety and to towards to Energy Health Environment Society Efficiency 26
Slide 64: Strong Focus on Sustainability
Strong Focus on Sustainability Health & Safety Focused on Zero tolerance and Zero harm Process safety audits and Process of 'Learning from Incident' is established inspections from external Toxicologist on board for Occupational Health and emergency response INR 240 Cr experts Amount invested
Slide 65: Multiple awards in sustainability/HSE
We have received multiple awards in the area of sustainability/ HSE Gujarat Cleaner Production Award Forest and Environment Dept., Government of Gujarat presented the Gujarat Cleaner Production Award to team Jhagadia. SERB IGCW 2017 Award The Industrial Green Chemistry World Council (IGCW) presented
Slide 66: Multi-year contracts with global majors
Aarti has been trusted by global majors with multi- year contracts Contract #1 Contract #2 10-year supply contract 20-year supply contract with a with an agrochemical specialty chemicals conglomerate major for a key herbicide for a key speciality Chemical intermediate intermediate Total contra
Slide 67: Growth Strategy
Growth Strategy • Scale up of capacities in existing products • New markets and applications for existing products • New value-added products in existing value chains • Improving market position across isomers • Scale up of capacities in existing 1 products and related applications • Increase presen
Slide 68: QIP: Financial Sustainability, Institutional Participation, Investing in Growth
QIP of Rs 750 crs: Capital for an incremental growth… Reduced debt-equity ratio from 1.3x to below 1.0x with a Financial Sustainability 6.6% dilution in overall shareholding of the company. 01 Maintaining financial leverage over long- Promoter shareholding still retained above 49% term within th
Slide 69: Consolidated Financial Statements
Consolidated Financial Statements In Rs Cr FY15 FY16 FY17 FY18 FY19* Balance Sheet Property, Plant and Equipment 967 1,246 1,695 1,996 2,145 Capital Work-in-Progress 1,923 313 270 436 795 Intangible Assets 0.04 0 2 2 1 Investments 173 41 47 47 33 Other Non-Current Assets 103 132 168 225 306 Total No
Slide 70: Consolidated Financial Statements
Consolidated Financial Statements In Rs Cr FY15 FY16 FY17 FY18 FY19* Profit and Loss Revenue 2,908 3,007 3,163 3,806 4,706 EBITDA 466 572 654 699 965 Depreciation 82 99 123 146 163 Profit Before Tax 251 363 416 429 622 Tax 61 95 88 83 118 PAT 206 257 316 333 492 % EBITDA 16% 19% 21% 18% 21% % ROCE 1
Slide 71: Scheme Highlights
Impact of Scheme on FY19 Consol numbers FY19 (Pre approval of FY19 (Post approval of In Rs Cr Impact Analysis Scheme) Scheme) Profit and Loss – Key Financials Scheme Highlights Revenue 5,014 4,706 Demerger of HPC Undertaking into a separate Company namely Aarti EBITDA 971 965 Decr by 0.6% Surfacta
Slide 72: Multiple Awards for innovation, excellence in exports
Multiple Awards for innovation, excellence in exports, etc. Chemtech Foundation Award CHEMTECH Foundation accorded Aarti Industries with the ‘Outstanding Achievement for Innovation’ award for the company’s commendable efforts in conserving the environments as well as ensuring sustainable growth thro
Slide 73: Thank You
@) AARTI INDUSTRIES LIMITED f “| PRODUCTIVITY WITH SAFETY 1S OUR MOTTO SUA Hh MA Wal CA Aa S