ET Now: Input material prices have risen by about almost 30.5% on a sequential basis. How are you dealing with the price spike in surfactants, acetic acid, acrylic acid and silicone oil?
Sunil Chari: Rossari is an innovation-led company, and we have been very proactive closely monitoring current trends. But the last few months have been unprecedented in my entire 40-year career in the chemicals industry. Besides the raw material price rise, increase in freight rates and the shortage of raw material also impacted us considerably.
We acted proactively through acquisitions in sequence to secure our raw materials. I am very happy to say that this quarter we have been at the forefront of supplying on time to all our raw material customers.
Margins have been impacted and this will impact our bottom line, like all other specialty chemical manufacturers. We, however, have been able to secure raw materials in spite of this big disruption.
How is the Greenfield project in Dahej going to be contributing to the revenues going forward?
In the past, Rossari’s focus has been on fungible manufacturing capacities. The Dahej facility, like our Silvassa facility, have been very fungible. It is designed to go into any segment like the HPPC segment, which is our largest. We see a very good break-up of demand, and we are confident that people complete the total usage of their capacity over the next three years.
How much of your products currently are IP-protected, which means your buyers will have to come to you because they are either cheap or they are innovative or they are giving better output?
As a company we always focus on innovation, and on being customisable in terms of requirement of the customers. When you are customisable and your products have been made as per the requirements of the customer, it is difficult for the customer to shift elsewhere.
Besides, the customers are big and the input cost is not very big. So it is difficult for our customers to shift. That is why we have sticky customers, and we continue to grow with every customer — either on the back of new products, or through an increase in the consumption of existing ones.
If raw material prices come down, will you start cutting back or renegotiating prices? How does the math work? Because suddenly there could be a situation where the top line starts contracting…
But we have had the increase in quantity of sales. We have seen constant uptick in the last six months. Our quarter-on-quarter growth has been very good even with price inflation.
Also, we continuously churn out products from our R&D Lab at IIT. There will be disruptions at times, like Ola has done with its new electric vehicles. We understand and work on who can disrupt us. And we will be ready.
You made that Rs 400 crore acquisition recently of Unitop. Then you had more acquisitions in Strides Star and Romakk. How exactly do these acquisitions fit into your scheme of things?
Our board was very clear that we do not want overlap of production capacity or segments where we service the customers. We do not want to buy market share. Unitop it is one of the biggest Ethoxylation and one of the few Propoxylation companies in India. This gives us backward integration into chemicals, especially new raw materials that we are developing in our labs.
It also gives us access to the agrochemical market and the oil & gas market. These are all areas where we could cross-sell our products. We have set eyes on personal care and retail as well, and this opens up new customer segments for us — new areas and new products which were not there before.
Romakk is a player of silicone which is important for personal care business. It is also used in textiles and other industry segments. These are areas where we are trying to deliver products on our own by adding capacities that were not there with us.
Tristar is in distillation, Unitop as I said is in Ethoxylation and propoxylation. I already told you about Romakk. These are segments which are going to grow well. Personal care and home care have been a focus area for growth for us. This will continue to grow.
All these acquisitions have been focussed on the HPPC segment, which was less than 50-20% for us a few years ago, and would be more than 70% in the next coming years.
As for your exports and domestic sales — how do the margins differ?
Exports traditionally have been less than 10% of our sales in the past years, but with the acquisition of Unitop and Tristar we are confident that our exports would go up to 20% of our sales in the coming years.
The margins in exports are better — especially in agro and even in the textile segment. Even in home and personal care, one is better off in the domestic markets.