Recently, Fairchem Organics was demerged from Fairchem Speciality Chemicals (now Privi Speciality Chemicals) and got listed.
Management Chairman - Mr. Utkarsha Shah - science graduate with Chemistry as a principal subject. Over a period of last more than 38 years and apart from spreading the existing coal business, he diversified into textile dyes, speciality chemicals, auxiliaries, intermedicates, polyster fibre & Real Estate Development. He acquired partial equity stake of Fairchem Organics Limited in the year 2010. He is heading various charitable initiatives in rural development, senior citizen, education & health.MD - Mr. Nahoosh Jariwala - He has work experience of more than 25 years in the chemical industry. He was the Managing Director of Fairchem Speciality Limited (now known as Privi Speciality Chemicals Limited) since April, 2010. Previously he was the Executive Director of the said company. Since August, 2020, he is the Managing Director of Fairchem Organics Limited.
No fraud cases or related party transaction issues until the moment but, information is limited. They only have 2 segments : chemicals and nutraceuticals but nutraceuticals has been declining for a while but they plan to increase this segment soon.Let’s start with chemicals. They have 4 main products :Fairchem is the only Indian player in these segments. These products were imported previously and it acts as import substitution just like Deepak nitrite with phenols. Even today, most of these products are imported from Europe.
They source most of their raw material directly from Kutch and they have more than 20 years of relationship. According to their annual report, this raw material is limited and this long term relationship helps them source the best quality. At the same time, in the investor presentation they mention that India has more than enough raw material.
Fairchem has been manufacturing same products for 25 years. Customers include Asian Paints, Huber (erstwhile Micro Inks), Arkema,
BASF, ADM, and Cargill. They use imported equipment such as Short Part Distillation from UIC Germany, and Fractionation from Sulzer Switzerland.
capital work has been increasing and long term borrowings have been increasing. At the same time, they have reduced their short term borrowing.
Industry highlights : 1.The oleo chemicals market is broadly segmented into four key applications markets: • Pharmaceutical & personal care, • Food & beverages, • Soaps & detergents, • Polymers2.The global oleo chemicals market is expected to reach USD 30.15 billion by 2024. The global oleochemicals market size was valued at USD 19.46 billion in 2020 and is expected to grow at a compound annual growth rate (CAGR) of 7.57% from 2021 to 2028.3.Asia Pacific is the leading consumer of oleo chemicals. The region is also expected to witness the fastest growth over the next few years owing to abundant raw material supply and significant developments in the application markets.4.Indian Oleo Chemical players are well positioned with abundant raw material supply, lower manpower cost and improving infrastructure which should be the key market drivers for the industry at large.
Risks :
1.Minimum information about business and management - this is something we’ll need to monitor.
2.Top 10 customers contributing around 64% & 66% of its total income during FY20 & 9MFY21 respectively. More than 90 % of the business is domestic.
3.Only 4 products but the usage of these products is diversified so they seem well positioned
4.High promoter salary compared to profit and last year, their remuneration increased by 32 %, when the profit itself increased by 25 % approximately.
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