The turnaround at Clariant India

Clariant Chemicals (India), a subsidiary of Clariant AG, manufactures and sells specialty chemicals. It operates into 2 business segments: Plastics & Coatings and Specialty Chemicals. The company’s products are used in various sectors such as agriculture, infrastructure, home & personal care, packaging, consumer goods, transportation and healthcare.

Plastics & Coatings:
This segment comprises of Pigments, Additives and Masterbatches. Clariant derives 93% of its revenues from this segment.

Pigments are used for coloring paint, ink, plastic, fabric, cosmetic and other materials. The company acquired Plastichemix’s masterbatch business. The company has significant presence in paints, coating ink and plastic applications. Clariant the preferred supplier to major players in the domestic market.

Additives are used to enhance the efficiency, safety, protection, durability and appearance of products such as plastics, coatings and printing ink.

Masterbatches is a concentrated mixture of pigments and/or additives dispersed in a polymer medium.

Specialty Chemicals:
This segment includes performance chemicals for personal care and industrial applications. Clariant derives 7% of its revenues from this segment. The company has entered supply agreements with Archroma India and Stahl India, to manufacture and supply products for textile and leather industry respectively.

The company has manufacturing units at several locations in India, spread across Vashere & Roha in Maharashtra; Cuddalore in Tamil Nadu; Rania, Kalol & Nandesari in Gujarat; Nagda in Madhya Pradesh; Bonthapally in Telangana and Edayar in Kerala. The Regional Innovation Center in Mumbai is part of Clariant’s Global Innovation Network.

In 2018, Clariant inaugurated its new Greenfield Healthcare Packaging production plant in Cuddalore, Tamil Nadu. The new plant will primarily serve globally active generic and branded pharmaceutical companies operating in India, as well as the domestic Indian pharmaceutical market.

Products:
– Sorb-It® Pharma desiccant bags to protect bulk pharmaceutical products.
– Aristoflex® Silk can be used to bring perfect silkiness to sun care and skin-whitening products in addition to face creams, eye relaxing creams and skin boosting or detoxing face masks.
– Eclipsogen® that offers carefree broad spectrum UV protection
– Eosidin™ provides new mechanisms to increase the natural skin barrier function, against all forms of allergies and pollution.

Clariant aim to be the preferred partner to the Personal Care industry and being recognized for its sustainable innovations.

Opportunity:
– The Indian specialty chemicals market has an estimated market size of USD 24 Billion
– The Indian specialty chemicals market is growing at almost twice global average
– The Indian specialty chemicals industry continues to enjoy advantages in terms of labour costs
– Clariant’s parent company is one of the world’s leading specialty chemical company

Management:
– Clariant Chemicals (India) is part of the Swiss-based Clariant Group
– Clariant has always been a dividend paying company
– Dr. Deepak Parikh, Vice-Chairman & MD, is a chemical engineer and a PhD in Polymer Science and Engineering

Investors:
– 51% of the shares held by Clariant AG
– SBI MF holds 4.1% of the company
– DSPBR MF holds 3.0% of the company
– Sundaram MF holds 1.2% of the company
– Vantage Equity Fund holds 1.1% of the company
– Bajaj Allianz Life holds 1.9% of the company

12 months ended March 2018:
– Net Sales at ₹1,014 crore
– PBT at ₹33.4 crore

Valuation:
15-Jun-2018:
At the CMP of ₹438, Clariant is available at a very low valuation of one times sales to market cap and around 1.5 times book value.

Resources:
The turnaround at Clariant – An interview with CEO. Read more: [McKinsey Insights]

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