Chemplast Sanmar (CSL), a leading manufacturer of chemicals and allied products, has planned a total capex of ₹725 crore over the next three years in capacity expansion across categories.
The company is enhancing the capacity of suspension grade PVC by 10 per cent as it is looking at opportunities across the suspension PVC value chain and expects suspension PVC to be a key growth driver in future . This new capacity is likely to be commissioned during this quarter, according to the company’s latest annual report.
The ₹5,892 crore Chennai-headquartered company is India’s second-largest manufacturer of suspension PVC resin with an installed capacity of 300-kilo tonnes per annum (ktpa). Its capacity utilisation has touched 99 per cent now and this business makes up two-thirds of the company’s revenue.
Govt projects driving demand
The suspension PVC has been steadily growing largely led by the pipes and fittings market. The demand for suspension PVC is expected to be strong through the next decade given the much lower level of penetration in India. Moreover, government projects on housing, water conveyancing, infrastructure and smart cities are all expected to drive strong demand for suspension PVC.
CSL is also the largest manufacturer of speciality paste PVC resin in India with an installed capacity of 66 ktpa. It is adding 41,000 tonnes of new capacity at Cuddalore and this will come on stream by next fiscal. The market for speciality paste PVC resin, which is used to make flexible products such as artificial leather, gloves, tarpaulins, conveyor belts and coated fabrics, is expected to grow from 143 ktpa in 2020 to 180 ktpa by FY25. But the domestic production is only 80 ktpa and the remaining portion has been met through imports. The gap is to increase from 60ktpa to 100 ktpa by FY25. This is where the company intends to address with its brownfield expansion.
It is also setting up a multi-purpose facility for custom manufacturing business and this unit is expected to be ready by the first half of next fiscal. Bigger opportunities are emerging in this business to serve the needs of pharmaceutical and agrochemical manufacturers. Chemplast Sanmar has an edge in terms of scale, technology and raw materials, over companies in other countries to be a major supplier in this business.
‘In right place at right time’
“The company is in the right place and at the right time. India’s PVC (speciality paste PVC and suspension PVC) and the custom manufacturing businesses are poised for unprecedented growth, not just for domestic supply, but also as responsible global partners,” Vijay Sankar, Chairman of the Chemplast Sanmar said in the report.
The company said its balance sheet challenges are over. The 2021 IPO helped mobilise ₹1,300 crore, which came in handy to pare ₹1,238 crore debt. As a result, the company had no long term net debt on its books as of March 31, 2022.
“The management is optimistic that the runway is clear–a combination of cash flows, character, credentials, and competitiveness is expected to enhance value quicker and more sustainably,” said Vijay Sankar.