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We will spend 40 per cent of our earnings
on R&D. Our research efforts will definitely pay
us in the long run.
Deepak Nitrite (DNL), the manufacturer
of basic and intermediate chemicals, operates through
four divisions. Its nitrite division at Nandesari, Gujarat
manufactures sodium nitrite and other related products.
DHL's second division, - Sahyadri Dyestuffs and Chemicals
in Pune manufactures fine chemicals. Hydrogenation at
Taloja, near Mumbai, manufactures a range of intermediates.
And the nitro aromatic division, at Vadodara, manufactures
products for dye, pharma application and additives like
optical brighteners.
DNL has been consistently outperforming
the industry. Its turnover has, grown from Rs 104.42
crore in 1994-95 to Rs 159.85 crore in 1998-99. Net
profit has jumped to Rs 11.22 crore in 1998-99 from
Rs 3.48 crore. DHL's success can be attributed to its
emphasis on exports and research and development. Deepak
C Mehta, managing director, spoke to Rakesh P Sharma
on the major strategy changes undertaken by the company
in the last few years.
Q. Could you tell us about
the major shift of focus in DNL’s strategy?
Earlier, we had primarily focused on meeting domestic
requirements and entering import substitution products.
But in the last five to seven years, we have changed
our approach to move away from intermediates, which
are more close commodities, to speciality intermediates.
This is because we realised that the cost of operating
were high and the government would find it difficult
to, reduce interest cost and energy cost. We have identified
exports and technology upgradation as the two major
areas of thrust.
Q. What
was the major reason for getting into exports?
We looked at exports as a major thrust for two reasons.
First, the domestic growth rate had slowed down. So
for us to grow faster, the only alternative was exports
to help us take a larger share of the World market.
Secondly, import duties had started corning down and
sooner or later we would have had to participate in
the world market, what with global competitors coming
into the India. Though our initial focus of entering'
international markets was to earn foreign exchange,
in the last, two to three, years, we are more focused
on becoming world class producers. This is because international
customers are very choosy and do not accept any mediocre
source of supply.
Q. Has the export gamble
paid off?
Our turnover has grown from Rs 104.42 crore in March
1995 to Rs 160 crore in March 1999. On the face of it,
it may appear that there is no dramatic growth. But
what really has grown significantly is the percentage
of exports to our .turnover: Our exports were hardly
Bs 9.33 crOre five years back. They have crossed Rs
36 crore in March 1999. This is a high growth fora-company
manufacturing intermediates, and achieving such growth
is not easy. Significantly; we are suppliers for some
of the best players in bulk drugs and agrd in the world
like BASF, Bayer, Ciba and Clariant.
Even now, we are consistently improving our performance
every quarter. When we started we were doing about Rs
2.5 crore a quarter, but today we are at Rs 13 crore
a quarter. Once customers sees our consistent high performance
in the last three years, then their commitment towards
us improves.
Q. Could you give us some instances of
how you manage to place a commodity product as a speciality
product?
Earlier we were making a dye intermediate.
In India, it was used in dyes for making colours for
Holi or colouring turbines. Here, we found that we were
competing against a number ofsmall companies. We then
made an ultra-pure quality of the intermediate and targeted
it at totally niche markets like electronic imaging:
This was earlier dominated only by the Japanese and
Germans. Both these coun- tries provided such pure quality,
that no one looked at products from other countries.
Through research, we develbped the same product and
targeted it at some customers in the US. Over the years,
a standard commodity product has been converted into
a hi-tech product. '
Another instance is the otho-nitrite- chloro-benzene-
which is used by pigment manufactures. In this category,
international customers did not touch second class manufactures.
Moreover, the customers were'so cynical that they-were
not asking for 98-99 , per cent purity, but were very
eager to know what was there in the one per cent impurity.
In order-to enter this market we started improving our
technology. We even went to our major raw material suppliers
to help them improve their quality, so that we coilld
stop the impurities at source. Now, we have quite a
few customers for this product in Korea, Japan, Germany
and US.
Q. What is your outlook for the current
year?
In the first quarter ended June 1999, our turnover grew
to Rs 39.68 crore from Rs 37.94 crore in the corresponding
previous year. Our net profifgrew by 24 per cent to
Rs 2.69 crore. Since our growth depends .upon the user
industries, it is very difficult to draw any projections
at the moment. But we hope to do well in the next few
quarters as our investments are expected to pay off
and hope to see a similar rise in net profit.
Significantly, our margins are expected to improve further
as we have moved to speciali- ty chemicals frort commodities.
Our exports to turnoveris expected to rise to around
27 per cent. We will continue to export one-third of
our products, with the balance being sold in ' the domestic
market, which is still significant.
Moreover, international markets are still in a bad shape
and as every body hopes, things should improve in the
next few months. During the current year, we will be
spending 40 per cent our earnings on R&D and beefing
up our pilot plant facilities. Our research efforts
will definitely pay us in the long run.
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