The
planning began as far back as the early ’90s,
when the company, foreseeing the threats coming
from a dismantled duty regime, went about implementing
strategies that would convert these threats into
opportunities.
The strategy was
to build on its strengths in niche areas of the
chemicals market, bring it up to global levels,
and work towards a leadership position in that
area.
A key advantage
that Deepak Nitrite has is its R&D base. “About
80 per cent of our products have been the result
of R&D efforts,” said Mehta. “Our
differentiator was our ability to develop customised
products based on our R&D and operation expertise.”
The company, which
began with two import substitutes — sodium
nitrite and sodium nitrate — in 1970, today
has a line-up of over 30 products in the inorganic,
organic intermediates. It provides fine and speciality
chemicals — basic intermediates to the pharmaceutical,
agro chemical, rubber, pigment and imaging chemicals
industries, most of which have come out or been
fine tuned by its in-house R&D.
“Today the
focus is not on import substitution or self sufficiency,
but delivering value proposition on a global scale,”
says Mehta.
Besides leveraging
its R&D and lab-to-productionising skills,
the company set about establishing its credibility
as a good and safe supplier of chemicals, winning
long-term commitment from discerning customers.
The strategy was
to develop new, non-traditional products, newer
intermediates for new markets, put up capacities
of international size for these products, and
reap the advantages of economies of scale.
It set up a pilot
plant with an investment of Rs3 crore and acquired
capability to ramp up operations from lab to production.
It doubled investment in R & D year on year,
moving up from 0.2 per cent of turnover five years
ago to 1 per cent of turnover today. About half
of its new export products have been developed
in-house through R&D in the last five years.
“The objective was to build up sustainable
advantage,” says Mehta.
Along the way, it
also developed in-house abilities that now serve
as key differentiators. For example, its ability
to handle core bulk nitration and hydrogenation
products, moving on to batch nitration and hydrogenation.
Simultaneously, it set up a target to reach 40
per cent from export earnings (which it now has
achieved), which it hopes to raise to 50 per cent
within the next eighteen months. It set about
changing its product mix, for which it also undertook
strategic acquisitions. The acquisition of Roha-based
Aryan Pesticides Ltd was a case in point, which
gave it extra edge in organic intermediates.
It also directed
efforts into becoming significant or single largest
supplier for its overseas customers, meeting at
least 60 per cent of their needs, and entering
into long term commitments through committed offerings.
“Our aim was not on selling on the price
proposition but on developing products that would
sell as value propositions,” says Mehta.
Thus its export partnership with international
customers have often begun from its R&D lab,
through joint research and development of products,
moving up the value chain.
A further extension
of this value proposition is the tab it keeps
on its supply chain management, extending across
the sourcing of its own raw material to tracking
its customers’ delivery and inventory scheduling.
Efforts to enhance the value proposition continue,
with its proposal to look for cheaper sources
of energy — such as LNG — that would
further bring down costs to the customer. “Energy
makes for 15 per cent of our production costs.
It makes sense to reduce energy costs,”
said Mehta, speaking to domain-b.
The company has plans to set up gas-based engines
and gas driven boilers with an investment of between
Rs8 crore and Rs10 crore. “More important
is the commitment. We will need to enter into
long term agreements to buy gas,” said Mehta.
Operating as a seasoned
global player the company has spread its risks
geographically through a global footprint —
Europe accounting for 50-60 per cent of exports,
US — 25 per cent, and the rest of it from
Japan and Korea. It has now set sights on the
emerging markets of China, South America and East
Europe. The company is also working towards offsetting
forex fluctuation risks by sourcing its raw material
internationally.
From the days
when Deepak Nitrite was born out of the need for
import substitution to today where it competes
in the global marketplace, the company has made
a full U-turn. As Mehta put it succinctly, “At
one time, we looked at exports to utilise excess
capacities. Now it is also our bread and butter.”
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