We are pleased to present to you our Forty Ninth Annual Report for the Financial Year (FY) 2019-20. During this year, Deepak Nitrite celebrates the milestone of 50 years in business. I would like to take this opportunity to thank all of you, our stakeholders, who are an integral part of our business and have contributed in significant measure to our progress. We have entered the Golden Jubilee year on the back of sound fundamentals, profitability and strong performance of Deepak Phenolics ahead of expectations. We strongly believe in delivering our promises made to investors and other stakeholders. We are now well positioned to take up several growth opportunities and I am sure that we will continue to receive your support as ever.GLOBAL ECONOMIC SCENARIO
FY 2019-20 was an extremely challenging year for the global economy and was marked by multiple upheavals. Trade conflicts, political uncertainties, heightened volatility in commodity prices with some never before seen developments with respect to crude oil, protectionism etc.
Towards the end of the fiscal, unprecedented impact was witnessed from the global spread of the COVID-19, which caused turmoil across markets worldwide. The world economy is anticipated to lose roughly US$ 8.5 trillion in output in 2020 & 2021 (Source: UN-World Economic Situation Report), nearly wiping out the cumulative output gains of the last four years. The pandemic has unfolded with alarming magnitude and the severity of the health and economic crisis is incomparable to any event in recent memory. Government enforced border controls and lockdowns of varied durations across multiple countries have impacted economic operations around the world. However, even as Governments around the world deploy fiscal and monetary stimulus in order to successfully resuscitate demand, it is believed that the second and third order effects of the pandemic may limit the pace of recovery.
India’s economic growth is estimated to be lower at 1.2% in 2020, a further decline from the previous year growth of 4.1% (Source: UN-World Economic Situation Report). In Fiscal 2019-20, the Indian Economy was benefiting from lower interest rates, witnessed benign inflation, improved liquidity and was on course to witness improved tax collections. Towards the second half of the fiscal, India began to witness early signs of an uptick in business activities signalling return of momentum to Asia’s third-largest economy. However, those were short lived as the pandemic has derailed the prospects for higher economic growth in the short term. The pace of recovery is currently uncertain as the country is yet unwinding from the lockdown and the medium to long term outlook is opaque at every level.MAJOR PROSPECTS IN INDIAN CHEMICAL INDUSTRY
The chemical industry in India has been actively gaining global market share in recent years and has been a beacon of hope. Leading players have demonstrated intent to scale up, diversify offerings and plough earnings back into the business by pursuing innovation and sophistication. Given its strong fundamentals, India’s chemical industry is expected to keep growing at a fairly strong pace after absorbing the shock in FY 2021. Also, the pace for the chemical industry’s adoption of technology continues to be on the rise. Looking towards an optimistic future, India’s chemical industry is set for sustained growth receiving impetus with capital investment and affirmative Government policies.ENTERING 50TH YEAR
As Deepak Nitrite is on the verge of completing its 50 years of operations, we take immense pride on our track record, not just of financial performance but also of the relationships that we have been able to build along the way. Deepak Nitrite is a trusted name in the Indian chemical industry and it has done so by having the right combination of dedicated employees, effective manufacturing processes and a sustained effort of building long term relationships with external stakeholders.
Its manufacturing strength is based on having strong growth pillars and considerable integration downstreams which has allowed us to remain resilient in the face of volatility. Calibrated transformation has been the underlying aspect of the Company which has enabled us to elevate our operations over the years and continuously expand offerings to increase the share of high-value and complex products. Higher outlay in capital infusion into R&D will help us widen our basket in the coming years and also in remaining competitive on a global scale. At the heart of this transformation, we cement our strongest value: to be a force for good.
During FY 2019-20, Deepak Phenolics having completed first full year of operations after commencement of commercial production and running above 90% capacity utilization, is a validation of the scale of commitment at the plant, and efficient movement of product with the help of our marketing and logistics team.RESILIENCE IN THE FACE OF ADVERSITY
Deepak Nitrite ended FY 2020 on a positive note despite major disruptions caused by the impact of COVID-19 pandemic. We implemented our Business Continuity Plan aimed at ensuring health and protection to all our employees while adhering to the guidelines provided by the Government authorities. Manufacturing activities commenced from mid – April 2020 in a phased manner, based on approvals from local authorities. Well-being of our employees and safety of our manufacturing sites were given paramount importance. Amidst the pan-India lockdown, in April 2020, we commissioned our plant for the manufacture of Iso-Propyl Alcohol a key ingredient for sanitizers. Our timing has been serendipitous as the Hon’ble Prime Minister has recently given a clarion call for ‘Atmanirbhar Bharat’ or Self-reliant India.
We will continue to focus on delivering profitable growth alongside calibrated expansion, timely project execution and operational excellence.OUR TRIPLE BOTTOMLINE APPROACH
The Company has increased its investment into developing a highly talented pool of employees from the shopfloor all the way to senior management. Various initiatives to recognize high performers, development of an e-learning portal, cross functional projects to encourage team building, and streamlining new inductions have been successfully executed. Our HR practices have been recognized by external agencies and Deepak Group retains its position as an employer of choice.
Our Company has been internationally recognized as a responsible corporate citizen. We are one of the Indian chemical companies to be accredited with ‘Responsible Care’ appreciating its efforts towards a safer planet. Deepak Nitrite is also an active member of ‘Together for Sustainability’ and a founder member of the Indian Council’s ‘Nicer Globe’. We have dedicated our Strategic Business Units to ensure sustainable manufacturing and adhering to all the safety norms and standards. The Company is committed towards responsible chemistry while conserving environment, safeguarding our employees & customers and taking care of the welfare of the community. It continues its investments into further reducing its environmental impact- with a focus on ‘value from waste’.
Either directly, or through Deepak Foundation, the CSR arm of the Company, we continue to support society around us.
During the year under review, Deepak Nitrite demonstrated strong all- round performance led by healthy growth across its Strategic Business Units. The Company executed and commissioned various expansions and new products including a large scale Iso-Propyl Alcohol plant, through Deepak Phenolics, which is now in the process of safe scaleup to capacity. We have aggressively pursued market share expansions in our current product baskets on the back of increased customer confidence and leadership. Alongside this, we have taken cost measures which is yielding results and we expect this to continue in future time. These are strategic improvements which will result in sustained benefits to the Company in the years to come.
We take pride in the fact that our Phenol mega-plant almost achieved maximum capacity in just the first full year of activity. It has been one of the highlights of the year for us and it will certainly strengthen our footing in the Indian and the global chemical industry for years to come by opening doors for further growth, helping us and India reduce import dependence in favour of products manufactured in India.PREPARING FOR THE FUTURE
In an uncertain future, stability becomes a great virtue. Deepak Nitrite has been constantly working towards being ‘future-ready’, which is essential to sustainably grow its businesses in all aspects. The ability to foresee changes in trends and enable the organisational changes in order to adapt to those changes at the right time is essential in order to differentiate oneself in the highly competitive global marketplace. We are making continuous investments in our productive assets, and our growth plans are also being formulated, bearing in mind our focus on efficient allocation of capital.
The decisions taken to expand our facilities or expand into additional product lines are deeply thought out and followed by meticulous research and planning. Forward and Backward integration is a key pillar of our growth strategy as it enables us to strengthen and reinforce our competitive position.DIVIDEND
On the back of the robust performance during the year, the Board of Directors have declared a higher Interim Dividend of `4.50 per equity share (225%) on a face value of `2.00 each. Given the developments with regard to the COVID-19 pandemic and its fallout, the Company has decided to conserve cash for the quarters ahead. Hence, the Board has prudently decided that the Interim Dividend is to be considered as the total dividend for the year.VOTE OF THANKS
On behalf of the Board, I would like to express my sincere gratitude and thank all stakeholders once again for being a part of the journey of our business over these years. We appreciate your continued confidence in the resilience and abilities of Deepak Nitrite and also the valuable guidance and endless support extended. We would also like to thank all of our staff members for their tireless efforts to accomplish our goals and bring our vision to life. We are confident of becoming a diversified chemical powerhouse in the near future.
DEEPAK C. MEHTA
Chairman & Managing Director