Five Small-Cap Chemical Makers Plan To Increase Capex To Tap Niche Options
Chemists examining chemical substances in test tubes while working on medical research in the laboratory. (Photo Bloomberg News)

Five Small-Cap Chemical Makers Plan To Increase Capex To Tap Niche Options

Disruptions in China’s chemical industry are creating opportunities for Indian manufacturers in niche areas such as phosgenation and rubber chemicals, Ambit Capital said, as five small-sized domestic producers indicated about increasing capex.

GHCL Ltd. Oriental Aromatics Ltd., Nocil Ltd., Paushak Ltd. and Rossari Bitoech Ltd. — hosted by the brokerage in a conference — said they were planning to enter the high value-added segments or adjacent verticals.

“FMCG end-customers’ sourcing strategy focussed on sustainability and China+1 is benefitting players like Rossari Biotech and Oriental Aromatics,” Ambit Capital said in a note.

Here’s what the companies had to say, according to Ambit Capital note’s...


  • Soda ash realisation in the domestic market may come under pressure in the near term due to rejection of the anti-dumping duty.
  • Long-term outlook for soda ash remains positive with demand normalisation and limited capacity expansion.
  • Incremental domestic capacities will get easily absorbed through demand improvement.
  • Adding 0.1 MTPA soda ash capacity and planning to expand sodium bicarbonate capacity.
  • Already improving higher margins versus peers through yield improvement in salts and digital initiatives.
  • Demand is back in textiles and GHCL is focusing on value-added products.
  • Demerger of textile business likely to be completed by first half of FY22 and management plans on increasing capital allocation in textile business with annual capex of Rs 100 crore.

Oriental Aromatics

  • Outlook for Indian flavours and fragrance industry has improved, led by China+1 sourcing strategy of FMCG players.
  • Embarked on a large capex cycle worth Rs 350-400 crore over the next three-four years.
  • Capex along with R&D initiatives will help the company grow at 20% CAGR over next three-four years.
  • Unfavourable raw material cycle can be a risk to the current high margins.
  • Focus on high margin, low volume aroma chemical molecules having no overlap with domestic peers to drive growth and offset margin pressures.


  • Largest domestic player in niche and regulated phosgenation chemistry.
  • Growth will be driven by capacity expansion in phosgene and addition of new chemistries.
  • Undergoing capex of Rs 120 crore which will triple its phosgene capacity.
  • Also looking to add new synergistic chemistries similar to phosgene which will help it perform a higher number of steps and become a one-stop solution for customers.
  • Margins have improved not only because of shortages but also due to structural changes like better product mix and process optimisation.
  • Very low related-party sales to Alembic Pharma and supplies independently to its peers too.


  • Likely to benefit in the near term owing to better demand-supply dynamics in rubber chemicals.
  • Volumes are back to pre-Covid levels and the recent price hikes will aid margin improvement.
  • Chinese domination and commodity nature of most of the products are key challenges making Nocil match pricing with competition.
  • Increasing share of value-added products to address cyclicality.
  • Carrying out preliminary studies on expansion beyond rubber chemicals.

Rossari Biotech

  • Expanding product offerings in home care, personal care and performance chemicals (HPPC) using its four existing key chemistries as platforms and through R&D collaboration with IIT Bombay.
  • Recently forayed into high-margin beauty and cosmetics formulations and has been adding customers.
  • Dahej capacity will get fully commissioned by end of FY21.
  • Management expects the new capacity to be fully utilised in the next three-four years, led by existing products and R&D pipeline driving future growth.
  • Animal health and nutrition business has been weak due to bird flu.
  • Management continues to be positive on all the segments in the long-term but said HPPC will be the key growth driver.
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