"We Have Emabrked Around 1500 Crores For The Next Phase Of Growth"

Rajendra Gogri,
Chairman & Managing Director, Aarti Industries Ltd.
“There is significant interest across international companies who are looking at India as an alternative source to procure specialties chemicals to reduce dependency on Chinese market. With the growth of Indian economy, certain import substitutes are witnessing a good demand across end user industries, which was not the case earlier. Many such chemicals will see a positive trend in growth and I believe that we will be able to capitalize on these opportunities” says Rajendra Gogri, Chairman & Managing Director, Aarti Industries Ltd in an exclusive interview with Mittravinda Ranjan.

Where does Aarti Group stand today since the company commenced its journey?
Our journey started way back in 1975, when the Indian Government was encouraging small scale investments in chemical manufacturing to develop indigenous chemical industry for import substitution. My brother Chandrakant Gogri – Chemical Engineer from Bombay University and his partner saw an opportunity and set up the first small scale manufacturing unit in Dombivali near Mumbai. I joined the business in 1983 after completing my Masters in Chemical Engineering from USA, and over the next couple of years, we added more small scale manufacturing units in Tarapur and later in Sarigam.
Though we always wanted to set up larger units, but it was only during 1990 after the end of licensing raj era that the chemical manufacturers could set up large scale facilities. In the due course we started expanding our facilities through backward integration to have feedstock security and continued to have strong focus on developing inhouse R&D capabilities which has been a strong growth driver for our organization.
Today, Aarti Group has 16 factories spread over 10 different locations where have developed diversified product portfolio of 125 specialty products through our in-house R&D which includes intermediates for dyes and pigments, agrochemicals, pharmaceuticals, rubber chemicals, home and personal care and serves over 800 valued customers in Indian as well as international markets.
How has Aarti Industries achieved strong global presence and recognised as one of the leading specialty chemicals player globally in a span of slightly over 40 years?
Chemical industry as such has a very wide number of chemicals, but from the time we commenced on our journey, we wanted to be niche in our own space and develop our own R&D capabilities. Over the years, we have built key chemistries and wide customer base that we will continue to leverage as we further expand our capacities and operations.
In-house research is on-going process for us at Aarti Industries to strengthen our technical competence and our technical teams work very closely with our customers to understand their needs and supply products to meet their specific requirements.
We have developed strong customer relationships that are based on integrity, care and excellence. In the times of crisis like product shortage etc. we have always stood by our customers and honored the contracts, which has earned us the reputation of being credible long term suppliers for our customers.
How are the market dynamics changing across various geographies and what part of production Aarti Industries exports?
Initially, it was only the dye stuff intermediates that were being exported, but as the dyeing industry moved from West of Suez to the East, the exports of dyes intermediates saw a sharp decline in exports. However, our business remained immune to the market shift since we still had the same as also new clients who had set up their facilities in India and had continued buying from us. Moreover, there was thrust on the other sectors such as pigments, polymers, additives, agrochemicals where the developed nations started looking at India as a key supplier for products which is what gave the push in the last 10 years to our business as well.
Globally crop protection companies are very bullish as far as growth is concerned and in the years to come we are witnessing a strong demand from this sector. Worldwide, there is a strong shift from metals to innovative engineering polymers on the materials side driven strongly by the application in the space of automobiles, aerospace, electrical and electronics sectors.
We export almost fifty per cent of our total production to various countries. North America, EU, Japan and China are the key markets for us and in terms of volume, one third of exports are for North America, one third for EU countries and then for rest of the world. China is a big market for us and accounts for almost 16 per cent of exported products. Because of the slowdown the product prices have marginally declined but since we have a very wide geographical spread and expansive product portfolio, we are in a pretty good shape.
In the years to come, we see a good demand for existing as well as new products across all segments from all key markets in North America, EU countries, Japan and China as well.
Though Aarti Industries has been at the forefront of being a sustainable solution provider right from the beginning, initially did you face any issues in being accepted as the preferred supplier from the global chemical majors?
No, we never faced any such issues right from the early years since we proactively engaged in following sustainable practices. While we offer niche chemistries to our customers, on the other hand we have continued to invest in improving our processes and efficiencies through our in-house research to comply with the changing regulatory standards.
We have always believed in selfregulation and one such example in this direction was to set up effluent treatment plants across all our manufacturing units out of which some have now been upgraded to zero liquid discharge.
Through our in-house research, we have developed several in-house technologies and introduced several process innovations like process to produce dry HCl to produce chlorosulfonic acid, a reactive dye intermediate. This new process offered two major advantages as it allowed us to utilise Dry HCl gas that was generated as the by product and eliminated the restriction of limiting capacity as there was no water. This technology picked up very fast since it allows the manufacturers to set up standalone plant with sulphur trioxide (SO3) and there is no restriction on capacity due to lack of water content which are the major advantages of this process.
Strong thrust on innovation and R&D has been one of the key drivers for our business which has enabled us to carve our niche in the market space and become a preferred business partner for organisations of high repute not only from India but even seek strong international partnerships.
We have pioneered in introducing various technologies in India, such as commercialising Continuous Loop reactor for Eco-friendly Hydrogenation Process and become a key global player for various hydrogenated products. There are few more process innovations that we have introduced in India especially for by-product recovery and reduction of effluents and energy conservation.
We have been able to leverage on sustainability and convert it to our advantage and self-regulation has enabled us to gain the confidence of our customers. Credit also goes to the founders, accomplished technocrats with strong business acumen, who could foresee the changing market trends and nurtured the culture of research and development in the DNA of the organisation.
And now you are getting into Toluene chemistries targeted for the same users as for the benzene derivatives. Do you see an overlap here and if this will create a challenge internally for the company?
There is no overlap here! Around 75-80 per cent of our specialty products are benzene derivatives and now we are getting into toluene chemistries, which have their own specific downstream usage. Though the products are targeted for the same end use industry it does not mean replacing the existing products but the intent is to expand product portfolio by leveraging on chemistries and customer base which will be a win-win situation for us as well as our customers.
What are your thoughts on the Make in India campaign and its impact on the specialty chemicals industry?
Overall, it will be a very good move if the end users come and invest in India since this will create more opportunities for specialty chemical manufacturers like us.
For the manufacturers, India will be a good market since the economy is growing, but backward integration may not be a very viable option because of lower volumes since, this makes sense only when the volumes are high. For lower volumes, procurement of chemicals would make economic sense which means good business for specialty chemical manufacturers.
Just to give you an example, one of our customers backward integrated and ended up with the challenge of handling the co-product and still had to procure product from us. However the government will need to address the challenges of infrastructure and policy related issues to create a level playing field for Indian and international players.
We have backward integrated and positioned ourselves strongly in the market which has been a strong driver for our growth and we are confident to maintain a strong growth momentum in the years to come.
What are the future plans of Aarti Industries?
Presently, we are trying to stabilize our new plants and working on products for B2B segment to supply in domestic as well as international markets. In the years to come we may get into B2C as well but that is too far at this point of time.
We have established synergistic technology partnerships with international players to develop new product pipelines and R&D will continue to be our core focus area to understand and serve the needs of our customers.
There is significant interest across international companies who are looking at India as an alternative source to procure specialties chemicals to reduce dependency on Chinese market. With the growth of Indian economy, certain import substitutes are witnessing a good demand across end user industries, which was not the case earlier. Many such chemicals will see a positive trend in growth and I believe that we will be able to capitalize on these opportunities.
In the past we have invested around Rs. 1200 crores over the last 4 years and have earmarked around ` 1500 crores for the next phase of growth.