Rossari Biotech will complete 100% acquisition of Unitop Chemicals in the next three years: Sunil Chari, MD

Sunil Chari, Promoter & Managing Director, Rossari Biotech, talks about the acquisition of Unitop Chemicals, usage of the 10 acres of the facility of Unitop, demand situation, the benefit of China+1 strategy and cash position among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: Tell us more about the acquisition that has been announced recently. What sort of synergy benefits do you foresee from it and what this acquisition means for the company and by when we will see its reflection on your finances?

A: Unitop, which we acquired, is an agrochemical focused speciality chemicals segment that we were not doing. So, this will add to our segment at which we were working, the 100% acquisition will be completed over the next three years. We are expecting that our next year’s EBITDA will be double of the last year.

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Q: The acquisition cost is around Rs 420 crore. How will this be funded and by when the funding process will be completed? Going forward, what is your outlook for the acquisition, and do you still have the appetite to make further acquisitions in some other areas or the same area?

A: As far as this acquisition is concerned, we concluded a preferential issue in April, and we are sitting at the cash of about Rs 375 crores. So, the acquisition will be funded from this Rs 375 crore and after this acquisition, until we digest this acquisition, we do not have any plan for such a big acquisition. If we may have some cash after this acquisition, then some small acquisitions can be done but big acquisition, at least, till we are able to gain substantial gains out of this, there is no plan for acquisitions.

Q: If we will talk about Unitop’s facility then it has lands of around 10 acres in which around 6-7 acres is being utilized. How do you plan to utilize the remaining?

A: We are, currently, utilizing about 65% of the capacity, whereas 35% is yet to be utilized. As far as the usage of this 35% is concerned, we will think about an expansion only after we reach 85-90% of the capacity utilization of this facility. But currently, I think, that we cannot see a big CapEx in Rossary or Unitop.

Q: How is the overall demand, which segments are showing better traction and what will be the outlook?

A: Our largest segment is Home Personal Care Performance Chemical (HPCPC) and the growth in the segment is very very good both because of the COVID-II wave and generally the health and hygiene, everybody is focused on it now. So, we see good growth in our existing segments and other segments of textile speciality chemicals and animal nutrition. So, as said earlier, our EBITDA will be doubled next year as compared to the last financial year. So, this is something, which is phenomenal growth because of acquisition and our organic growth is also very strong. The biggest thing is that the company is totally debt-free. Even after making such big acquisition cash of Rs 100 crore will be less with us and you know that there is no requirement of a CapEx for the next two-three years, and we have plans to double our EBITDA. So, this is very-very excited for us and Unitop’s is also similar like us R&D driven and provides customized solutions to the customers and there is no overlap with our existing business.

Q: How the China+1 strategy has played so far for Rossari Biotech? Also, what is the split between the domestic market and international market and what growth is expected in the international market?

A: We are expecting that in comparison to the last year, we will triple our export in the next financial year. People in the Western countries, the US and Europe, both are looking at buying and replacing China in all categories. This is the same with home and personal care and speciality chemicals. Unitop has nearly 50 reach registered products and USAPA registered products. So, these 50 would drive our growth for the future. And agrochemical in the market will grow domestically and also internationally. So, we see a very healthy exports growth in the coming year also.

Q: Besides agro-chemicals, you have exposure to surfactant-based chemicals, oil & gas segments. So, what is the demand scenario in these segments and what are your growth expectations from these segments?

A: We have doubled our EBITDA and even the top line in the last three years and now talking of doubling it in two years, so, the home and personal care should drive the growth and then we have animal nutrition, which will grow very fast. So, amongst all the sectors, we feel that animal nutrition will go, in terms of percentage, the highest but its base is small for it. But HPPC is already more than 50% of the turnover and it should do very well. Agro and oil & gas should also do very well. So, all engines are running very very fast.

Q: How is the inventory levels and how is the input cost scenario?

A: As a company, when we started the company in 1997, we did not have money. So, we learnt to respect the capital. So, our working capital cycle is intact as to 60 days always for the past 23 years. So, we will always focus on being conservative. As our debt is zero and we say that despite such a huge acquisition it stands at zero. We are very very focused on being a disciplined working capital management company.

Q: Speciality chemical has emerged as a very interesting segment in the last two to three years and you have a very strong presence in the segment, and we have also seen growth in it. As in the case of agro-chemical, you are entering the segment through Unitop. Do you see any further opportunities for diversification? You are a company worth Rs 7,000 crore in terms of the market cap. Can you please tell us the level to which it will reach in the next two to three years in accordance with the growth expectations that you have? Also, what is the next five years target in terms of top line and bottom line as well as in ranking in the speciality space?

A: If as a company I say that I am doubling my EBITDA in the next financial year then the growth looks phenomenally good. CapEx is not required; we are sitting at zero debt and are still sitting at cash even after a big acquisition. In the home personal care, oil and gas, agrochemicals, animal nutrition they all are very fast-growing industries, and we have a good name in the market. We are like on a springboard, and we talk to each other that we are sitting on a springboard and what better we would have asked for as at this moment our growth is doubling in two years and being debt-free, cash flows are healthy, the working capital cycle is managed. So, we see good times ahead and for me in my career, I haven’t seen a better time than this.

Q: This is why I wished to know where the current market cap will reach in the recent future? Also, how long this momentum of exponential growth will continue?

A: Market cap is something that we do not understand. We are engineers, so we understand that we should grow the bottom line and we want to grow from the last year’s EBITDA and bottom line of Rs 123 crore and double it. This momentum will continue in the future also. So, we want to reward our shareholders with good returns always.

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Q: As you are sitting at good cash. So, should we expect a good reward for the shareholders and how the cash will be utilized?

A: We have cash of around Rs 375 crore of which around Rs 275 crore will be used in the acquisition of Unitop. So, we will have cash of around Rs 100 crore, which means small acquisitions may take place, we do not have any plan for a big acquisition, and neither have plans to take any big debt.