Rossari Biotech will grow by 40% this year compared to last year on an organic standalone basis: Sunil Chari, MD

Sunil Chari, Managing Director & Co-Founder, Rossari Biotech, talks about what is his outlook on the chemical sector for 2022, growth drivers, pricing scenario, margin, PAT, acquisition of Unitop, Strides Star and Romakk, acquisition strategy, export market and product pipeline among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: What is your sector outlook for chemicals for 2022 and what would be the growth drivers? Also, how upbeat are you for your company?

A: Just not 2022, but the entire decade is very good for the Indian speciality chemical industry. I am seeing a 40% growth for Rossari Biotech this year compared to the last year on an organic standalone basis. On a consolidated basis, we are doubling our turnover. So by the next year, we will be near doubling our turnover what we did last year. In terms of health and hygiene, the focus on health and hygiene is increasing substantially. We are a zero-debt company and our full CapEx has been done, so, we do not need any CapEx for the next two years to double the business. Our manufacturing capabilities have increased a lot with the new acquisitions that we have made of Unitop and Tristar. So, we are amongst the top five surfactant manufacturers in the country. We are among the largest acrylic polymer manufacturer in the country. And at our lab at IIT, Powai, we work on customizing innovation. We work on application development and recently, we have launched a nanotechnology-based 30-days CORONA virus protection product. The product was launched just last week in which if we will treat a surface then there will be no need to sanitize it for the next 30 days.

Q: We would like to know the pricing scenario, which has corrected a bit after an initial surge. What are an update in demand terms from home, personal care, and performance chemicals segment YoY and QoQ?

A: Last quarter, we have posted the lowest margin because there was a supply-chain issue at the global level. But, we are seeing it better in this quarter compared to the last quarter and it seems that we will be able to do better in the next quarter compared to the last quarter. We have to pass on 100% to the customers. So as a company, we are focusing on our asset turnover. So, we are looking at how we can churn out 4x or 5x of our asset turnover and on a total amount how much more money we can earn. This has been a focus continuously as a company that we earn more money in every quarter compared to the last quarter. 

Q: You have talked about the margin, which was slightly low last time but going forward what would be the band for it and if there will be an improvement then what would be a range that the company can achieve at an ease?

A: We had a gross margin of about 30% in the last quarter and we are hopeful that we will be back to those levels by the first quarter because the raw material prices have started falling, freight & logistic cost is also declining and its availability is easier. So, we are very confident that on a consolidated amount basis we will continue to grow substantially in the next year.

Q: Last 5 years for the company has been fantastic with PAT growth of 87% CAGR. Will you be able to grow at this pace in the next 5 years?

A: We want to do more by saying less. So, we always assure that 20% growth is not difficult for us. We talked about a 20% growth even when we came for the IPO and practically we have doubled the sales within one year. So, we would do our best as our internal targets are quite high but for the investors, we will promise that we will post a 20% growth year-on-year.

Q: You have made an acquisition worth Rs 400 crore of Unitop recently and then you had more acquisitions like Strides Star and Romakk. What sort of synergy benefits do you foresee can you quantify the benefit as a percentage of top/bottom-line?

A: If we will have a look at this year's sales then the consolidation started from September, which means we will get just seven months this year. But if we will have a look at the upcoming year then nearly 50% of our sales will come from the acquisition companies compared to the last year's sale. Even after doing all this, we are a zero-debt company. In terms of synergies, we received new manufacturing technologies. Unitop is amongst the few ethoxylations and propoxylation companies in India. The R&D equipment of Thiloscale, I think, just 2-4 such equipment are available in India, where we can make an R&D for 1kg of ethoxylation and propoxylation. At Tristar, we manufacture personal care additives and there are few manufacturers of the same in the world. This is a special class of additives that needs distillation. This expands our manufacturing capability. Rossari's primary sale is home personal care and performance chemical (HPCPC), which was nearly 55-60% and now with this acquisition, our HPCPC's percentage would reach nearly 75%. So, other businesses are growing, namely Animal Health and Nutrition as well as Textile Speciality Chemical, but with this, we also received new customers. So, Unitop is a leader in agro surfactants and also in oil & gas and Tristar is into the home and personal care additives. So, we have received new customers, where we can promote the products of Rossari and promote the products of Unitop, Tristar and Romakk with the customers of Rossari. Romakk is a silicon fluid manufacturing company and has a speciality technology that very few companies in the world have. We have an opportunity to grow it in the personal care and industrial areas.

Q: Going forward, what will be your acquisition strategy and do you feel that there is more appetite for more acquisition, if yes, in which segments and the markets where you want to grow or your strategy is towards consolidation?

A: At least to the end of this year there will be consolidation because the board says that making acquisition and making it successful is not easy. The first few months have been very exciting for us as we have had no major surprises in our acquisitions and our growth plan is looking better than we said at the start. So, we will consolidate the acquisitions in the first four quarters. Of course, as we are zero debt, we had a board's mandate that we will not take more than 2x EBITDA. So, we have to keep our internal below it. So, we may plan something in the future but at the moment there is nothing on the radar.

Q: How much is exports contributing to revenue right now and what is your target for FY23 from exports or the international markets?

A: Last year, in Rossari, we had about 10% of exports. Now with acquisitions for next year, we are targeting more than 20% of the total because turnover is doubling. So, we are targeting the export of about Rs 200 crore for the next financial year.

Q: Update us about the product line-up across segments, which can be a game-changer for the company?

A: With Dr Nano, as I have said, earlier, about the 30-day protection against CORONA-virus in which we hold the handle, put hands on the table, mobile phones and spectacles, and we are coating them with a simple product that a child can also spread. This will provide you with 3-day protection against CORONA Virus. So, this is an exciting launch for the institutional cleaning business, which we have. In addition to it, we have a lot of products for the detergent industry, so enzymes are there; silicon for home personal care and performance chemicals could be a major area for focus. Then, Propoxylation products because we are one of the few companies in India that have Propoxylation facility. We have to grow our Propoxylation business and of course, we have to grow the Ethoxylation business as well. The focus remains on H50C and animal health nutrition. Unitop is is an agro surfactant company, which is number 1 in India and we have to make it world number 1 in the future. So, we will focus on Unitop to expand its agro-business a lot and silicon surfactant is used a lot in agro as a spreader over the leaves of the bush and we are focusing on it for the current year. At the same time, we have exciting launches in the pipeline in the lab at IIT and as I have said that we are a few companies in India with access to the IIT and IIT network. We are hoping for many many new exciting launches from IIT labs.