The Chinese clampdown on polluting industries and shutting down of many smaller units have created demand supply mismatch. One such industry that I will be talking about is the Indian Amine Industry and there are two key players benefiting the change in fortunes are Balaji amines and Alkyl Amines.
What are Amines?
Amines are organic compounds derived from inorganic compound Ammonia(NH3). {Organic compounds are those having carbon atoms}. When the Hydrogen in Ammonia is replaced by Alkyl group i.e. molecule containing Carbon & Hydrogen, we get amines.
Amines are a large class of nitrogen-containing organic compounds derived from Ammonia (NH3) by displacement of H2 in the ammonia molecule by other radicals such as Methyl, Ethyl and Propanol. There are 3 key players in Indian Amine industry which are RCF, Balaji Amines & Alkyl Amines. I will be covering only the later two.
Aliphatic amines which are the core products of these companies, Balaji Amines and Alkyl amines find usage mainly in Pharmaceuticals & APIs(60% of revenue) followed by Agro-chemicals.
Amine is a very versatile molecule it is used in a large number of medicines
Acetonitrile which is manufactured by Alkyl Amines and capacity for which is also setup by Balaji Amines is used as a solvent. Solvents are considered more or less as commodity chemicals, thus not having the pricing power.
Solvents can be used as reaction agents or even extraction agents. Their high boiling points and varying densities are used for facilitating multiple reactions. Solvents account for 80%-90% of the mass utilized in a typical pharmaceutical chemical operation.
Both these companies export about 20% of their sales.
The size of aliphatic amines industry globally is $4.1 billion, which represents just ~0.1% of the ~$4,100bn global chemical industry. Globally, the Aliphatic Amines industry is oligopolistic with two-three producers catering to the majority of demand in a region. Eastman Chemical Company and BASF are the largest players globally with the top six companies controlling around 50% of the global capacities.
China is the largest consumer and producer of aliphatic amines accounting for almost 60% of the global production. In terms of the usage, aliphatic amines and their derivatives primarily find application as solvents (44%) which are essentially used to dissolve a solute, followed by pesticides (15%) and animal/poultry feed additives (8%). (Source: Balaji Amines Ltd Annual report 2018-19.)
IN SHORT IT MEANS THAT THE FORTUNE OF AMINE INDUSTRY IS DEPENDENT ON ITS END INDUSTRY SUCH AS PHARMACEUTICALS AND CHEMICALS. As of today(29.06.20) both of them are doing good.
Indian Amine Industry: Key Attributes
Indian Amine Industry: Balaji Amines and Alkyl Amines
Indian Amine Industry: Balaji Amines and Alkyl Amines
Alkyl Amines Chemicals Ltd
Alkyl Amines Chemicals limited is one the largest manufacturer of amines & derivative products of amines. The company has 12 plants, 2 at Patalganga (Maharashtra), 9 at Kurkumbh(Maharashtra) & 1 at Dahej(Gujarat).
The Dahej based facility is the latest addition with a capacity of 30,000 TPA(Tonnes per annum) of methyl amine with a capacity utilization of 70%. It started operation from end March’2018. Of the 30,000T , 50% of production is consumed captively to produce derivative products.
Target capacity of Dahej plant is 120,000 TPA which will be gradually expanded over 5 years from the current capacity of 30,000T.
Alkyl amine also has a capacity of 10,000 TPA of Isopropyl amine at patalganga which is used in agro-chemicals.
The company was earlier manufacturing methyl amines at Patalganga having a capacity of 15,000TPA. The facility has been converted to manufacture multi amines. (Ethylamine as of now)
Alkyl Amines’ management is working hard on bringing down the efficiencies in the operations of the company. One visible aspect is the power as a percentage of sales have been brought down from 15% to 10% in last 5 years.
ALKYL AMINES USES ETHANOL AS RAW MATERIAL. THEY FACED THE INCREASED RAW MATERIAL COST DUE TO INCREASE IN PRICES OF ETHANOL DRIVEN BY ETHANOL PROCUREMENT BY CENTRAL GOVT. IN ORDER TO AVOID PAYING HIGH DOMESTICALLY, THE COMPANY HAS STARTED TO IMPORT ETHANOL WHICH IS DERIVED FROM CORN.
Balaji Amines Ltd
Larger of the two main amine companies in India.
Balaji Amines as 3 plants, 2 in Maharashtra & 1 in Hyderabad.
Balaji Amine is setting up a mega project in solapur (90 acres of land) which is expected to start production from FY20-21. IT WILL MANUFACTURE IPA (Iso Propyl Alcohol) or MIPA (Mono Iso-propyl Amine) USED IN PHARMA INDUSTRY.
Most of the products of Balaji Amines are derived products implying better margins.
Performance was subdued in Q2 FY19 mainly due to the Maratha andolan in Maharashtra. Given the plant is at Solapur, Maharashtra which was one of the epicenter of the strike, it was obvious it would have impacted the company by way of continuous disturbances/bandhs.
Balaji Amines also owns a 5 star hotel called as “Balaji Sarovar” in Solapur. Given that the hotel is run by Sarovar group & is not managed by Balaji Amines, is not negative for the company in terms of bandwidth allocation. BUT IN TERMS OF CAPITAL INVESTMENT, THEY INCURRED ₹110 CRORES. HOTEL BUSINESS HAS LONG GESTATION PERIOD FOR BECOMING PROFITABLE.
The most alluring aspect about Balaji Amines is they have lot of additional capacity ready to start production as soon as they get the NOC. Given the positive amines & amine derivative market, they would be best positioned to take advantage of it.
Balaji Amines also acquired one company from the promoter group called as ” Balaji Speciality Chemicals” for₹66cr. This company is expected to generate sales of ₹100 cr for FY19 and about ₹400cr for FY20.
Indian Amine Industry: Balaji Amines and Alkyl Amines :-- Product Profile
Indian Amine Industry: Balaji Amines and Alkyl Amines :-- Financial Performance
Balaji Amines Vs Alkyl Amines(Green cells implies one co. having edge over the other)
Balaji Amines and Alkyl Amines: The better bet?
Since these companies have so many products with each product having their own supply demand dynamics, it is very difficult to predict future growth prospects. As of now, things look rosy and of the two, Balaji Amines with large unused capacity and larger percentage of sales coming from derivative product will be a better bet.
Alkyl amine just have one additional capacity of Dahej which is already operational.
The only problem with the unused capacity of Balaji Amines is that they have been waiting for NOC to start production for quite sometime now. This needs to be looked into closely.
Balaji Amines got the NOC of environmental clearance on 11th June 2019 to manufacture Morpholine, Acetonitrile and DMAHCL
Link to all my blogs on Balaji Amines & Alkyl Amines