Top 4 Chemical Companies in India by Growth

2021 was a bumper year for the chemical sector as the sector was re-rated in terms of both PE ratio as well as earnings upgrades.

Supply disruptions from China along with high logistic costs led to a multifold increase in prices of chemicals.

Industry experts believed the sector could churn out multibaggers going forward.

However, the Russia-Ukraine war changed the picture completely.

Global chemical prices plummeted ending the sector's three-year bull run. This led to margins shrinking and raising doubts over the rich valuations of chemical companies.

Fast forward to the middle of 2022.

Chemical stocks are once again on the rise amid a weakening rupee, supply interruptions, the China+1 megatrend playing out, and a surge in international demand.

Capitalising on the global tailwinds, the Indian chemical segment is expected to grow at a compound annual growth rate (CAGR) of 15-20% to rise to US$304 bn (Rs 30,400 crore) by 2025.

Domestic demand is also booming as the sector is expanding its footprint across other industries like agriculture, pharmaceutical, food processing, and more.

That is why you need to keep the best chemical stocks on your watchlist which have shown consistent growth in earnings.

Let's take a look at the top 4 chemical stocks in India by growth.

These companies are filtered using Equitymaster Indian stock screener, which have shown consistent growth across parameters.

#1 Rossari Biotech

Counted as one of India's largest and premier textile and specialty chemical manufacturers, Rossari Biotech has over 20 years of experience.

The company has developed a 4,250 diversified product portfolio that serves over 20 key industrial segments in India.

The company is heavily invested in two main product categories in specialty chemicals - home, personal care, performance chemicals, and textile specialty chemicals.

It also has a thriving animal health and nutrition (AHN) division.

The company has one manufacturing unit each in Silvassa and Dahej with an installed capacity of 252,500 MTPA. It also has two government recognized R&D facilities at Silvassa and Mumbai.

Rossari has delivered sales and profit growth of 44.8% and 43.6%, respectively on a 5-year CAGR basis. The company attributes this to streamlining its processes and systems which has enhanced efficiency and productivity.

In 2022, the company delivered a 109% YoY increase in revenues while net profit for the same period rose 20.7%.

During the financial year 2021-22, Rossari added 100+ new clients to their customer list. Additionally, the company increased footprint across 9 new geographies.

The year gone by also saw Rossari making strategic collaborations and acquisitions to broaden and deepen its market reach.

The company acquired Unitop Chemicals and Tristar Intermediates and made an investment in Romakk Chemicals that helped unlock additional production capacity.

It also focused on cross selling products and developing adjacent product lines with specialty chemicals.

All of these factors have contributed to the stable growth journey of Rossari Biotech so far. The trend is expected to continue as the company has taken suitable price hikes.

To know more, check out Rossari Biotech's financial factsheet and its latest quarterly result.

#2 Deepak Nitrite

Deepak Nitrite is a leading Indian manufacturer of organic, inorganic, fine, and speciality chemicals.

Founded in 1970, the company has 100+ products in its portfolio with established manufacturing facilities located in the states of Gujarat, Maharashtra, and Telangana.

The company has successfully doubled its IPA production capability to 60,00 MTPA during the fiscal year 2021-22.

Deepak Nitrite has captured over 70% market share in India in important inorganic compounds like sodium nitrite, sodium nitrate, and nitrotoluenes.

It serves the need of an international clientele in 45+ countries in 6 continents.

Over the last 5 years, Deepak Nitrite has shown a compounded sales growth of 39.5% and a profit growth of 61.7%.

For 2022, the company's income rose 56% and its net profit grew by 37.5% on a year-on-year (YoY) basis.

The steady growth in 2022 and over the years can be attributed to the company's vision of expanding its product line.

Deepak Nitrite has plans to invest approximately Rs 3,000 m in new products based on environmentally friendly technologies for agrochemical and pharmaceutical intermediate.

An additional Rs 1,000 m has been set aside for brownfield expansions of the existing product range.

Over the next 2 to 3 years, Deepak Nitrite is looking to increase its footprint in the market by investing Rs 15 bn in new downstream products and sophisticated chemistry platforms.

Moreover, the company aims to add high-value solvents and has set aside Rs 7,000 m.

To know more about Deepak Nitrite, check out its factsheet and its latest quarterly result.

#3 Meghmani Finechem

A part of the Ahmedabad-based Meghmani Group, Meghmani Finechem has emerged as the fourth largest manufacturing company of chlor-alkali and its derivatives in India. The company is known for its backward and forward integration facilities.

The company's manufacturing operations are centred across a 60-hectare facility in Dahej.

Meghmani Finechem has experienced steady growth over the last 5 years. It has recorded a sales and profit CAGR of 35.6% and 30.6%, respectively.

For the financial year 2021-22, the company recorded a YoY growth of 87% in its revenues with a PAT increase of 151%.

The growth was on account of high realisations and volume growth resulting from capex in the preceding years.

Working proactively towards reaching a healthy capacity utilisation while optimising volume contribution from the capex has also resulted in healthy return ratios for the company.

To continue with this growth trajectory in the foreseeable future, Meghmani Finechem intends to bank on its consolidated portfolio approach and remain focused on strengthening its operating efficiency.

To know more, check out Meghmani Finechem's financial factsheet and its latest quarterly result.

#4 Tatva Chintan Pharma

Incorporated in 1996, Tatva Chintan Pharma operates in the space of niche specialty chemicals.

It's a globally recognised specialty chemical player and the largest and only commercial manufacturer of structure directing agents for zeolites in India.

The company offers several market-leading products in its portfolio such as structure directing agents, phase transfer catalysts, electrolyte salts for batteries, pharmaceutical and agrochemical intermediates, and other speciality chemicals.

Tatva Chintan Pharma operates through two manufacturing facilities situated at Ankleshwar and Dahej in Gujarat, both of which are strategically located very close to the Hazira port.

The company has witnessed a sales CAGR of 33.7% in the last 5 years. The profit CAGR for the same duration stands at a healthy 40.8%.

Operating income during the financial year 2021-22 rose by 44.4% on a YoY basis whereas net profit grew by 83.4%.

The phenomenal growth of the company has key contributors such as investing in leading sustainable practices with cutting-edge technology while building a presence in the niche business involving complex chemistry.

The company has plans to continue to increase offerings in their current business segments. It also intends to diversify into new product lines by tapping into segments.

To know more about Tatva Chintan Pharma, check out its factsheet and its latest quarterly result.

Is it the right time to invest in chemical companies?

China dominated the global chemical market. However, multiple manufacturing units in China shut shop paving the way for India to make its presence felt in the international landscape.

The numbers prove this point.

Indian chemical exports hit a record high at US$ 29.3 bn in the financial year 2021-22. This was an eye-popping 106% growth over 2013-14 exports.

Consumer demand globally has multiplied and a number of chemical companies in India have signed long term contracts. This has led to multifold growth in capacity and revenue for select chemical companies.

If the sector grows at this rate, it will be one of the fastest growing sectors and emerge as an efficient and cost-effective alternative to China.

Consider this...

China commands 20% share in the global speciality chemical industry worth US$ 800 bn.

Even a 5% shift from China to India will unleash a US$ 8 bn opportunity for specialty chemical companies in India. Within five years, India could double its share in global chemical industry.

It's safe to say that the opportunity is huge for Indian chemical companies.

No wonder, the sector is poised to become the trillion dollar sector of 2025.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...