crisil report - Diamines And Chemicals Limited

Diamines and Chemicals Ltd
Figure 11: Major domestic end-use applications of EDA
Agro
Chemicals, 52%
Pharmaceuticals,
1%
Speciality
Chemicals , 3%
Others, 6%
Chelating
agent, 23%
Polyamide
Resins, 15%
Source: Company, CRISIL Research
Long-term growth is contingent on new capacity
where visibility is low
The de-bottlenecking of capacity constraints will enable the company to produce
an incremental ~2,700-tonnes of ethyleneamines, which will facilitate near-term
growth. Post this, the company’s production will again hit against capacity
constraints. As a result, we believe that Diamines’ long-term growth is
significantly contingent on expanding or adding new capacity for ethyleneamines
based on the EDC process. While the management is planning to expand its
capacity by around ~15,000 tonnes in future, either in India or Middle East, the
visibility on the timing, location, and nature of business expansion is limited.
Visibility on long-term
growth is low
The company is also evaluating options of expansion through a JV with other
partners who may be strategic or financial partners. We believe that the
expansion plan is in an early stage and will take at least four to five years to
materialise. Progress of the capacity expansion plan remains a key monitorable.
We believe there will be business risks involved as the company will be
competing with global players who have much better economies of scale and
pricing power compared to Diamines.
Operating margins susceptible to price volatility and
raw material mix
Diamines’ operating margins have remained volatile primarily because of the
volatility in product prices coupled with changing raw material mix. Diamines
prices its products based on their import prices. Raw material is the major cost
driver for the company and constitutes around 50 to 60% of total sales.
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