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Fineotex Chemical Ltd. (FCL) is one of the leading specialty chemical manufacturer in India. Its products are widely used in textile sector, water treatment, leather, construction and paint sector. The company has manufacturing facilities in India and Malaysia with a combined production capacity of 43,000 tonnes per annum and with over 450 products in the portfolio. FCL’s products find application across the entire textile value chain spanning from pre-treatment, dyeing, printing and finishing. It has long track record in chemical industry with a presence in key international textile hubs like Bangladesh, Indonesia, Malaysia, Thailand, Vietnam, Singapore, Brazil, USA and Germany. As on FY20, around 94% of the revenue is derived from textile chemicals. On consolidated basis, it’s overseas business accounted to 52% to the total revenue.

Investment rationale:

Leading player in textile chemical market with rich client base

* Through its subsidiary i.e. Biotex Malayasia’s (Biotex) high-end product expertise and strategic positioning among the global customers, FCL has maintained a strong client relationship in domestic as well as in international markets. With a four decade long business expertise, the company has maintained faith among its customers for its customized quality products that specializesin entire range of textile processing.

* Textile chemical accounts only a small portion of the total textile production cost thus, FCL’s clients are price insensitive and sticky due to its product expertise. Currently, it is doing business with around 85 textile corporate like Welspun, Vardhaman, Raymonds, Birla, Himatsingka, etc.

* In terms of government support, there is a policy tailwinds for the textile sector from key flagship programs like Make-in-India, Atmanirbhar Bharat, investment in textile parks, etc.

* Textile chemical sector has large presence of unorganized players. FCL aims to gain market share with its customized value added products that primarily focuses on saving costs (power, water consumption and treatments cost).

* As a result, the company is likely to witness strong growth in textile chemical in next five years and benefit from India’s emergence as a global supply alternate to China.

Strong growth trajectory ahead with upcomingAmbernath plant

* FCL is undertaking a brownfield expansion at its Ambernath facility, with an estimated capex of Rs. 27cr. The plant is expected to be operational by Q1FY22. The capacity of plant will increase on a staggering basis to reach the guided capacity of 36,000 tonnes per annum. Post expansion, the company will have total capacity of 79,000 tonnes per annum.

* This expanded facility will be utilized to cater demand for textile chemicals, cleaning & hygiene and drilling specialty chemicals.

Diversification into new high growth areas

* To diversify the business presence, FCL has made an entry in new high growth areas like home care, hygiene and oil & drilling chemical. In home care/hygiene segment, the company is targeting to cater leading branded detergent manufacturersfor their requirementsfor polymers.

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