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CLEAN SCIENCE AND TECHNOLOGY LIMITED

Incorporated in 2003, Clean Science and Technology Private Limited (CSTL) is among the few companies globally focused entirely on developing newer technologies using in-house catalytic processes, which are eco-friendly and cost competitive. This has enabled them to emerge as the largest manufacturer globally of certain specialty chemicals in terms of installed manufacturing capacities. Some of these technologies have been developed and commercialized for the first time globally. CSTL’s continued focus on product identification, process innovation, catalyst development, significant scale of operations as well as measures towards strategic backward integration have all contributed to the success as one of the fastest growing and among the most profitable specialty chemical companies globally. The company manufactures chemicals under three major functionally critical specialty chemical segments which are Performance Chemicals - MEHQ, BHA and AP; Pharmaceutical Intermediates - Guaiacol and DCC; and FMCG Chemicals - 4-MAP and Anisole. The company is the largest manufacturer globally of MEHQ, BHA, Anisole and 4-MAP, in terms of installed manufacturing capacities as of March 31, 2021. CSTL has two certified production facilities in India strategically located at Kurkumbh (Maharashtra), in close proximity to the JNPT port from where the company exports majority of the products.

Indigenously Developed Technology Backed By Strong R&D Processes

CSTL is among the leading companies in India to have commercialized use of environment-friendly processes to manufacture certain specialty chemicals, at global capacities. The company has achieved this position by optimizing use of conventional raw materials, improving atom economy, enhancing yields, reducing effluent discharge, and consequently increasing cost competitiveness. Technical expertise that the company has developed over the years helped them carry out these processes at global scale capacities, which is difficult to replicate, and create significant barriers for new entrants. The company has developed these technologies through process innovation and consistent R&D. Various catalysts have been developed in-house through R&D, which are used across process developments, and have helped improve productivity, yields, and cost efficiencies. By employing “clean-technologies”, the company distinguishes their processes from conventional processes and optimizes use of non-toxic raw materials, resulting in lower effluent generation, and products that are not as harmful to the end-consumer as conventionally produced chemicals. For instance, the company manufactures sulphur-free BHA and sulphur-free DCC.

Being a technologically advanced company, they have pioneered the commercialization of catalyticreactions in production processes. For instance, CSTL is the only company globally to deploy vapourphase technology for manufacturing Anisole from phenol with better atom economy and only water as effluent compared to liquid phase manufacturing process. The company has similarly developed unconventional processes to manufacture certain other specialty chemicals. With phenol being widely available and Anisole being produced for captive consumption, the company is integrated to the commodity level, which also helps them reduce costs and increase the profit margins. This has placed them in a distinguished position as the most cost-competitive producer of these critical products, demonstrated by their significant exports to China, and giving the company highest margins in the industry in India for Fiscal 2020.

Largest Producers Globally Of Functionally Critical Specialty Chemicals with Backward Integration

CSTL is among the largest producers globally of certain specialty chemicals in terms of manufacturing capacities. The company’s specialty chemicals have a wide range of applications across industries aided by abundant supply of their key raw materials which results in a significantly de-risked business model. The company’s products are used as polymerization inhibitors, intermediates for agrochemicals and pharmaceuticals, anti-oxidants, UV blockers, and anti-retroviral reagents, which are functionally critical in a wide range of industries, including in the manufacture of paints and inks, agro-chemicals, pharmaceuticals, flavours and fragrance, food and animal nutrition (feed), and personal care (cosmetics) products.

The customer base of the company comprises of manufacturers in India and other regulated international markets including China, Canada, Europe, the United States of America, Taiwan, Korea, and Japan. In Fiscals 2019, 2020 and 2021, revenue generated from customers outside India represented 72.29%, 68.76% and 67.86%, of total revenue from operations, respectively, with a significant portion generated from China. CSTL has been supplying to customers in such regulated markets, which sets them apart from other Indian companies and enables them to compete effectively in terms of cost and quality, with global players in the industry.

The company’s raw materials largely comprise of commodity chemicals such as phenol, hydrogen peroxide, acetic anhydride, acetone, and tertiary butanol, which are widely available, unlike conventionally used diphenols such as hydroquinone and catechol that are susceptible to increased price volatility due to controlled supply. CSTL engages with numerous suppliers for its raw materials that are available domestically and imported in large volumes in India, enabling it to have greater control over costs. The company manufactures Anisole which is largely consumed captively in the production of the key products, including MEHQ, Guaiacol, 4-MAP, and BHA.

Strategically Located Manufacturing Facilities

CSTL has two manufacturing facilities, both of which are located at Kurkumbh (Maharashtra). The company have also recently set-up a unit at third manufacturing facility, adjacent to the existing facilities in Kurkumbh (Maharashtra). Further, as the company’s operations are primarily export oriented, the facilities are strategically located at close proximity to the JNPT Port. The power requirements for the facilities are partly met by the local state power grid and partly through the captive solar plants that the company have set-up at the premises of the facilities. Each of the manufacturing facilities has an effluent treatment plant equipped with aerobic as well as anaerobic systems. These effluent treatment plants treat the industrial waste water and recycle it for reuse, making both facilities zero liquid discharge facilities.

Global Customer Base

CSTL has generated total export revenue of Rs. 344.7 crs i.e. 68.59% of total revenue in FY21. The company has direct customers and distributors entities located in India and outside India, including China, United States, Europe, Japan, Taiwan and Korea.

CSTL products are used as key starting level materials, as inhibitors, or as additives, by customers, for products sold in regulated markets. Key customers include Bayer AG, SRF Limited, Gennex Laboratories Limited, Nutriad International NV and Vinati Organics Limited. Due to the resources involved in engaging with new suppliers, customers are less inclined to pursue alternate supply sources. This provides the company with an advantage over new entrants that would need to make significant investments and endure a long gestation period with potential customers in order to effectively compete. Some of the customers have also been associated with the company for over 10 years indicating a strong customer relation.

Strong and consistent financial performance in the last three Fiscals

CSTL has grown its revenue at a CAGR of ~14.15% over the last three years with profitability growth of 42.5% during the same period. The company has one of the highest net profit margins in the industry at 38.71% in FY21. The ROCE of the company has increased from 50.75% in FY19 to 73.89% in FY21 signifying the efficient operations of the company. The asset turnover of the company is among the highest in the chemical industry, which reflects their commitment to operationalize their manufacturing facilities in a timely and cost efficient manner.

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