ALKYL AMINES CHEMICALS LTD (AACL) chairman and MD Yogesh M. Kothari’s family business history goes back 140 years in financial services and stock markets. His great grandfather Purbhoodas Jeevandas Kothari was one of the founders of the Bombay Stock Exchange (BSE). His elder brother — veteran investment banker and chairman of DSP Investment Managers — Hemendra Kothari, pioneered investment banking in India.
But Yogesh, the youngest in the family, was good at science since school and wanted to be an engineer. His love for science further bloomed in 1967, when he enrolled into UDCT (now the Institute of Chemical Technology or ICT) at Matunga in Mumbai.
After graduation, Yogesh went to the U.S. to do Masters in chemical engineering and Business Administration from the University of Massachusetts and joined an industrial plant design major in Germany. After a year, he came back to India and decided to explore the world of intermediate chemicals. In 1979, Alkyl Amines Chemicals was incorporated to make aliphatic amines, derivatives of ammonia and intermediates used in the making of pharmaceuticals, agrochemicals, water treatment chemicals, rubber chemicals, among others. At that time public sector Rashtriya Chemicals and Fertilizers Ltd. (RCF) was the sole domestic manufacturer of aliphatic amines and most of the demand was met by imports from multinationals. “Today, we are probably the largest manufacturer of ethylamines in the world,” says 73-year-old Kothari. Ethylamine is a type of aliphatic amine.
With revenues of ₹1,543 crore in FY22, AACL is among the fastest-growing chemical companies in India. Revenue grew at a CAGR of 18.28% in the last 10 years, 25.24% in the last five years and 22.16% in the last three years. Its profit growth was the eighth highest among chemical companies in the last three years — a CAGR of 39%.
That high growth in recent years was mainly fuelled by Covid-19, as pharmaceutical companies constitute around half of AACL’s clientele. Around 25% of the company’s production goes as ingredients for agro-chemicals, while the rest is mainly used in water treatment, rubber chemicals, textiles etc. Alkyl Amines is also one of the largest makers of ingredients used in anti-viral drugs, including favipiravir and molnupiravir, which were in high demand during the pandemic. Further, AACL has a 40% share of the domestic market for acetonitrile (used to make pharmaceuticals, rubber products, pesticides and acrylic nail removers). Prices of acryloetonitrile, used to make rubber products for automobile, plastic, and consumer durable manufacturers and acrylic fibres (used by textile and apparel makers), have increased by over 100% in the last few years. Globally, the alkyl amines market is forecast to reach $7,110.2 million by 2026, after growing at a CAGR of 6.2% during 2021-2026, according to industry analysts.
“When volumes go up, overhead costs come down. Further, prudent procurement and management of main raw materials such as ammonia, coal and ethyl alcohol help in increasing earnings. We also do a lot of operational efficiency in plants with our own research and development,” says Kirat Patel, executive director and a veteran with AACL since its early days.
The company currently has a capacity to make one lakh metric tonnes (MT) of amines, and 35,000 MT each of amine derivatives and specialty amines, considered as high value-added products. It sells around 100 products from its 20 plants. About 30% of the amines produced are consumed in-house to make value-added products, 15-20% of which are exported. Nearly 70-75% of the production is consumed by life science companies.
“EBITDA (Earnings before interest, taxes, depreciation, and amortisation) margin was the lowest in the past 12 quarters at 17.3% in Q4FY22. Capacity expansion in methyl and ethyl amines and capacity utilisation ramp-up of the recently expanded acetonitrile plant should drive better margins in FY23-24 for AACL,” observes Swarnendu Bhushan, research analyst with Motilal Oswal.
When AACL commissioned its first aliphatic amine plant at Patalganga in 1982, it was a struggle in early years. Demand was low, multinationals were dominating the scene and revenues were low. The big change happened since the 1990s, when numerous domestic pharmaceutical and agrochemical companies started to do big business. In the first 15 years, Hemendra Kothari helped his younger brother get a grip of the business, leading the company as its chairman.
“Our growth was steady and in line with the demand growth in the country and abroad. Every three-four years, we were adding new capacities and getting into related new product lines,” says Patel. In 1986, the plant at Patalganga was expanded and a second one was commissioned in 1992. After four years, AACL acquired a 70 acre facility at Kurkumbh in Maharashtra and commissioned three multipurpose plants. In 2000, a second amine and a new hydrogen plant were set up at the facility. With business expanding, AACL forayed into another amine derivative, acetonitrile, and set up plants for its production. Soon, a methyl amines plant came up at Dahej, Gujarat. At least one new plant has been commissioned every year in the last six years, across the three manufacturing hubs.
“Last year we spent around ₹204 crore on capex (acetonitrile plant). In the next capex cycle, we plan to spend around ₹390 crore for ethyl amines at Kurkumbh to create about 35,000 MT of capacity, the largest in the world,” says Kothari.
Consolidation is taking place globally in the world of amines. Apart from BASF and Eastman Chemicals, which mainly cater to their home markets in the U.S. and Europe, the industry does not have too many global players. Historically, the segment has been growing at 7-8% per annum and is likely to do so in the coming years as well, according to analysts. Back home, AACL, Balaji Amines and RCF control most of the market since technology innovation is difficult and amines are highly hazardous chemicals which demand very high safety requirements and plants similar to petrochemical complexes. It requires over ₹100 crore to set up even a small amine plant.
Though Alkyl Amines do not have much competition from Chinese companies, the closure of chemical companies in China due to pollution has created demand in the local market for specialty and commodity chemicals.
Research and development is what helps AACL stay ahead of competition. While the company now makes C1-C6 class of the amines value chain, Balaji and RCF are still behind in the C1-C2 space. “We are soon launching a few more products,” says Kothari.
More than revenue growth, the focus is on profitability with judicious raw material management, process innovations to raise yield and ways to improve plant efficiency, adds Kothari. The company is exploring ways to reduce carbon footprint, including boilers on gas instead of coal and deploying high-effluent treating equipment at its plants.
Currently, the company’s day-to-day operations are mostly managed by Yogesh Kothari’s son and executive director Suneet Y. Kothari, and Kirat Patel. A cricketer during his youth, the elder Kothari now finds time to read books, watch TV and devote time for his alma mater ICT.