Sudharshan Chemical Targets No.3 Spot in Global Pigment Manufacturing

Sudarshan Chemical Industries Ltd (SCIL), the largest pigment manufacturer in India (with >35% market share) is aiming to achieve the top 3rd position globally by market share by focusing on its core business, developing R&D, expanding to new markets, and improving manufacturing and operations.

Currently, SCIL is the fourth-largest pigment manufacturer by market share, globally.

Having this global scale is essential to success in pigments as it leads to sustainable growth, cheaper feedstock, and access to cutting-edge technologies, a report published by HDFC Securities said.

“SCIL’s current Capex cycle was started in FY17. It has incurred INR 5.5 billion over FY17-20 and planned for INR 3.5 billion over FY21-FY22E. While a significant portion of Capex targets growth, some part of it is targeting margin expansion. We expect asset-turnover to be ~2.3-2.5x at peak utilization” the report said.

Further, SCIL is enhancing its product mix towards higher-margin and higher-realisation speciality products such as azo pigments, cosmetics and pigment dispersions vs. non-speciality ones. It plans to launch ~25 products globally.

Two major global players shifting away from the pigment business could act as a tailwind for Indian pigment manufacturers. “We believe SCIL is in a sweet spot to seize this opportunity by offering products similar to those of global players,” the report added.

The report states that SCIL opened a subsidiary, Sudarshan Japan Limited in Japan to serve the Japanese market last year and also has plans to expand in South East Asia and South Korea. “We expect revenue to grow at a 14.8% CAGR over FY21-24E given SCIL’s plans for geographical expansion and new product offerings,” it added.

The company launched high-performance yellow pigment in 2019 which SCIL developed the entire technology in-house and launched it within eighteen months of inception, the report added.

According to the report, SCIL has a global distribution network, with eight sales offices, around 60 channel partners, and sales in over 85 countries. It has also set up marketing subsidiaries in Europe, North America and Mexico to support revenue growth from these markets in coming years.  

Its wholly-owned Chinese subsidiary is engaged indistributing pigments in local markets and improving sourcing efficiencies.

SCIL sources ~30% of its raw material from China. Pigment exports of the company constituted 50% of total sales in FY20, up from 32% in FY10.

Export contribution to revenue is expected to go up with rising production of high-performance and effect pigments and global expansion.