The company belongs to the small-cap category with a market capitalization of Rs 664 crore. On March 28, company shares closed at Rs 665 per share, down 1.24 percent from the previous close price on the stock exchange.
Oriental Carbon & Chemicals (OCCL) manufactures insoluble sulphur, an essential compound used as a vulcanization agent in manufacturing tyres. Company has a direct play in the domestic and global tyre industry.
Oriental Carbon & Chemical is a leading producer of insoluble sulphur, a crucial component in the tyre and rubber industry. Globally, they command a 10% market share, amounting to approximately 300,000 metric tonnes, while domestically, they hold a significant 55-60% share, which translates to around 20,000 metric tonnes.
The company faces substantial entry barriers due to its diverse product portfolio and stringent customer approval processes, which typically span over 24 months for validation. Moreover, the business is capital-intensive and demands substantial investment in research and development.
Established in 1978 as Dharuhera Chemicals Limited, Oriental Carbon & Chemicals Ltd (OCCL) underwent a merger with Oriental Carbon Limited in 1984. It operates under the umbrella of the JP Goenka Group of Companies. In 1994, OCCL established a state-of-the-art manufacturing facility dedicated to insoluble sulfur production, which has since become the company’s flagship product. Additionally, OCCL is engaged in the manufacture of sulfuric acid and oleum.
Currently, OCCL operates three production units, with two located at the Dharuhera Industrial Unit in Haryana and one at Mundra SEZ in Gujarat. The company’s production portfolio includes insoluble sulphur, sulphuric acid, and oleum, with production capacities standing at 39,500 metric tonnes per annum (MTPA) for insoluble sulphur (IS) and 88,200 MTPA for sulphuric acid & oleum.
In the financial realm, OCCL witnessed a 14 percent year-on-year decrease in revenue, sliding from Rs 120 crore in Q3 FY23 to Rs 103 crore in Q3 FY24. Simultaneously, the net profit plummeted by 43 percent, declining from Rs 12.80 crore to Rs 7.30 crore during the same period.
Regarding its market performance, Oriental Carbon & Chemicals Ltd shares experienced a 15 percent decline over the past six months, although they managed to gain 2 percent over the last 12 months.
The company is currently executing a capital expenditure program aimed at expanding its IS capacity by 11,000 MTPA at Dharuhera, with 5,500 MTPA already commissioned in December 2021. Additionally, it plans to expand sulphuric acid capacity by 42,000 MTPA.
The decision regarding the commissioning of the second phase of capacity expansion, which amounts to 5,500 MTPA, is still pending. Additionally, the company has unveiled a business restructuring initiative wherein the chemicals business will be separated into its own entity, while the investment business and Duncan Engineering Limited will remain as subsidiaries within the current structure.
In Q1 FY24, Insoluble Sulphur constituted 88% of the company’s revenue mix, with 12% generated from Sulphuric acid and another 12% from Oleum.
With a robust presence, the company maintains strong partnerships with over 40 customers spanning 21 countries, including renowned names such as Apollo, MRF, Bridgestone, Ceat, and Goodyear. In the previous fiscal year (FY23), the company expanded its clientele by adding 6 new customers.
Company Operating in over 21 countries worldwide, including prominent markets like China, Africa, Russia, and North America, the company distributes its products efficiently through a network of warehouses and agents. Approximately 51% of the company’s total sales are attributed to exports.
Written by Omkar Chitnis
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