Synopsis: While tyre companies remain in the spotlight, OCCL has quietly become one of the world’s few significant suppliers of insoluble sulphur, a critical ingredient in premium tyres. Backed by strong customer relationships, high entry barriers and a focused pure-play structure post demerger, the company has built a unique global niche.
India’s speciality chemical industry has increasingly emerged as a key part of global manufacturing supply chains, with several companies building leadership positions in highly niche segments. As global customers look for reliable and diversified sourcing partners, Indian manufacturers with specialised technologies and long-standing customer relationships are gaining prominence.
Companies operating in critical but often overlooked products are gradually becoming indispensable to global industries. One such niche segment is insoluble sulphur, a key ingredient used in tyre manufacturing, where OCCL has quietly established a significant global presence.
With a market cap of Rs 680 crore, the shares of OCCL Ltd are trading at Rs 136 and are trading at a PE of 14 compared to their industry’s PE of 22. The shares have given a return of more than 36% YTD.
The Invisible Chemical Behind Every Premium Tyre
While the majority of investors focus on automobile and tyre manufacturers, the speciality chemicals needed to make modern tyres tend to stay unnoticed. However, these chemicals are vital to produce durable tyres which can operate in harsh weather, bear heavy weight and travel on tough roads.
Insoluble sulphur is one of those chemicals that help in the vulcanisation of rubber and play a major role in providing extra strength and heat resistance to tyres. Without insoluble sulphur, it would have been much harder to make modern radial tyres or premium-quality tyres.
However, the global insoluble sulphur market is a very niche market, as not many companies are technologically equipped to make it in bulk and also have client approval for manufacturing this chemical. OCCL has made its mark in this unique field globally.
From Sulphur Chemicals to a Global Niche Leader
The evolution of OCCL as a company has been traced back for decades, starting from being a sulphur-based chemical manufacturer. Over the years, the company has transitioned into producing speciality chemicals and is today among the top producers of insoluble sulphur in India.
OCCL currently holds a domestic market share of an estimated 55-60% as well as a global market share of about 10% in the domain of insoluble sulphur production. The company caters to over 40 customers in 21 different countries and is thus among the few speciality chemical manufacturers in India which have managed to develop a global footprint.
The products of the company are branded under the label of “Diamond Sulf” and suit the needs of tyre manufacturers across the globe. Almost 86% of the total revenue generated by OCCL is due to insoluble sulphur, reflecting the level of specialisation involved in its business model.
Why Insoluble Sulphur Is Such a Difficult Business
The entry into the business of producing insoluble sulphur is very difficult. Unlike general commodity chemicals, the production of insoluble sulphur requires unique process expertise, operational experience, and large investment. Above all, the tyre industry has very rigorous qualification processes.
Tyres are safety products; hence, companies dealing in such products do not normally have the practice of changing suppliers often. The potential supplier will go through the process of testing and approval.
This makes for strong customer loyalty and insulates existing firms from any new competitor. It has been made clear by the management that factors like technological complexity, customer approval process, and capital intensity remain important barriers to entry in this case.
Building Relationships With Global Tyre Giants
The one of the key advantages of OCCL is its customer base. OCCL sells its products to many leading tyre manufacturers like Apollo Tyres, Bridgestone, Continental, Goodyear, CEAT, JK Tyre, MRF and Sumitomo Rubber Industries. All these companies together manufacture a major share of tyres around the world.
Creating a relationship with such customers takes quite a few years and demands thorough testing of products and their regular evaluation. It is important to note that OCCL became a preferred partner of these international companies, which means that its products have high quality and are reliable. In some sense, OCCL has become an invisible but very important link in the global tyre manufacturing chain.
Capacity Expansion Helped Build Global Scale
One more reason behind the growth of OCCL has been their persistent capacity addition efforts. Their capacity in terms of production of insoluble sulphur has grown consistently from just 3,000 metric tonnes in 2000 to 39,500 metric tonnes today. All such efforts have allowed OCCL to serve both the domestic as well as international markets along with building its international presence.
The facilities that OCCL maintains at Dharuhera and Mundra have been useful for the company in scaling up and making a mark in the international market. Today, OCCL exports its products to the markets of North America, Europe, China, Russia, and many others.
The Demerger Created a pure-play chemical company.
One major development that can be attributed to the recent corporate history of the company has been the demerger of the chemical business of AG Ventures Limited, earlier known as Oriental Carbon & Chemicals Limited, into OCCL.
This demerger was effected from July 1, 2024 and effectively made OCCL a speciality chemicals company. This means that the nine months’ results are not comparable to those of the previous year since no operations were there before the date of appointment.
Even more significant than this is that the business structure is cleaner after the restructuring.Prior to the demerger, the speciality chemicals operations were run within the diversified entity, and this was usually quite complicated to value and analyse. The demerger has resulted in investors getting a direct play on one of the few insoluble sulphur manufacturers in the world.
This structure should allow the management to focus all their capital investments on growing the speciality chemicals business, increasing their market share and improving customer relations globally. Given that this is a niche market, this demerger has actually created one of the few pure plays in the insoluble sulphur market.
Industry Tailwinds Continue to Support Growth
The general external environment also seems to be positive. Management pointed out that the high auto sales volume, cut in GST rates, monetary policy measures, and growing government investments in infrastructure development have all helped boost the tyre demand.
An increase in auto production leads to the rise in production of tyres and consequently in the demand for insoluble sulphur. In particular, the Indian tyre market is projected to expand at a rate of 7-8% in FY26, providing a supportive framework for the business. Moreover, premiumisation in developing countries could further aid demand growth; Europe constitutes the bulk of OCCL’s exports, and the trade relationship with Europe remains positive and constructive.
Near-Term Challenges Remain
However, despite good demand prospects, there are still some immediate problems for the company. First and foremost is the surge in prices for sulphur. According to the company’s management, the average price for sulphur rose noticeably throughout the year and impacted margins. In spite of the fact that the company was able to partially pass on the price increases at home, there are some difficulties with passing all the costs in the international market due to competition.
The company was forced to provide discounts in the US market in order to provide supplies through tariff disruptions. Moreover, the utilisation rate of the industry capacities of insoluble sulphur on the global level amounts to 70-75%. This also adds to the problem of pricing. However, the company’s management is quite confident that either sulphur prices will fall or the industry will start raising prices at some point.
Financials
OCCL delivered a strong financial performance in FY26 after becoming a pure-play speciality chemical company. Revenue rose sharply by nearly 65% from Rs 307 crore in FY25 to Rs 506 crore in FY26, driven by healthy demand and improved operating conditions. Operating profit increased from Rs 53 crore to Rs 89 crore, while operating margins remained healthy at around 18% despite elevated sulphur prices and pricing pressures in export markets.
Profitability improved significantly, with profit before tax increasing from Rs 29 crore to Rs 55 crore and net profit more than doubling from Rs 21 crore to Rs 48 crore. EPS also surged from Rs 4.29 to Rs 9.55. On a quarterly basis, Q4 FY26 revenue stood at Rs 149 crore, while net profit jumped to Rs 19 crore from Rs 7 crore in Q3 FY26, indicating improving operating leverage and recovery in business momentum.
Outlook
The long-term outlook for OCCL remains favourable, supported by expected growth of 7-8% in the Indian tyre industry, rising automobile production and increasing premiumisation trends. The company is also aggressively targeting higher domestic market share following anti-dumping duties on imports from China and Japan.
While elevated sulphur prices and global overcapacity could continue to impact margins in the near term, OCCL’s strong relationships with global tyre manufacturers, high entry barriers and niche leadership in insoluble sulphur position it well for long-term growth. Any moderation in raw material prices and improvement in export conditions could further support earnings going forward.
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