Thread by @ValueInvestor27

Summary notes of QIP document of Phillips Carbon Black Ltd: (A long thread)
Overview
We are the largest carbon black producer in India by capacity. Globally, we were the 7th largest carbon black company, by sales. As a manufacturer of over 75 grades of carbon black,

we have a diversified product portfolio. Our performance chemicals are used in the production of rubber-based products primarily as a reinforcing agent in tyres and non-tyre rubber products (“Performance Chemicals”) and our speciality chemicals are used in manufacture of

non-rubber products (“Speciality Chemicals”). Our sales volumes in Fiscal 2021 from tyre, Performance Chemicals and Specialty Chemicals was 65%, 29% and 6%.
Our carbon black, under the Speciality Chemicals vertical is primarily used as a pigment, UV stabilizer.

We cater to various industries such as tyre, rubber, elastomer, plastic, coatings, paints, fibre, footwear, cables, and ink manufacturing industries amongst others, which provides us with a wide and diversified customer base.

Further, with customers which include tyre manufacturers in both India as well as outside India and the demand for tyres estimated to grow at a CAGR of 7- 9% during Fiscal 2022-2025E.

We held 9% of the carbon black market in Asia, excluding China. Our global presence reaches more than 40 countries. Our exports accounted for 27.33% of our total sale volume in Fiscal 2021

Our Company commenced production of carbon black, using the oil furnace technology. Presently, have four manufacturing facilities strategically located in proximity to domestic tyre manufacturers, raw material suppliers and ports.

We also generate green power through our cogeneration power plants at the aforesaid manufacturing facilities. The installed capacity, as on March 31, 2021, at our four manufacturing facilities is as follows:

As on June 30, 2021, our Company had 84 MW of green power generation capacity. For Fiscal 2021, sale
of power amounted to ₹ 67.25 crore.
Our Company is undertaking an expansion program in both carbon black and power segment, involving both greenfield and brownfield expansion.

The greenfield expansion is underway at Chennai with an installed capacity of 147,000 MTPA of carbon black production along with a 24 MW power plant. The completion of the greenfield project would not only bring total installed capacity to approximately 750,000 MTPA but

also increase the power generation capacity of our Company to 122 MW.

Our Competitive Strengths
• Leadership position in carbon black in India with a strong global footprint
• Strategically located manufacturing facilities with capability to use alternate feedstock: We have developed a seamless capability of using multiple feedstocks, like

CBFS and CBO for the manufacture of carbon black.
• Strong customer relationship: In 2021, our sales to top ten customers contributed 64.30%.
• Strong focus on research and development for expansion of specialty carbon black portfolio (High margin)

Our Strategies
• Enhancing capacity to meet rising demand: We intend to commence commercial production at our green field carbon black production facility by December 31, 2022.
• Increasing share of value-added products: Our Co aims to reduce its reliance on formula-based

ranges of product increasing the share of Performance Chemicals and Specialty Chemicals.
• Grow our market share in existing geographies and expand operations to new geographies

Risks:
• Our Company relies on certain major suppliers, with whom we have not entered into long term contracts, for supply of certain of raw materials. We utilise CBO or CBFS which are subject to daily price volatility. We import around 80% of the basic raw material

• Fluctuations in crude oil prices may adversely affect our revenues and profits
• Our Company competes against imports mainly from China and Russia

• Most of our arrangements with customers are through purchase orders and we have not entered into
any contracts with such customers. . In 2021, our top 5 customers contributed 56.68%. the sales prices for our products are adjusted from time to time in accordance with the market

Purpose of this Issue:
Our Company proposes to utilize the Net Proceeds towards (i) ongoing and future capital expenditure
requirements of the Company and our Subsidiaries; (ii) working capital requirements; (iii) debt
repayment;

CARBON BLACK GLOBAL OVERVIEW: Carbon black demand is forecast to grow 3.7% per year from 2019 to reach 16.1 million tons in 2024.

INDIAN CARBON BLACK INDUSTRY:
CB is a key RM for tyre manufacturing and accounts for ~23-25% of total RM costs (both in volume and value). Specialty carbon black is increasingly used as value enhancing filler in varied products like plastics, dyes, pigments etc.

China’s competitiveness has declined due to
relatively high production costs (partly due to increase in RM prices, higher environmental costs, wage
inflation etc.)

Greenfield Expansion
We are setting up a green field CB production facility at TN, with an investment amount of about ₹ 800 crore. In order to cater to the current demand and the upcoming demand, we are commissioning a facility in TN with a capacity of 1,47,000 MTPA.

Products
Our Company is the largest carbon black producer in India by capacity. A large volume of rubber carbon black is sold directly to tyre producers. Carbon black is used for the production of rubber-based products

Rubber Carbon Black/ Performance Chemicals
Rubber carbon black is broadly classified into two categories viz. hard black and soft black. Hard black is generally used in applications demanding high abrasion resistance i.e., which come in contact with the road and are subject

to higher friction while soft black is used for applications demanding high modulus i.e., for the side wall of tyres. Co manufactures different grades of both hard black and soft black. As on March 31, 2021, our Company had a market share of 35% of India’s domestic consumption.

Specialty Chemicals:
We are amongst the select few carbon black producers in the world having the capability to manufacture specialty chemical grades. our Company also manufactures products specific to customer’s needs.

Our Company is one of the leading carbon black producers in the world to meet the stringent US FDA
requirements for direct and indirect food contact plastics applications like food trays and cutleries.

Our customer base comprising more than 100 customers, includes reputed players in fields of high-end films, fibre, pressure pipes, inks, and compounders for automotive industries, thus providing a robust platform for introduction of new products to such markets.

ORGANISATIONAL STRUCTURE
Our Subsidiaries
Our subsidiaries are as below:
1. Phillips Carbon Black Cyprus Holdings Limited
2. Phillips Carbon Black Vietnam Joint Stock Company
3. PCBL (TN) Limited

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