Today we are going to catch-up with one of the other unique companies in the Indian recycling and circular economy space

This one company in India that has spent 30 years building the infrastructure to be the destination for that rerouting. It operates 13 manufacturing plants across 4 recycling verticals. It has 1,900+ procurement touch-points spanning 5 continents. It is the only company in India with ILA-accredited recycling plants (the International Lead Association, which is the global gold standard for lead recycling quality). It processes over 2.87 lakh metric tonnes of scrap annually, selling refined recycled products to 375+ customers across 70+ countries.

Let's discuss more on Gravita India India's recycling rate is approximately 20%. In developed markets in the US, Germany, Japan it sits between 60% and 80%. That gap alone tells you there is a massive structural opportunity somewhere. But the more interesting number is this: roughly 60% of India's lead scrap still flows through the informal sector backyard smelters and kabadiwalas who operate with 50–70% recovery rates, zero environmental compliance, and a single competitive advantage: they don't pay the 18% GST.

That 18% tax-evasion arbitrage is the only reason the informal sector still exists in lead recycling. Not technology. Not customer relationships. Not scale. Just tax evasion.

And three separate regulatory forces, the Battery Waste Management Rules of 2022, the Extended Producer Responsibility framework, and the GST Reverse Charge Mechanism are now converging to systematically destroy that single advantage. When that happens and it is a matter of when, not if the scrap that currently flows through thousands of unregistered backyard smelters will have to be rerouted through registered, compliant, scaled recyclers.

Gravita works in this particular industry. And what most people miss when they look at it is this: Gravita is not a commodity recycler. It is a conversion spread business with toll-road-like economics, wrapped inside a multi-decade formalisation arbitrage, with a procurement moat that took three decades to build and cannot be replicated with capital alone. And even if it can be replicated with capital then also it would take 30 yrs to build such a business + end of the day this is a dirty business which very few new entrants would be willing to enter compared to the likes of Quick Commerce...

This is the second part of our "Finding Moated Business" series, following our previous discussion on INOX INDIA.

The focus this time is on another highly intriguing Indian chemical company. It's one of only four such companies globally, which strongly suggests the presence of a significant competitive advantage, or MOAT, in its business model.

In this thread, we will analyze this business in three key steps:
1) Understanding what makes this business MOAT-ed and how.

2) Assessing if this MOAT translates into robust financial performance for the company.

3) Determining if this MOAT's primary function is to simply accumulate cash on the balance sheet at a normalized growth rate, or if it provides the capacity for growth significantly faster than its industry peers. This company makes the molecule responsible for the freshness in 99% of the perfumes sold in the world today. It is one of just four companies on the planet that has mastered the chemistry of extracting sulphur from a foul-smelling hazardous paper mill by-product and turning it into the building block of a $3.8 billion global aroma chemicals market.

It is a preferred supplier to the world's top 15 fragrance houses - Givaudan, Firmenich, IFF, Symrise, Takasago, Mane, Keva and to the FMCG majors that sit above them :- P&G, Henkel, Reckitt, BASF, AkzoNobel, Unilever, Colgate-Palmolive.

It has a 51:49 joint venture with Givaudan, the world's largest fragrance company, the JV's dedicated greenfield plant in Mahad was inaugurated in October 2024 and will exclusively manufacture 40 high-margin molecules for Givaudan.

Its EBITDA margins have moved from 11-12% to 26.8% in under a decade. Its return on capital is the highest in the Indian aroma chemicals space.

Its Executive Director D.B. Rao has been on the board since 1982. Its Chairman & MD Mahesh Babani has been on the board since 1989. Both are still running the company.

This is Privi Speciality Chemicals Limited, and to understand why it deserves your attention, you have to first understand the position it occupies in the industry.

To deep dive beyond the surface we recently visited the plant of one of the leading aesthetic solution player in India - SJS Enterprise Ltd.

And here is all that we got to know after visiting their Bengaluru facility Let's first start from all the products that company is into and understand the key moat that the company has in each of the products the company is in

For starters it is key to know that what they are doing is "Customisation at Scale" where last year they delivered close to 20000 SKUs and ~20mil parts across its diversified customer base in 20 countries across the globe