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