DCM Shriram To Turn Hindustan Speciality Chemicals Profitable Within A Year: CFO Amit Agarwal

Diversified conglomerate DCM Shriram is going to turn Hindustan Speciality Chemicals profitable within a year through improved efficiencies and backward integration, Executive Director and Group CFO Amit Agarwal said on June 13.

DCM Shriram on Wednesday received approval from its Board of Directors to acquire a 100% stake in Hindustan Speciality Chemicals for Rs 375 crore. The acquisition is expected to be completed by September 2025, subject to regulatory and shareholder approvals, the company informed the stock exchanges in a filing.

Speaking to NDTV Profit, Agarwal acknowledged that Hindustan Speciality Chemicals has been a loss-making company, due to factors like high debt and low capacity utilisation.

“I think it should be profitable in the next one year. The company has huge debt. Their EBITDA in FY25 was about minus Rs 8 crores, and capacity utilisation is low, around 60%. I think that leads to lower economies of scale efficiency and things like that. They also had issues with working capital and didn't have full forward and backward integration,” he said, adding that DCM Shriram plans to turn all that around.

Agarwal explained that the proposed acquisition value includes debt repayment and equity purchase. The acquired plant is located just 3.5 km from DCM's Gujarat chemical complex, offering operational synergies.

“It gives us a jumpstart into the advanced materials segment, which is a high-growth business, growing at about 11% in India and 5% globally. For DCM Shriram, we are the second-largest producer in the country of caustic soda and chlorine. We also manufacture epichlorohydrin and the plant we're acquiring manufactures liquid epoxy resin and is also into derivatives. So, we are actually able to cover the entire value chain,” he said.

The acquisition also includes 37 acres of surplus land, allowing for future expansion, Agarwal noted, adding that the move aligns with the company's long-term growth strategy.

He also outlined a three-year growth plan for the advanced materials segment. DCM Shriram plans to significantly scale up Hindustan Speciality's capacity. This expansion will also help de-risk DCM Shriram's overall chemicals business by building a more integrated and diversified value chain.

“The current capacity of liquid epoxy resin with Hindustan Speciality is 17,000 tons per annum. We will take it up to about 50,000 plus in the next three years. On derivatives, their capacity is another about… close to about 17,000 to 18,000 tonnes per annum, which also will grow by almost four to five times,” he highlighted.

Shares of DCM Shriram closed 0.23% higher at Rs 1,127.7 apiece on the NSE on Friday. In comparison, benchmark Nifty50 settled 0.68% lower at 24,718.6 in a negative market.