Fairchem Speciality Ltd: An aspiring chemical giant
(BSE Code: 530117) (CMP: Rs.374.05) (FV: Rs.10)
Fairchem Speciality Ltd (Fairchem), formerly Adi Finechem Ltd, is an emerging renewable speciality chemicals company controlled by Canada-based private equity giant Fairfax Holding led by Mr. Prem Watsa (also known as the Warren Buffet of Canada). Fairchem was formed as a result of the merger between Adi Finechem Ltd (a manufacturer of oleo chemicals and nutraceuticals) and Privi Organics Ltd (a manufacturer of aroma chemicals). The combined entity represents significant financial, research & development, marketing and global sourcing capabilities with the requisite management bandwidth.
Fairchem serves as a platform for organic as well as inorganic growth in the area of speciality chemicals. Its product portfolio includes aroma chemicals, oleo chemicals and nutraceuticals. Its aroma chemical products find application in various consumer goods like soaps, deodorants, perfumes, detergent, hair oil, etc.
The speciality chemicals industry in India is thriving and India is fast becoming an important destination for most global MNCs. The Indian speciality chemicals space is growing significantly, with demand being driven by both domestic consumption and exports. At $23 billion, speciality chemicals constitute ~20% of the overall Indian chemicals industry and this segment is poised to grow at 11% to reach $39 billion by 2021. India is becoming a global manufacturing hub for multiple sub-segments within speciality chemicals. A case in point is the organic pigments industry where most
manufacturing bases are moving to Asia (particularly to India) from western countries. Similarly, in the natural flavor, fragrances and nutraceutical ingredients space, India has an inherent sourcing advantage and most global players rely on supplies from Indian manufacturers.
Fairfax Holding has invested in Indian listed companies like IIFL and Thomas Cook apart from some niche unlisted companies, which have the potential to grow multi-fold. Investors are advised to keep an eye on this stock and accumulate on every decline. Fairchem could become a large-cap niche speciality chemical giant in the next 3-5 years.