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The decade's top wealth creators: Paushak and Alkyl Amines Chemicals

With total returns of 76.9 per cent and 74.4 per cent CAGR over the last 10 years, here are two stocks among the top 10 in our annual Wealth 100 study

The decade's top wealth creators: Paushak and Alkyl Amines Chemicals

While stocks fluctuate on a day-to-day basis, real wealth is created in the market when you hold a good company for the long term. In November 2021, we conducted our annual Wealth 100 study, which was published in the December 2021 issue of 'Wealth Insight'. This coverage is meant to bring out the most rewarding stocks of the last decade. While creating this list, we applied the following filters:

  • In order to ensure consistency of wealth creation, we removed those stocks that delivered more than 50 per cent of their total gains over 10 years within a specific year.
  • In order to ensure quality, we ensured that the return on equity (ROE) should be more than 12 per cent in at least eight out of the last 10 years; or it should be rising in at least eight out of 10 years.
  • Do note that we also included dividends while calculating the returns. That's only sensible as dividends become substantial as your holding period goes up.

    Here we discuss two wealth creators from the top 10 in the list.

    Paushak: The power of process

    The decade's top wealth creators: Paushak and Alkyl Amines Chemicals

    A part of the Alembic Group of Companies, it is India's largest phosgene-based speciality-chemicals manufacturer and caters to the pharmaceutical, agrochemical and other industries. It also manufactures organic intermediates like isocyanates, chloroformates and carbonyl chlorides. Phosgene-derived intermediates are used to manufacture active pharmaceutical ingredients, speciality plastics, coatings and agricultural-protection chemicals.

    With over 35 years of experience in managing phosgene, it is one of the few companies in the country to have a licence to manufacture phosgene gas (which is highly poisonous). The company added chloroformates (FY13) and isocyanates (FY15) to its product portfolio. In FY17, it ventured into the agrochemical-intermediates business, thereby adding pace to its growth. Its incessant emphasis on safety and environment protection, aided by an expansion in its R&D team, has enabled it to adopt automation and solvent-free processes. Its backwards integration helps it combat cost competition and pricing pressure, mainly from China.

    In FY21, it received the government's approval to expand the phosgene capacity from 4,800 MT per year to 14,400 MT per year. As a result, it has planned a capex programme of Rs 120 crore to accelerate its growth. Besides capacity addition, the 'China plus one' trend and its indigenously developed technology for manufacturing phosgene will augur well for the company, enabling it to become a global supplier and enjoy cost competitiveness. While the outlook for this company remains bright, the same cannot be said for the stock, given the company's high valuation of a P/E of 81.5 times.

    Alkyl Amines Chemicals: A diversified portfolio

    The decade's top wealth creators: Paushak and Alkyl Amines Chemicals

    A leading manufacturer of aliphatic amines, amine derivatives and speciality amines, Alkyl Amines is the global leader in ethylamine, one of the leading players in diethylhydroxylamine and one of the largest producers of dimethylamine hydrochloride. Alkyl Amines has over 41 years of expertise in amine technology.

    In 1982, the company commissioned its first plant in Patalganga, Maharashtra, in Technological collaboration with Leonard Process Company, USA. Subsequently, the plant's capacity was expanded to manufacture other amines, leveraging the technical know-how of Acid Amines Technologies, USA. Thereafter, the company has continuously expanded its capacity in aliphatic amines, as well as targeted new products, particularly in amine derivatives and speciality chemicals. Owing to the presence of technocrats in senior management and an established R&D team, the company is able to offer a wide palette of products (over 100 stock-keeping units). In 2012, the company added acetonitrile to its product offerings, which provided a fillip to its growth. Acetonitrile is mainly used in rubber chemicals, rigid PU foams and fuel additives. Besides, it is used as a solvent by pharmaceutical manufacturers.

    The aliphatic-amine industry in India is dominated by Alkyl Amines and Balaji Amines. The industry has high entry barriers, owing to complex manufacturing processes, high lead time in customer approval, high fixed costs, stringent government regulations (environmental clearances) and R&D activities. However, the run-up in the stock markets over the last one and a half years has pushed its valuation (P/E of 58.6) way ahead of its major competitor (P/E of 31.1).

    Also in our 'Wealth 100' series:

    The decade's top wealth creators: Caplin Point Laboratories and HLE Glascoat

    The decade's top wealth creators: NGL Fine-Chem and GRM Overseas

    The decade's top wealth creators: Deepak Nitrite and Tasty Bite Eatables

    The decade's top wealth creators: Stylam Industries and Bajaj Finance