With due respect, I beg to differ here. Oleochemicals is a broad class of green chemicals and can be used in several applications. I don’t track Fairchem, but for Fine Organics, their end user application and customers are different than what Patanjali may offer. Even if they can match the R&D capabilities of Fine (honestly I think it’s very hard to do) or if Patanjali mocks up their products, it takes appx 3-5 years from the customers to get the approval for the products. Fine Organics itself said in last quarter that every time they launch new products, even for them, it takes a few years to get the approval from the existing customer. This creates a lot of hassle and exit barriers for the customers as well, and deter them from choosing another suppliers. Now if there are not Himalayan barriers to entry, then I don’t know what is.
Fine Organics can surely try to backward integrate and may be their JV in Thailand is the same thought process, but their change in policy regarding spot contracts from RM suppliers and the pricing power over their customers will keep them insulated from volatile margins in future. Patanjali surely has edge in this regard, but I don’t think they can disrupt Fine anytime soon.
Disc: Invested from lower levels.
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