Nithin’s Portfolio

INDUSTRY STRUCTURE

Industry Dynamics as of 2016 : This industry structure was proposed by Vinati Organics

Para amino phenol or 4-aminophenol (PAP) is one of the most widely used intermediate in the pharmaceutical industry.

Primarily, PAP is used in the manufacture of paracetamol, a widely used Over-the-counter :

• Analgesic (pain reliever)
• Antipyretic (fever reducer)

More than 80% of para amino phenol worldwide is used for manufacturing paracetamol.

Sectoral use :

• Pharmaceutical sector : 80%
• Rubber antioxidant : 7 %
• Dyes : 5%
• Miscellaneous : 8%

Indian PAP Scenario :

• India is one of the major users of p-amino phenol and is the second largest market for this product after China.
• The following are the important users of PAP in India:

2016 Data : All credits to Vinati Organics

The captive users of para amino phenol :

• Meghmani Organics
• Farmsons
• Bharat Chemicals .

The demand of PAP in India based on paracetamol capacity that exists is close to 38,500 TPA.
However, all the PAP and paracetamol capacity is currently not being utilized.
Easy availability of competitive PAP from China, pollution and credit terms are the major reasons for the imports.

• India currently imports close to 21000 TPA of PAP.
• All the imports of PAP happen from China.

EXPORT Possibility :

• In 2010, the consumption of paracetamol in Asia was 65000 TPA and that in Europe it was around 25000 TPA.
• The global demand for paracetamol stands between 145000 to 160000 TPA.
• Hence, to cater the global demand, the present project has high potential for export.

Domestic / Export Markets

• According to CCN reports, the Chinese capacity for para amino phenol is close to 110000 TPA.
• In addition to paracetamol, PAP is also used as an ingredient for hair dye (Reddish brown hair dye).
• The main producers of this kind of dye are Rohm & Haas and a few Chinese players. It is known that close to 5000 TPA of PAP is the Chinese demand of PAP in hair dyes.

• While India does have installed capacity of PAP, most of the Indian demand for PAP is met through imports since the Chinese producers are cost competitive.
• Thus, on a conservative side, we can estimate that the total demand for PAP globally is 130000-150000 TPA.

Project Description with Processes Details :

• Manufacturing Process: Broad manufacturing process of the chemical (Para amino phenol) is described and depicted below.
• In our novel route, Para Amino Phenol is manufactured directly from Nitrobenzene and Hydrogen in presence of aqueous Sulphuric acid.
• Nitrobenzene is in-house produced by Nitration of Benzene using conc. Nitric acid. Hydrogen is manufactured from Methanol and Water.

• Reaction scheme for Hydrogen from Methanol Methanol and Steam react at high temperature in presence of catalyst to produce Hydrogen, Carbon Monoxide and Carbon dioxide by following reaction

• The hydrogen gas is further purified by using hydrogen purification system i.e. by Pressure swing absorber (PSA)

• Nitrobenzene undergoes continuous hydrogenation to give an intermediate phenyl hydroxyl amine, which in presence of sulfuric acid undergo rearrangement to product p-aminophenol (pAP) and Aniline as by-product.
• The sulfuric acid present is neutralized using Anhydrous Ammonia to produce by product Ammonium Sulphate.
• The impurities in product pAP are removed by continuous extraction with different solvents.
• Extracted solvents are recycled by distilling the spent solvent.
• Process block diagram for the manufacturer of Para amino phenol

Mentioned by Vinati Organics :

Total demand for PAP in India is to the tune of ~25,000 MTPA and all of it is being imported.

Share Khan Report :

BUSINESS

Sadhana Nitro Chemicals : Company is engaged in manufacture of chemical intermediates, heavy organic chemicals and performance chemicals India emerged as one of the major source for chemical intermediates

1. Opportunity Size
2. Key Points
3. Moat
4. Process
5. Management Track

Opportunity :
PAP

• Opportunity size for PAP The World demand for PAP before Pandemic has been at 1,60,000 TPA.
• Out of which 1,50,000 TPA (i.e. 94% of Total World demand of PAP) is sourced from CHINA.
• Total demand for PAP in India is to the tune of ~25,000 MTPA and all of it is being imported.
  7.0 Billion Dollar Opportunity mentioned by Vinati Organics :

Key Points :

• Sadhana Nitro Chem after 4 years of Efforts, got PROCESS TECHNOLOGY

• Superiority in PAP Production

• Structural Import Substitution Story

• In India, there is NO COMMERCIAL SUPPLIER of PAP.

• In Short, Sadhana Nitro Chem has unique advantage due to

• Manufacturing PAP using NB Route(Green Process)

• PAP is BACKWARD INTEGRATED by NB where Sadhana has 4 decades experience in handling NB and NB derivatives (NB refers to Nitro-Benzene)

• PLI Scheme : In 2021-22

• PLI SCHEME In AGM 2021,the management said that Sadhana has been Awarded PLI Scheme by Indian Govt for PAP Plants of 36,000 TPA and Sadhana will get incentives In Short, Committed Production Capacity for PAP : 36,000 TPA Committed Investment by Sadhana : Rs.197.27 Crore

  Key Chemicals :
  • PAP : Para Amino Phenol
  • 2-Anilino-6-Dibutylamino-3-Methylfluoran : ODB2 Color Formant
  • MAP : Mera Amino Phenol
  • Aniline :
  • BTCA
  • Metallic Acid MA
  • Nitro Benzine NB
  • Ortho Amino Phenol OAP
  • Ammonium Sulphate AMS
  • Diethyl Keto Acia DEKA
  • Diamino Diphenyl Ether ODA
  • 1,2,3,4 Butane Terra Carboxylic Acid BTCA
  • 3,3 Dinitro Diphenyl Sulphone 3,3 DNDS
  • Dietyl Keto Acid DEKA
  • Aniline 2,5 Disulphonic Acid : ANDS 2,5

MOAT

• Differentiation : Only producer of PAP in India
• Disruption : Yes due to green chemistry, safe for environment no discharge.
• Execution : Yet to find out
• Ability to Scale :
• Forward Integration : In AGM 22,Mgmt said they will FORWARD Integrate into production of Paracetamol because PAP is RAW MATERIAL for Paracetamol and it is natural to forward integrate into Paracetamol In my View, it is possible only after 2-3 years
• Expanding Downstream Capacities : In AGM 2022,Mgmt said that they were Expanding Nitro-Benzene(NB) Downstream Derivative COLOUR FORMER(ODB2) Capacity from 550 TPA to 2000 TPA. Plans to
• Utilisation of OBB2 to 60% by Q4-FY 23 and 90% in FY 23-24
• Capex they are doing need for PAP, COLOR Formants, ODB2
• It is also significant because Sadhana Nitro-Chem is also BACKWARD INTEGRATED in ODB2. To manufacture ODB2,the Company requires Keto Acids(DBKA,DEKA) and MAP. At present both MAP and Keto Acids has been manufacturing by Sadhana. So it is an INTEGRATED manufacturer of ODB2
• Since 80% goes into Pharma, the DEMAND will be DEFENSIVE in Nature
• Sadhana Nitro got PROCESS TECHNOLOGY Superiority using GREENER Technology(that means it is SUSTAINABLE in Future)

PROCESS

SADHANA Diagram : Unique Competitive Advantage of Sadhana Firstly,

PAP Can be Produced using 2 Routes

1.PNCB Route (First Route)
2.NB Route (Second Route)

I. The First Route for PAP production is used by ALL CHINA Manufacturers and some Indian Manufacturers and in China there is one company named Anubahyi Chemicals they make via NB route

ii. The Second Route only Sadhana makes it

• So the First advantage of Sadhana Nitro is to manufacture PAP using Nitro-Benzene(NB) Route.
• The Second Advantage is that Sadhana Nitro has 4 decades of Experience in Nitro-Benzene(NB) which in turn use NB to manufacture PAP

MANAGEMENT TRACK

Compliance :

Granules mentioned in the concall that the end user supply of Raw Material has Quality issue.

Execution :

Post Phase -1 PAP Commercialization, the Company Stabilized both Production and QUALITY Standard
·
Scaling :

Capex Announcement :
PAP Capacities In AGM 2021
Sadhana said that the FIRST PHASE of 6000 TPA PAP Commercial Production Started in Q3 FY 22. In AGM 2022

• The receipt of PAP Product Approval from Clients has Commenced.
• The Company is in the process of Expanding PAP Production from 6000 MTPA to 36,000 MTPA in next 1.5 years

Sadhana will become commercial supplier of PAP to Indian Companies

Raw Material
BENZENE : AARTI INDUSTRIES – Con call February 13th 2020

NITRIC ACID : DEEPAK FERT, GNFC, RFC
METHANOL : GSFC, RFC, DEEPAK FERT
SULPHURIC ACID : DMCC (Cannot be Tanfac because wherever Sadhana goes DMCC follows)
ANHYDROUS AMMONIDA : Local
TOLUENE : Local
SOLVENT : Local

IBUPROFEN vs PARACETOMOL

@Vivek_Shetty : Can you please share your valuable inputs here

SHIPMENT DATA

Sadhana Customers

• RAINBOW CHEMICALS COMPANY → Sumitomo Chemical is their parent company
• DOMTAR PAPER COMPANY LLC
• HUNTSMAN ADVANCED MATERIALS
• YUNICHEM USA
• GALERIA PRODUCTORA DE COSMETICOS
• MIKI SANGYO (USA) INC.

Recent News

Live price of Para Amino Phenol : 4-Aminophenol Price and Market Analysis – ECHEMI

Current Capacity Utilization

PAP : 3000 TPA – LIVE
Expanded to 6000 TPA – NOT LIVE
Future Capex – 36000 TPA – NOT LIVE

ODB2 – 550 TPA – LIVE
Expanded to 2000 TPA – NOT LIVE

KETO ACID
600 TPA – LIVE

MAP
2400 TPA -LIVE

ANDS
1440 TPA – LIVE

NITROBENZE
12000 TPA – LIVE

PS : This is not a recommendation, all credits to Vinati Organics, Share Khan, Panjiva, Import Genuis for all details.