Kronox Lab Sciences Limited
Company
| Website 🔗 |  |
| Business Activity | Manufacture |
| Division | Chemicals |
| Sub-class | Specialty Fine Chemicals |
| Location | Vadodara, Gujarat |
| Establishment Year | 2008 |
Management
| Managing Director | Jogindersingh Jaswal |
| Educational Qualifications | Bachelor’s degree in science from Panjab University |
| Experience | Over 30 years in the chemical industry |
| Annual Salary | 1.92 Cr |
| Total Number of Employees | 212 |
About
Kronox primarily serves the pharmaceutical and scientific research industries, with its products used as reacting agents, raw materials for Active Pharmaceutical Ingredients (APIs), excipients in formulations, and reagents for research and testing.
Products and Services:
Kronox manufactures over 185 High Purity Specialty Fine Chemicals related to phosphates, sulfates, acetates, chlorides, and citrates.
These chemicals are offered in various grades and particle sizes tailored to customer requirements. In addition to standard products, Kronox undertakes custom manufacturing, collaborating with clients to develop and produce chemicals with specific purity levels and characteristics.
The company primarily operates in a business-to-business (B2B) model, directly engaging with customers to understand their technical requirements and future needs
Clients:
1. Pharmaceuticals 2. Scientific and Laboratory Research 3. Nutraceuticals 4. Biotech 5. Agrochemicals 6. Personal Care 7. Metallurgy 8. Animal Health
Raw Materials and Suppliers:
Key raw materials include citric acid, phosphoric acid, potassium hydroxide, sodium hydroxide, soda ash, potassium carbonate, sodium bicarbonate, and acetic acid. These materials are sourced from domestic suppliers.
Other Key Aspects:
Research and Development
As of December 31, 2023, Kronox had 122 products under various stages of research and development.
Work Flow Chart
Revenue – Category
Revenue – Region
Audit and Legal
Auditor’s Remarks:
No qualifications by the statutory auditors
Contingent Liabilities:
There were no contingent liabilities as of December 31, 2023
Legal Cases:
SWOT Analysis
Strengths
| Wide range of products with applications in diverse end-user industries |
| Long-standing relationships with customers |
| High entry and exit barriers due to long customer approval cycles and strict product standards |
| Strong focus on R&D and Quality Control |
| Zero-debt company with strong and consistent financial performance |
Weaknesses
| Lack of long-term contracts with customers: The company does not have long-term agreements with customers for product purchases. This can lead to revenue uncertainty and potential fluctuations in demand. |
| Potential for conflicts of interest with Promoter Group: Promoters and their Group Companies are involved in similar businesses, creating a possibility of conflicts of interest in the future. |
Opportunities
| Explore newer applications for existing products: Kronox Lab Sciences Limited has the opportunity to research and identify new applications for its current product portfolio |
| Focus on import substitution and increasing exports: The company already exports to over 20 countries. There is potential to further strengthen their global presence and target import-dependent markets, capitalizing on their international experience. |
Threats
| Meeting domestic and international industry standards: Maintaining adherence to evolving industry standards is critical. Failure to comply could lead to product rejections and damage the company’s reputation, impacting sales and financial performance. |
| Risks inherent in the manufacturing, storage, and transportation of chemical substances: The nature of the business exposes the company to risks related to chemical handling. Obtaining necessary approvals, ensuring safe storage, and adhering to transportation regulations are vital to mitigate potential hazards and operational disruptions. |
Porter’s Five Forces
| Threat of New Entrants | LOW |
| The speciality fine chemicals domain presents substantial entry and exit barriers, attributed to protracted customer approval processes and stringent product standards, thus mitigating the threat of new entrants. |
| Bargaining Power of Suppliers | LOW |
| of Raw materials required by the company are more common chemicals which have a good number of suppliers in the market. |
| Bargaining Power of Buyers | LOW – MODERATE |
| Custom manufacturing requires deep domain knowledge, expertise and understanding of the characteristics of each chemical and its compounds and long customer approval cycles make the business sticky and it is not easy for the buyer to go for quick alternatives |
| Threat of Substitute Products or Services | LOW |
| With R&D new chemicals keep replacing the existing chemicals in use, but the company produces about 185 chemicals, and this diversity lowers the threat of substitute for the company. |
| Rivalry Among Existing Competitors | MODERATE |
| There are good number of competitors in the market manufacturing fine chemicals in similar fields. |
Peer Comparison
Kronox faces competition primarily from domestic and international companies including Canton Laboratories Private Limited (India), Jost Chemicals, USA, (Czech Republic), Budenheim (Germany), Jiangsu Kolod Food Ingredients Co. Ltd. (China), CFL Chemische Fabrik Lehrte GmbH & Co. KG (Germany) and Ichimaru Co. Ltd. (Japan), amongst others.
PAT Margin: Kronox’s PAT margin in FY 2023 stood at 16.8%, exceeding the average PAT margin of 15.5% for its peer group in the same period
ROCE: Kronox exhibited a strong ROCE of 48.3% in FY 2023. This figure significantly surpasses the average ROCE of 20.7% among its Indian peers in the same year.
Debt-to-Equity Ratio: Kronox operated with a debt-to-equity ratio of 0.0 in FY 2023, indicating a debt-free financial position. In comparison, the average debt-to-equity ratio among its Indian peers was 0.2.
Smaller Scale:
Kronox is relatively small in terms of revenue compared to some of its industry peers. In FY 2023, Kronox recorded revenue of ₹ 95.5 Cr, while Tatva Chintan Pharma Chem Limited reported ₹ 423.6 Cr. This smaller scale might limit its bargaining power with both suppliers and customers and could hinder its ability to compete effectively for large contracts.
Green Box
To address capacity constraints and cater to growing demand, Kronox plans to establish a new manufacturing unit at GIDC Dahej – II Industrial Estate.
As of December 31, 2023, Kronox had 122 products under various stages of research and development.
R&D investments indicate positive outcomes: The company has consistently expanded its product portfolio. It has a track record of adding new customers. Kronox has secured repeat orders from a significant portion of its customer base.
Kronox Lab Sciences has maintained a positive net cash flow from operating activities over the past few years:
Strong Financial Position: Kronox benefits from a robust balance sheet, characterized by zero debt and consistent profitability. This financial strength provides the company with flexibility and a competitive advantage in pursuing growth opportunities.
Wide Range of Products and Diversified End-User Industries: Kronox manufactures over 185 high-purity speciality fine chemicals, catering to a variety of industries. This diversification mitigates dependence on a single product or sector, contributing to business stability and growth potential.
Amber Box
Environmental, Health, and Safety (EHS) Compliance:
Kronox Lab Sciences Limited faces inherent risks related to the manufacturing, usage, and storage of chemical substances. The company is subject to various central and state laws and government regulations in India concerning EHS. Failure to comply with these regulations could lead to penalties, suspension or revocation of approvals, and disruptions in business operations.
Product Quality and Standards:
As a manufacturer of High Purity Specialty Fine Chemicals used in industries with stringent quality requirements like pharmaceuticals, Kronox must adhere to both domestic and international industry standards. Any deviation from these standards could result in product rejection by customers, impacting the company’s revenue and reputation.
The company’s revenue is concentrated in a few products. The top 20 products contributed approximately 70% of the total revenue in recent periods. This concentration presents a risk if the demand for these specific products declines.
Red Box
The average utilized capacity of its manufacturing units for the nine months ended December 31, 2023, and FY 2023, 2022, and 2021 is 50.47%, 67.23%, 70.98%, and 78.36%, respectively. The capacity utilization has been falling YoY in the last four years. The company’s capacity utilization has been additionally adversely affected by limitations and restrictions on production at Unit – III, making it non-viable to manufacture certain products.
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