Global Specialties Firm Rises In India

Acquisition by acquisition, Dorf Ketal Chemicals is emerging as a serious contender in the global specialty chemical market. Earlier this year, the little-known firm acquired DuPont’s specialty catalyst business, a move that will boost its sales by at least $50 million annually. The purchase was the latest in what the Indian company promises will be a long series of buys.

In the pharmaceutical arena, many Indian firms have become international players. Readers of the business pages in daily newspapers know about Indian drug companies such as Piramal Healthcare or Dr. Reddy’s Laboratories. Similarly, Reliance Industries is familiar to anyone with a passing knowledge of petrochemicals. In contrast, no company from India is a well-known global producer of specialty chemicals.

Dorf Ketal is on its way to assuming that mantle. Its managers tell C&EN that they are looking for additional businesses to buy and getting ready to set up manufacturing facilities and technical support centers in several countries to better serve existing customers.

The company is privately owned, but that could change, too. Until now, Dorf Ketal has been able to use its own cash flow and bank loans to finance acquisitions, says Subodh Menon, the company’s founder and its director of business and operations. But “we’re looking at bigger deals, so we will probably need to go public,” he says, adding that this will likely be done on the National Stock Exchange of India. The deals the company is considering will be worth as much as $200 million.

By global standards, Dorf Ketal will remain a small player for some time. Founded in 1992, the firm expects to record $300 million in sales this year and wants to expand to $800 million in the next few years. In comparison, the medium-sized Boston-based specialties producer Cabot Corp. recorded sales of $680 million in its latest quarter alone.

But in some sectors, Dorf Ketal is already a force to reckon with. In the refinery chemicals business, the young company is so well established that its main competitors are the industry giants Nalco and General Electric.

During C&EN’s visits to Dorf Ketal’s offices, plants, and R&D center in the Mumbai area, the firm demonstrated that it is managed carefully, despite the speed at which it’s growing. For example, its seriousness about safety became evident at its main manufacturing facilities in Taloja, a suburb of Mumbai, when Kaushik Biswas, a quality manager for the firm, denied a request to take a camera on-site.

The denial was not to hide any secret, Biswas explained, but rather to prevent an explosion in the unlikely event that errant flammable gases ignited when a photo was taken. The plant, he stressed, complies with the highest U.S. and European safety standards.

The company is similarly cautious about its reputation in the marketplace. Pramod Menon, the firm’s head of marketing and a cousin of founder Subodh Menon’s, says Dorf Ketal does not sell chemicals it hasn’t manufactured itself. “We get many customer requests to source Indian-made chemicals for them, and we turn them all down,” he says. “These are opportunities, but if we’re not sure how the product was made, we don’t want to be blamed if things go wrong.”

To effectively manage its high rate of growth, Dorf Ketal has staffed its operations with industry veterans. At the Taloja manufacturing site, the head of safety is an experienced Clariant operations manager; the site’s medical doctor formerly worked for Bayer. In the U.S., the firm’s business development manager for petrochemicals was previously with GE Water & Process Technologies.

Dorf Ketal targets its acquisitions methodically, Subodh Menon tells C&EN. The company tends to buy businesses that large chemical makers find too small. “It’s not that it’s a dying sector or that the big companies are not interested in the chemistry, it’s just that they don’t want to invest time, money, and research resources in markets that are worth less than $1 billion,” he says.

When Subodh Menon founded Dorf Ketal, it was an importer of chemicals. In the early 1990s, he recalls, the Indian economy wasn’t as free as it is now, and import duties on chemicals were set at 35%. The high tariff created an incentive to manufacture products locally, he says. “From that point, we came up with innovative chemistries,” he adds.

Specialty chemical companies need to come up with new products frequently, and India is a fairly good place for that, says Christopher Bluemel, a German entrepreneur and director of i-Chess, a Mumbai-based producer of custom chemical intermediates. Indian scientists, he says, tend to work long hours, require lower salaries than those in the West, and complete tasks fast. “In our company, the typical time from getting a molecule, developing the route, establishing the process, and finding and getting raw materials is four to six weeks—very fast,” he says. Indians, he adds, have a natural tendency to be customer-focused.

The main disadvantages of basing operations in India, Bluemel warns, are the lack of government support for certain chemical technologies such as phosgenation and fluorination and the difficulty in preventing proprietary know-how from escaping the company. He further reckons that, although it’s not a problem for a European-managed firm like his, Indian companies have a relatively weak track record when it comes to launching new products on a global scale.

In refinery chemicals, a market in which Dorf Ketal’s position is particularly strong, India is a good place to develop new products, Pramod Menon says. For one, the country is well positioned geographically, with the Middle East on one side and China on the other.

In addition, the Indian market itself encourages the development of new formulations, Pramod Menon explains. In most countries, refineries tend to process the same grade of crude oil over and over. In India, however, refineries change oil sources frequently because of price fluctuations. “We gained a lot of exposure to various grades,” he says.

One of the key uses for refinery chemicals is to lengthen the time that refineries can operate without requiring a maintenance shutdown. Refinery operators worldwide buy Dorf Ketal’s chemicals, Pramod Menon says, because they perform well rather than because they are cheaper than competitors’ products. “We’ve identified problems that GE and Nalco could not solve, and we solved them,” he says.

One factor supporting the international growth of the business was an earlier Dorf Ketal acquisition, the 2001 purchase of UOP’s refinery chemicals business.

As it did with its UOP buy, Dorf Ketal intends to expand the DuPont catalyst business by putting significant resources behind it. To start with, it will integrate the business with Intec Polymers, an Indian maker of organic titanates that Dorf Ketal acquired last year.

The firm also plans to build a 10,000-metric-ton-per-year plant in the Mundra Port & Special Economic Zone in western Gujarat. This is more than the production capacity DuPont had for the business, Subodh Menon points out. “We will develop new applications for the products and file patents on these,” he says. The products acquired from DuPont, consisting mostly of organic titanates and zirconates, are already used in applications as diverse as catalysis, curing and cross-linking, and surface modification.

Specialty chemicals typically require more technical support than other classes of chemicals. Because most of its operations are in India, Dorf Ketal has relatively weak technical services, but it plans to set up application development units in several countries. It will also build plants to formulate products closer to customers’ sites to speed up delivery, Subodh Menon says.

Menon’s vision for Dorf Ketal is to turn it into an India-based global player in the specialty chemical field. The plan might well succeed if the company continues to build on India’s considerable strengths in chemistry and not get bogged down by the country’s relatively poor track record in implementing global product launches.