Deepak Nitrite: Indian agrochemical industry needs a robust contract manufacturing ecosystem

AgroPages recently had the privilege to speak with senior executives from three major Indian CRAMS (Contract Research and Manufacturing Services) companies - PI Industries, Deepak Nitrite and Aarti Industries. These companies are trusted manufacturing partners for global agrochemical giants, providing a range of services from process research and development to large-scale production of intermediates and active ingredients. 

We interviewed Mr. Mayank Singhal, Vice Chairperson and Managing Director at PI Industries; Mr. Maulik Mehta, CEO and Executive Director of Deepak Nitrite and Mr. Rajendra V. Gogri, Chairman and Managing Director, Aarti Industries. Through our in-depth discussions, we aimed to understand the unique strengths and value propositions of these CRAMS leaders that make them the partner of choice for agrochemical multinationals. 

Here below is the text transcript of the interview with Mr. Maulik Mehta, CEO and Executive Director of Deepak Nitrite.

Mr. Maulik Mehta, CEO and Executive Director of Deepak Nitrite

Could you elaborate on the key capabilities and strengths that position your company as a preferred partner for agrochemical multinationals?

Deepak Nitrite Ltd. (DNL) is a well-established integrated manufacturer in the chemical industry, with a track record spanning over five decades. The company specializes in a wide range of chemical processes, including nitration, hydrogenation, diazotization, sulphonation, and other varied chemistry capabilities. DNL's expertise covers the entire spectrum of chemicals, ranging from basic to specialized compounds, and it caters to a diverse array of applications.

DNL operates six manufacturing facilities and exports its products to more than 45 countries across six continents, underscoring its extensive global presence. Furthermore, DNL has earned a strong global reputation as a responsible manufacturer and the preferred supplier for discerning customers within the industry.

A notable strength of DNL is its robust research and development (R&D) capabilities, which empowers the company to optimize products, develop and scale up processes, serving the complex chemistry needs of its AgroChemical customers effectively.

Could you describe the nature of your long-term relationships with major agrochemical companies and how your company support their operations?

For many years, DNL has been in successful partnerships with major multinational agrochemical companies, providing essential intermediates. These collaborations have resulted in DNL receiving recognition as the recipient of the prestigious "Best Supplier Award" from these valued customers. DNL consistently delivers a wide range of intermediates to bolster the operations of these agrochemical giants. This achievement is a testament to DNL's commitment to fostering strong and long-lasting customer relationships and delivering exceptional services to meet the needs of its valued clients.

What new technologies or innovations in manufacturing processes have you implemented recently to improve efficiency or reduce costs?

DNL has made a significant investment over the years to enhance its manufacturing capabilities. This investment is aimed at ensuring a reliable supply of raw materials, increasing efficiency through backward integration, expanding its product range, and incorporating new chemical processes into its operations.

DNL has also achieved its highest-ever production levels in specific products, highlighting its strong business resilience, its capability to constantly improve processes to consistently meet the customer requirements, and the ability to make the most products and agro intermediates. Notably, the company has successfully exported key agrochemical and pharmaceutical intermediates to China.

Furthermore, DNL is actively transitioning many of its batch processes into continuous processes to enhance efficiency, reduce byproduct generation and enhance inherent process safety. The company places a key emphasis on continually improving the efficiency of its manufacturing plants as part of its commitment to innovation in manufacturing processes.

DNL has a large R&D team focused on innovation and process enhancement. How does their work translate to providing solutions for complex chemistries? 

DNL has a dedicated R&D team of more than 100 skilled specialists whose focus is on innovation, process simplification & enhancement, and effective by-product reclamation. Over the years DNL has ensured continuous investment in R&D and also aligned with the industry best practices. R&D Teams also work on New product development and scale up to pilot and semi commercial, Operational excellence for improved atom efficiency, catalyst development and testing and by product valorization. Our R&D group follows a stage gate process with dedicated safety, environment lab, and integrated LIMS system. We have batch and continuous processes modeling software combined with gram and kg scale fluorination, photochlorination, vapor phase, and Grignard reaction systems. The plug flow and parallel synthesizers, solid gas mixtures, polymer formulation as well.

How does your company stay on top of the latest regulatory requirements and ensure compliance? 

DNL places a strong emphasis on compliance with relevant regulations & standards, safeguarding sensitive data and upholding legal & ethical principles.

To achieve this, DNL remains vigilant in staying informed about changes in legislation, policies, and regulations that could impact the company; ensuring that strict compliance is maintained at all times. The company enforces a comprehensive code of conduct and ethical standards, guiding the behavior and actions of employees across all levels.

DNL takes a proactive approach in complying with both local and national regulatory requirements. Hazardous waste generated during manufacturing processes is responsibly disposed off in accordance with the Hazardous and Other Waste (Management and Transboundary Movement) Rules of 2016. Additionally, DNL adheres to air emission standards set by the Pollution Control Board and refrains from using ozone-depleting substances in its operations. Plastic waste is recycled through a CPCB-registered plastic waste processor, and post-consumer waste is managed through Extended Producer Responsibility (EPR) programs. The company ensures that 100% of fly ash is handed over to brick and tile manufacturers in accordance with fly ash notification guidelines.

You outlined good perspectives on growth drivers. How are you positioned competitively to tap into these opportunities vs tackling the challenges?

Challenges:

The agrochemical industry in India grapples with several challenges that hinder its growth and competitiveness. Unlike China, India is playing catch up with our geographical competitor in terms of large-scale production facilities and capacity for mass production. 

A significant issue lies in the slow registration process for new agrochemical molecules. This sluggishness not only incurs high research and development costs but also consumes valuable time. Additionally, India heavily relies on imports from China, with nearly half of its agrochemical intermediates coming from there. This dependence subjects the industry to margin pressures due to macroeconomic factors and inventory management challenges caused by seasonal demand fluctuations.

The absence of a robust contract manufacturing ecosystem is another obstacle faced by agrochemical companies in India. The introduction of such arrangements could enhance scalability, allowing firms to concentrate on molecule discovery and marketing while outsourcing other aspects of their operations. Moreover, the industry is burdened by high costs associated with air and water pollution treatment, further eroding the cost-effectiveness of agrochemical production. These multifaceted challenges call for strategic solutions to bolster India's agrochemical sector.

Growth Opportunities:

As per McKinsey, the agrochemical market in India is currently valued at approximately USD 5.5 billion and is experiencing steady growth rate of 8-9% annually. It is projected that by 2040, this market will contribute to 40% of India's total chemical exports.

This growth is primarily driven by the rising global demand for food, resulting from population growth and changing dietary preferences. To meet this demand, there has been an increased use of agrochemicals. However, compared to developed countries like Japan and the USA, agrochemical penetration in India is lower, but it is expected to improve, boosting domestic demand.

Government subsidies on fertilizers have been promoting higher crop yields, leading to increased agrochemical usage in the domestic market. The "Make in India" initiative has streamlined regulations and enhanced infrastructure, positioning India as a global manufacturing hub for agrochemical products.

DNL obtained some impressive sustainability rating achievements. Could you elaborate on some key ESG initiatives making an impact?

DNL views sustainability not as an optional corporate social responsibility or an expense but as a vital element of its business strategy. DNL have taken concrete steps to put  sustainability and ESG (Environmental, Social, and Governance) initiatives into action:

• Initiated a comprehensive assessment of their operations, identified gaps, and developed strategic plans to address them. 

• Safety audits are being conducted across all the manufacturing sites, using leading indicators to promote the highest safety standards.
  

• DNL is actively investing in mandatory safety training, fostering greater employee engagement, implementing progressive disciplinary measures, and enhancing team's capabilities at every site.
  

• DNL’s dedication to sustainability has yielded positive results, as evidenced by their Silver Rating and an impressive sustainability rating in the 83rd percentile by ECOVADIS.
  

• Notably, DNL's Dahej Facility has achieved a perfect score of 100% in the "Together for Sustainability" assessment, demonstrating the commitment to environmental, social, and governance excellence.
  

I understand DNL has gained from the agrochemical market's growth. What gives you a strategic edge to continue capitalizing on this sector going forward?

DNL, a prominent player in the chemicals industry, is strategically positioned to benefit from the growth in the agrochemical intermediates sector. Here's a concise overview:

Strategic Investments: DNL has strategically invested in manufacturing products that utilize core technology platforms for new agrochemical and pharmaceutical intermediates, aligning with the growth in these sectors.

Backward Integration: DNL's focus on backward integration, utilizing advanced chemistry platforms like photochlorination and fluorination, aims to reduce supply chain risks in the agrochemical space. This approach strengthens their capabilities for key inputs, ensuring a competitive edge. DNL is a largest consumer of Toluene and nitric acid in India. We are also the largest producer of Sodium nitrite and nitrate, which gives us edge in serving the market for diazo and its’ derivatives. Our manufacturing processes are backward integrated till Ammonia, making us one of the most resilient manufacturing company.

DNL is capitalizing on the growing agrochemical intermediates sector in India through strategic investments, diverse product offerings, and a forward-looking approach to enhance their production capabilities and reduce supply chain risks, positioning them for continued growth and success.

This article was initially published in AgroPages' '2023 India Focus' magazine.

If you would like to share your company's story. Please contact Christina Xie at christina@agropages.com