Sailesh C. Mehta's innovative strategies put Deepak Fertilisers and Petrochemicals on the growth trajectory; here's how

About five to six years ago, Sailesh C. Mehta, Chairman & Managing Director of Deepak Fertilisers and Petrochemicals Corporation Ltd (DFPCL), sat down with his strategic team with a simple yet loaded question. “What should we do over the next decade with our businesses?” he asked. The reason, in Mehta’s view, was simple. There was too much talk about price, but it was important to make the shift to value.

In a simple conference room at his Pune office, the 62-year-old, who is a winner in the Natural Resources (Chemicals and Metals & Mining) category of the BT-PwC India’s Best CEOs ranking this year, elaborates on the thought process. “I saw the invaluable knowledge we possessed in areas like fertilisers, industrial chemicals, and mining chemicals picked up over 40 years. It was very clear that we needed to build on it,” says Mehta.

In many ways, it was time to take a hard look at the businesses and get them ready for the inevitable disruptions of the future. A more complacent manager might not have seen the need, given the leadership position the company enjoyed, but things had to be turned around to seize newer opportunities.

The businesses sit well with the India growth story. Mehta cites the case of power, where coal is needed, and you cannot do anything without mining chemicals. “There was an obvious tailwind, and the mid-income segment was growing. That meant a large demand for fruits and vegetables,” he explains.

Finally, some mantras were drawn up: getting the size right (doubling fertiliser capacity and the belief that the play in ammonium nitrate could make it very large globally); and, strengthening the value chain (this was across businesses, and in the case of ammonia, the firm decided to produce it on its own as opposed to relying on the Middle East). The new greenfield ammonia plant has also helped the company lower the risk profile of all three businesses. All this meant the organisation would need to change. Mehta spent time on areas like teamwork and total quality management. That meant shifting the emphasis from a commodity player to one offering holistic solutions, or from the customer to the consumer.

Through the conversation, Mehta labours on the last point and how it has worked out well. The foray into investing in brands was one such initiative and came because commodity businesses were getting squeezed. “The solution was to move to the final consumer… plus value emerges from a brand,” he says. Often, that means a higher price the consumer needs to pay. Take the case of sugarcane, where the insight was that a 1% increase in sucrose led to a Rs 35-crore benefit to a sugar mill. “We then understood what nutrients could impact sucrose content. If people see value, they will not speak about the price, since the benefits are clearly understood,” he says.

For technical ammonium nitrate (TAN)—a key ingredient in pharmaceuticals, mining, power, construction, and steel industries—the way to make that insight into reality was not just to supply it to an industrial explosives company but to enhance mine productivity. With time and success in core sectors—where DFPCL gets paid based on success—the move from product to mining solutions is now a reality.

Vinit Bolinjkar, Head (Research) at Ventura Securities, sees a big opportunity for the company in ammonia. “From a backward integration point of view, ammonia is well-placed, and moving ahead to complex derivatives leads to high margins,” he explains. In the chemicals business, the products are completely fungible. “They can manufacture any product depending on demand, and it is easy to be opportunistic about this.” The big clincher for him is TAN. “It can be used in many sectors, and in the long term, we will see it grow sharply. The company has a very sound understanding of this business segment.” In FY24, the firm’s performance was affected by a reduction in government subsidy on fertilisers.

DFPCL has a complex set of businesses, and often when Mehta travelled overseas, there were folks who wanted to enter into partnerships. But, he says, “It was important for investors to be clear about our businesses.” In December 2022, a decision was taken to demerge the mining chemicals into Deepak Mining Services Pvt. Ltd, for which NCLT approvals have come through. According to him, this gives investors an option to choose businesses with greater ease.

The move from commodities to holistic services is “a massive cultural change”. Push him on what the next three to five years will look like, and Mehta says the transformation will be complete. “The commodity to brand [shift] will be a big one, apart from each company in the group having a sharp focus on its business. We have a solid base with global manufacturing scale, and there is a joy in connecting with the end consumer,” he says.

In keeping with his own brand, he signs off with a smile. 

@krishnagopalan