In conversation with K. Natarajan, Executive Director & COO, Galaxy Surfactants Ltd

While the demand for personal care products is still slightly below the pre-COVID levels, home & hygiene as a category has seen a structural shift in demand.

"We firmly believe that our existing portfolio of over 200+ products along with green innovations in the areas of mild surfactants, non-toxic preservation will power our next leg of growth in the coming decade." says K. Natarajan, Executive Director & COO, Galaxy Surfactants Ltd

What is the demand outlook for your products? Has it reached pre-COVID levels?  

As you know, Galaxy Surfactants caters exclusively to the home & personal care space. While the demand for personal care products is still slightly below the pre-COVID levels, home & hygiene as a category has seen a structural shift in demand. The growing awareness about health and hygiene along with the adoption of the work from home (WFH) culture has aided this. 

Coming to Galaxy, our performance surfactants that find application in both, home and personal care formulations saw a healthy 8.8 per cent volume growth in FY21, benefiting from the structural shift in demand for hygiene as well as home care products. While speciality products, which majorly go into personal care, ended the year flat; what was encouraging is the fact that the volumes in H-2 saw a growth of 15.7 per cent over H-1. 

Demand outlook, therefore, remains robust. Barring any new disruptions, we expect volume growth to stay in the 6-8 per cent zone as against the 5.3 per cent reported in FY 21; this is despite the disruption that we faced at the beginning of FY21-22. 

What are the steps taken by your company to build on your market share?   

At Galaxy, we believe that market share is a derivative of two critical factors –  

• Relationships that you share with your customers built over the years through quality service, products, interactions & innovations. Product basket & expertise – Today’s customers want a one-stop solution for all their needs. At Galaxy, we have equipped ourselves to cater to this requirement in order to stay relevant for every home & personal care manufacturer globally. 

• Customers today want solutions, trending innovations, and consistent service – without any surprises. It is this attribute that we have built over the years that ensures that we not only gain but also, build on our market share. 

As of today, while we are present with over 1,400+ customers globally, the thirst to mind partner with more such customers, increase wallet share with existing customers through new products & locations as well as launch trending products in line with the emerging consumer needs; remains as high as ever. We firmly believe that our existing portfolio of over 200+ products along with green innovations in the areas of mild surfactants, non-toxic preservation will power our next leg of growth in the coming decade. This, backed by our strong customer base, will ensure faster conversions; thus, enabling us to build our market share.  

What is the earnings outlook for the coming quarters?   

While we officially do not give guidance, barring any new disruptions, we expect the volume growth to stay in the 6-8 per cent zone for FY22. Historically, EBITDA growth has been 200-500 bps higher than that while PAT growth has been higher than the EBITDA growth. Apart from growth, our focus is also on our RoCE, which has been in excess of 22 per cent in 7 out of the last 10 years; we should maintain that.  

What is the outlook on margins for your company?  

At Galaxy, we look at the EBITDA/MT as a margin parameter as against the operating margins, given that our revenues are a derivative of the fatty alcohol prices; the main raw material for our performance surfactants make up for 65 per cent of our overall revenues. 

Initially, we had spelled out an EBITDA/MT guidance of Rs 15,000-Rs 17,000/MT, which we revised in Q3FY21 to Rs 16,000-Rs 18,000/MT after the EBITDA/MT came in, more than Rs 18,000/MT for four continuous quarters. EBITDA/MT is a derivative of our overall mix and operating leverage. While we do see a pickup in speciality demand going ahead, which should aid margins, supply chain disruptions, rising commodity prices along with the inherent risk of COVID, makes us a bit cautious on the operational front and this could adversely impact margins. 

How many new clients you are able to add every quarter on average? Who are your big clients?  

As you know, we supply to over 1,400+ customers and are present with all major players in the home & personal care space, new clients therefore for us is either an altogether new business in the form of a new product or extension of an existing product to a new location for a given customer. We cater to all types of customers, be it the major MNCs or the local players or start-up e-commerce players operating in the home & personal care space. MNCs that we have partnered with include Unilever, Procter & Gamble, Henkel, Colgate, L’Oreal, BDF, J&J, Reckitt, and many more. 

What are some of the biggest challenges faced by your company to achieve the growth targets? 

The challenge that we have on hand is a once in a century challenge and while it continues to cause unprecedented damage to our nation, people, businesses as well as the way we operate; it has further enhanced the value of collaboration, integration, and adaptation – attributes that can only be demonstrated by people. This year for us has been the year of our people – people who held their ground amidst the surrounding catastrophe. 

Challenges were multi-fold, varying from quarter to quarter. Q-1of FY21 was the first quarter, which saw a complete shutdown for 1.5 months. As restrictions started easing, quickly getting back to the momentum and comply all the safety protocols was the immediate need. Managing the incremental demand on a real-time basis that emerged due to the growing need for handwashes, home & hygiene products, given the operational constraints was the next challenge. The subsequent quarters saw significant disruption in the logistics space due to a continuous rise in the freight rates. Unavailability of containers and other supply-side disruptions required our front-end teams to engage 24x7 with customers, vendors, and officials to ensure minimisation of the said impact. 

The start of FY22 saw the re-emergence of COVID, which this time around impacted our main pillar - our people. This not only disrupted our operations but also, delayed the scheduled Capex.  

Rising commodity prices, postponement of new launches and unavailability of 100 per cent of the work force at any given point of time were some of the other challenges that we faced in FY21. This situation continued at the start of FY22 as well. Despite the significant challenges, we emerged stronger and continued to march ahead, demonstrating the attributes of a resilient organisation.