Sudarshan Chemical says its German buyout will help it shield from Trump’s tariffs

New Delhi: Sudarshan Chemical Ltd believes it can shield itself from US President Donald Trump’s proposed reciprocal tariffs owing to its 19 manufacturing facilities across 11 countries, including one in America.

The Pune-headquartered company acquired Germany’s Heubach Group for ₹1,180 crore in October 2024, giving it a network of facilities, including the one at Fairless Hills, Pennsylvania, US.

“This new acquisition gives us a lot of flexibility and options. If there are tariffs on Mexico, we supply from Europe and India. If there are tariffs on India, we supply from Europe into the US market,” said Rajesh Rathi, managing director at Sudarshan Chemical.

Trump’s decision to impose 25% tariffs on goods made in Mexico and Canada has rekindled fears of additional taxes on goods exported from India to the US, especially since Trump has been critical of the country’s tariff regime.

An additional tariff could hurt Sudarshan Chemical’s profitability. Last year, 42% of its ₹2,539 crore in revenue came from exporting pigments used to add colour to paints and coatings.

Market expansion

Heubach Group clocked over €879 million (about ₹8,000 crore) in 2023, after which it filed for bankruptcy in April 2024. After completing the buyout, Sudarshan Chemical will join the chemical manufacturers with over $1 billion in annual revenue.

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Calling the deal “a golden opportunity”, Rathi said Sudarshan Chemical can also leverage its manufacturing unit in Pennsylvania.

“We may look at scaling up that plant. In the first few years, we will be very conservative with cash. But to scale up the plant will not require much money because it already has the capacity,” Rathi said in an interview.

Before the Heubach acquisition, Sudarshan Chemical catered to global demand via its production units at Roha and Mahad in Maharashtra. Now, the company will have production facilities in 11 countries, including Brazil, Mexico, the US, and Germany.

With a 35% market share in India, Sudarshan Chemical is the largest pigment maker in the domestic market and claims to be the third-largest in the world. It competes with Pidilite Pigments and Meghmani Pigments, among others. Rathi said the Heubach acquisition is a step towards becoming a world leader in the pigment industry.

“We view this acquisition as a positive step, propelling the company to become the second-largest pigment player globally and expect it to be value accretive over the medium to long term, as the synergies unfold,” wrote Nitesh Dhoot, Krushna Parekh and Nitin Raheja of Dolat Capital in a note dated 16 October 2024.

Sudarshan Chemical’s revenue grew 18% over a year earlier to ₹666 crore in October-December. However, its profitability plunged 96.5% to ₹0.5 crore from ₹14.59 crore. The firm attributed the decline to the one-time payment of the cost to acquire the German firm and softness in the international and domestic markets.

Sudarshan Chemicals, valued at ₹6,796 crore by market capitalization at the end of Friday, has seen its shares jump 34% so far this fiscal compared to a 1% gain in the 30-share benchmark Sensex.

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