Inox Group companies prepare for semiconductor boom, LNG growth prospects in India

Group company Inox Air Products is positioning itself to supply gas to semiconductor manufacturers, while for Inox India, a listed company, the potential lies in building gas-related infrastructure for semiconductor fabs and LNG storage facilities.

Semiconductor manufacturing requires as many as 46 gases, Jain said in an interview. Only six of them are made in India, highlighting a “significant gap" in domestic supply, he said.

“If semiconductor manufacturing takes off in the country, we will need to develop the capability to supply all of them," he said.

The government, which aims to reduce dependency on imported semiconductors, has secured over ₹1.5 trillion in investments from companies like Micron, Tata Electronics, CG Power, and Kaynes Technology to make chips in India. The first chip from an Indian fab is expected to debut by October, marking a major step towards achieving self-sufficiency in the sector.

 

Inox Air Products is focused on investing in developing production capabilities for the remaining 40 gases needed for the semiconductor sector, he said.

“The technology is out there, and we're actively talking to global partners to bring it to India. But it’s not a quick fix—finding the right partners for all 40 technologies is a lengthy process. While we’re still in talks with Tata, we’ve already sealed a deal with Micron, the American semiconductor manufacturer," Jain said.

Gas warehouse

Initially, semiconductor manufacturers will have to rely on imported gases and chemicals. Suppliers like Inox will need to build sizable inventories of these imported gases in India to mitigate the impact of any trade disruptions "because a semiconductor fab cannot afford even a millisecond of downtime," Jain said.

Inox Air Products is seeking land to establish India’s first dedicated semiconductor gas warehouse, he said. This would entail an investment of “thousands of crores" of rupees, Jain said, adding that the funding will be met through accruals and debt and that the company presently has no intention of making a public offering.

The Indian government has highlighted industry estimates valuing the country's semiconductor market at $109 billion by 2030, soaring from about $38 billion in 2023. To fuel this rapid growth and lessen dependence on imports, the government has introduced various initiatives to boost domestic semiconductor manufacturing.

Inox Air Products is a 50:50 joint venture between the Inox Group and US industrial gases maker Air Products. Linde India Ltd is the biggest company in India's industrial gases sector.

For the other group company, Inox India, there are two opportunities. One lies in developing the gas-related infrastructure for semiconductor fabs. Inox India makes cryogenic equipment for industries such as healthcare, energy, space, food & beverages and transportation. It is one of the largest cryogenic equipment suppliers in India by revenue and operates along three core business verticals—industrial gases, LNG, and cryo-scientific solutions.

But the biggest opportunity for Inox India is in LNG, Jain said. As the world moves toward cleaner energy, LNG is gaining momentum as a transitional fuel, with the potential to replace diesel as the fuel of choice for power generation and transportation. Inox India is looking to leverage this trend, Jain said.

The company is a key player in the LNG infrastructure space, making everything from storage tanks for LNG transport ships and LNG port terminals to smaller fuel tanks for vehicles like trucks.

“At our Baroda facility, we make everything from a 300-litre LNG fuel tank to a 3-lakh-litre large storage tank," Jain said.

The company recently made mini-LNG terminals in Scotland, the Bahamas and Antigua and is in discussions for similar facilities with Indonesia and Port Blair in India, Jain said. Making LNG terminals for island nations to reduce their reliance on diesel and natural gas for power generation presents the company a big business opportunity, he said.

LNG operations accounted for 14% of Inox India's ₹349 crore revenue in the December quarter, according to an investor presentation by the company.

Inox holds over a 60% market share for setting up LNG fuelling stations in India, as per a report by Dalal & Broacha Stock Broking dated 11 February. About 300-400 new stations are expected over the next 3-4 years, each contributing ₹5-6 crore in revenue, the brokerage said.

Import dependence

India's natural gas demand is expected to grow over 2.5 times over current levels in the next 10 years, said Rohit Chaturvedi, partner, transport and logistics, GIDAS, Forvis Mazars in India.

“With domestic gas production peaking, there will be higher dependence on imported LNG. And India will need to further expand its RLNG (regasified LNG) capacities in the medium term to manage higher LNG imports," he said.

 

Inox India made its market debut in December 2023, listing at ₹910, a 43% premium to its IPO price. After gains in the subsequent months, the stock has declined 25% over the past six months to return to its debut price of ₹910 as of Wednesday.

Mutual funds backing Inox India include ICICI Prudential Mutual Fund, DSP Mutual Fund, Mahindra Manulife Mutual Fund, UTI Mutual Fund and Tata Mutual Fund, as per Prime Database.