The Hindu Business Line : SPIC hopeful of recovery soon

SOUTHERN Petrochemical Industries Corporation Ltd (SPIC) will send "definite signal of recovery" this financial year-end, thanks to corporate debt restructure, cost cutting and agri-products marketing, according to its Vice-Chairman, Mr Ashwin C. Muthiah.

Talking to reporters here, he said that while its core fertiliser business is on track, SPIC is looking at allied agri-products businesses - biotechnology and seeds - for short-term growth. Investments in fertiliser business will involve large financial commitments, which the company can consider in two-three years.

The company is also sprucing up its governance systems to enhance efficiencies by setting up a Management Assurance Group, an independent team within the company, to cover financial, technical and marketing issues. It was developed jointly with PricewaterhouseCoopers, he said.

While declining to provide details, Mr Muthiah said that SPIC would complete the disinvestment in Indo-Jordan Chemicals Company by end 2004-05. This would help shore up reserves and pay up liabilities.

It is also working on reviving SPIC Petrochemicals project. "Efforts are more positive than what it was before," he said.

The devaluation of its floating rate notes as a part of the corporate debt restructure represent a savings of Rs 215 crore, the benefit of which will be reflected in the current year's balance sheet, he said.

The company had raised over $120 million (about Rs 600 crore), but had defaulted on the payments. As a part of the restructure it had issued new notes at a lesser value, and payments would start only from 2008 and go up to 2017-18, he said.

To revive its pharma division that handles Penicillin-G production, it is looking at contract manufacturing of enzymes and penicillin and its derivatives. This would help to add value before the company disinvests this line of business, he said.

It will leverage the SPIC brand name to market and distribute agri-products for revenue growth, he said.

One option would be from its biotech division, which produces tissue cultured plant materials. The facility at Coimbatore can produce about 10 million tissue cultured plantlets a year but capacity utilisation has been only around one million plantlets. The company has developed tissue cultured banana plants and plans to produce about 2 million to 3 million plants. This will be a high value - high margin business, he said.

SPIC will also focus on its seeds business and plans to increase marketing, Mr Muthiah said.

Since 2002, SPIC has reduced its manpower by about 500 employees at its fertiliser plant at Tuticorin, apart from 200 employees from its corporate and regional offices through a voluntary retirement scheme.

It has also upgraded the plant to improve energy efficiency levels on a par with the best in the industry. International consultants, Haldor Topsoe have audited the energy utilisation at the plant to frame a long-term and short-term strategy, he said.