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Our Bureau

Mumbai , Oct. 19

TATA Chemicals' proposed one-million-tonne urea plant in Bangladesh, part of the Tata group's recently announced $2-billion investment package in that country, could cost $450 million-$500 million.

Mr Prasad Menon, the company Managing Director, on Tuesday said the project is at a preliminary stage and therefore the details, including whether the company would go it alone or be in partnership, are yet to be finalised.

"Various options are being examined. If everything goes well then it should be ready in four years from project approval," he said.

In the quarterly results presented on Tuesday, Mr P.K. Ghose, Chief Financial Officer, Tata Chemicals, pointed out that the company's debt-equity ratio had improved from 0.45 to 0.31. "Seventy per cent of debt is now short-term supplier credit," he said.

Senior officials see the balance sheet as well poised to take on expansion projects. "Now is the time to look for growth," Mr Menon said. The company has de-bottlenecking projects on the anvil.

For the just-ended second quarter, the company reported a profit after tax of Rs 87.19 crore (Rs 82.91 crore for the previous corresponding period) on net sales/income from operations of Rs 729.02 crore (Rs 809.53 crore).

The lower income was attributed to rising raw material costs, high freight charge and the impact of a transport strike followed by one from contractors. Mr Menon said he expected commodity prices to rule firm for some more time before any relief. Even if Chinese consumption responsible for driving commodity prices begins cooling down, other countries such as Brazil are showing strong demand.

Ammonia prices continue to be high and though the official import price for phosphoric acid is $402 a tonne, its global price is $420-430. There is also the price of metcoke to contend with, which is moving in sympathy with coal and oil prices. Coke accounts for 40 per cent of the variable cost in soda ash manufacture.

Tata Chemicals is looking at assured, long-term supply of its raw materials. Mr Menon admitted long-term supply contracts would be tough to ink at times of bullish commodity prices. Equity participation in supplier facilities or securitising supplies is among the options the company is studying.

There is, however, one benefit buried in the avalanche of high raw material cost. Soda ash prices began rising globally last year and Indian manufacturers, too, resorted to price corrections. "We expect another $15-20 increase in global soda ash prices," Mr Menon said. This should help bring correction on the import front, wherein countries such as Bulgaria had been strong on shipments to India essentially due to the gap opened up by higher domestic prices and long-term supply prices contracted much earlier.

By March 2005, the total landed quantum here should touch 200,000 tonnes, double the imports of last year.

With some of the long-term contracts drawing to a close and another price hike globally on the cards in soda ash, imports may be checked, Mr Menon said.

Though the issue of dumping by China is not a worry at present, it remains an issue to be constantly watched.

Benefit from price corrections at the global level was also had in Tata Chemicals' STPP business, which grew by 18 per cent.

For the half year, Tata Chemical's profit after tax amounted to Rs 132.83 crore (Rs 131.72 crore) on net sales/income from operations of Rs 1,249.44 crore (Rs 1,224.11 crore).

For the full fiscal, it is hoping for a 10 per cent growth in revenues.

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