The Hindu Business Line : Gujarat Alkalies plans Rs 200-cr expansion

STATE-owned Gujarat Alkalies and Chemicals Ltd (GACL) has lined up fresh investments of over Rs 200 crore for a brownfield expansion of its caustic soda plant at Dahej and a new hydrogen peroxide manufacturing unit.

The company's board, which met here recently, has approved setting up a new 12,500-tonnes-per-annum (tpa) hydrogen peroxide unit at the company's facility at Dahej in south Gujarat.

The project is likely to cost Rs 100 crore and would be completed by October 2006.

GACL's board had earlier approved a 33,000-tpa caustic soda expansion at Dahej and detailed engineering for another 33,000 tpa capacity at an investment of Rs 78 crore.

"We will carry out detailed engineering for 66,000-tpa caustic soda. While 33,000-tpa capacity expansion will be completed by March 2006, if the market stays favourable, we will invest another Rs 30 crore to get the entire capacity commissioned," the GACL Managing Director, Mr P.K. Taneja, told Business Line.

The company has also lined up an investment of Rs 15 crore for a 24,740-tpa poly-aluminium chloride facility and a 33,000-tpa caustic soda flaking unit at a cost of Rs 9.28 crore, Mr Taneja said. The foundation stone laying ceremony for the new plant was conducted on Tuesday.

GACL, which is 40-per cent owned by Gujarat Government and 37 per cent by the public, will raise nearly Rs 80 crore from internal accruals and Rs 120 crore as debt from banks or financial institutions.

"It is a small amount and we can raise from anywhere. In fact, we are deliberately taking on fresh loans to bring down our average cost of borrowing from about 8.5 per cent, at present. Our outstanding debt is Rs 645 crore and our debt-equity ratio stands at 1.28 and is slated to fall further. We are getting offers for debt at rates as low as 7-7.5 per cent," Mr Taneja said.

The company has, however, ruled out raising money from the market.

"There is no need to go to the public when we are getting debt at extremely attractive rates. Equity is always a more expensive option as expectations are higher," he said.

With the upswing in the demand for the alkali industry, GACL, which boasts of a capacity utilisation of over 100 per cent, says it managed to turn around and become profitable due to several cost cutting measures.

"In the last two years, we reduced our overall debt from Rs 1,027 crore to Rs 645 crore. We substituted our high-cost debt with cheaper funds and brought down our cost of capital from over 13 per cent to 8.5 per cent.

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