The Hindu Business Line : Travancore Chem manages cash profit last fiscal

THE State public sector Travancore Cochin Chemicals Ltd, in nearby Eloor, which switched over to energy efficient membrane technology in August, has managed to make cash profits in 2004-05.

However, due to debt servicing at high interest rate, the net result of the company remained negative, according to Mr N.R. Subramaniam, Managing Director.

The unit had to provide Rs 13 crore for depreciation, while annual interest of Rs 6 crore was paid towards interest on loan.

These factors led to the company making a net loss of around Rs 4 crore in 2004-05, Mr Subramanian told Business Line on Monday.

He said the Rs 50-crore loan which was taken at 12 per cent interest for setting up the environment friendly membrane plant in the late nineties is still pending, and servicing of this debt has become a major burden on the company's profitability.

"The company has been regularly paying interest of Rs 6 crore every year," he said.

To extricate the unit from the red, a capital-restructuring proposal was submitted to the Government about two years ago and it is still under the consideration of the authorities.

"If the loan is converted into equity or a soft loan is provided to liquidate the high cost loan, then the company could make a turnaround," Mr Subramanian said.

According to him, the shift to a membrane plant has reduced power consumption from about 3,500 units per tonne to 2,700 units.

Besides, the capacity of the unit would be expanded by 25 tonnes at a cost of Rs 22 crore to 150 tonnes a day from 125 tonnes and it would be completed by May 12, he said.

Mr Subramaniam said the market in Kerala for caustic soda, the main product of the company, was good and, hence, whatever quantity produced was absorbed by the captive market in the State.

Depending on the expansion of user industries such as Kerala Minerals and Metals Ltd at Chavara in Kollam district and Hindustan Newsprint Ltd at Velloor in Kottayam district, Travancore Cochin Chemicals would expand its capacity further, he said.

The turnover of the company in 2004-05 stood at Rs 107 crore, against Rs 109 crore the previous fiscal.

The decline, he said, is because "only the membrane plant was running during the last financial year with a lesser capacity."

During the current fiscal, it would be able to operate above the installed capacity of 150 tonnes a day, he said.

Effecting cost cutting measures such as saving on energy will help the company improve its cash profits. Mr Subramaniam said the unit was not contemplating any reduction in the workforce through VRS. The employees' strength has come down to 820 at present, including officers and other staff, from 1,200, he said.

Another major problem faced by Travancore Cochin Chemicals is shortage of the raw material salt. After the tsunami attack in December on the coastal belts of Tamil Nadu, salt production has not yet stabilised.

Salt requirement is now met by bringing it from Gujarat and this involves high transportation costs, said Mr Subramaniam.

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