The Hindu Business Line : TAC in black, needs more capital

Pushed into the red by a quirk of government policy that withdrew subsidy on ammonium chloride while still retaining it on another nitrogenous fertiliser, urea, TAC was forced to seek solutions from within.

Chennai , Dec. 5

A SLEW of measures that helped Tuticorin Alkali Chemicals & Fertilisers (TAC) turn in a cash profit for 2004-05, has also bolstered the confidence of the company to think of raising both capital and debt.

The company is targeting a turnover of Rs 167 crore and a net profit for the current financial year that began in October. On the cards is a plan to put up a 6-MW biomass-fired power plant and high value chemicals, such as calcium chloride used in oil drilling.

TAC has equity capital of Rs 14 crore. Its Managing Director, Mr S. Chandramohan, feels there is both need and room to raise further equity, but says the company will not do it in a hurry. "First, we will have to pay a dividend," he told Business Line.

TAC, part of the Chennai-based SPIC group, mainly produces ammonium chloride — a nitrogenous fertiliser — and soda ash. Pushed into the red by a quirk of government policy that withdrew subsidy on ammonium chloride while still retaining it on another nitrogenous fertiliser, urea, TAC was forced to seek solutions from within.

Cost cutting: It modified its steam boiler so that it could use cheaper imported coal. It introduced a `gassifier' that helped avoid the use of oil in its furnace, to save Rs 1 crore every year. It installed a device to extract carbon dioxide from in-house flue gases to avoid uncertain supply of the raw material from SPIC.

An agreement with customers for an assured annual offtake of soda ash checked the impact of imports. The company sold an unprofitable chemical pesticide unit in Tiruchi to save annually Rs 1 crore in operating costs. A debt restructure brought down the interest burden. Workforce was slashed from 500 to 360.

With all this, the company made a net profit of Rs 1.6 crore for the July-September quarter of 2004-05, although there was a net loss for the whole year. TAC's accumulated losses stand at Rs 32 crore.

Now, with sales of soda ash and ammonium chloride picking up and new products — sodium percarbonate and calcium chloride — starting to contribute, TAC sees better times ahead.

Financial recast: On the plans are another financial restructure. The company had informed the stock exchanges of a proposal to issue equity shares on preferential basis to South Indian Bank Ltd by converting the preference shares held by them.

The company is seeking debt funds to repay existing term loans of Rs 65 crore. Interest cost slid from Rs 10 crore in 2003-04 to Rs 6.5 crore last year, but Mr Chandramohan sees more scope for reduction.

But would it be a while before the accumulated losses are wiped off? Mr Chandramohan said the company had plans for `accumulated losses' too. The company has no share premium account.

Recently, another company of the SPIC group, Manali Petrochemicals, wrote down its accumulated losses by reducing its capital — the face value of its Rs 10 share was cut to Rs 7.5.

Asked if TAC would adopt a similar measure, Mr Chandramohan said he did not want to comment on that now.

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