The Hindu Business Line : Chemfab to merge associate co, plans expansion

A NUMBER of events are happening in Chennai-based Chemfab Alkalies Ltd — a merger, a hive off, an expansion and a diversification. First, the company is in the process of merging an associate company, Membrane Technologies Ltd — whose special type membranes are marketed by DuPont.

(Incidentally, the personal stake of the promoter-CMD, Dr C.H. Krishnamurthy Rao, is likely to go beyond 75 per cent. Consequently, he will have to offload a part of his holdings to retain public holding at 25 per cent, to remain listed.)

Second, Chemfab intends to hive off its fledgling health products division in a joint venture, for which the company is in talks with "two international parties".

Third, the company proposes to double its capacity to 66,000 tonnes (of caustic soda) a year. Finally, the company is working out a plan for a large-scale diversification.

All this, on the back of three good quarters. In the quarter ended December, Chemfab made a net profit of Rs 4.42 crore versus Rs 3.99 crore in the same period last year.

Its nine months net, at Rs 13.96 crore exceeded the Rs 9-crore profit the company made for the whole of last year.

Dr Rao told Business Line that the merger of the Rs 22-crore Membrane Technologies Ltd (MTL) with Chemfab would be good for the latter's shareholders.

MTL has three lines of business — manufacture and marketing of hollow fibre membranes (the patents for which are held by MTL's parent company, the Singapore-based Dr Rao Holdings), water (the `Team brand' normal and herbal mineral water) and project execution. According to Dr Rao, all the three businesses are at the take-off point.

The `alkaline water'— which can neutralise acidic wastes in the body and reduce weight — has grown to be a Rs 7 crore business.

The same kind of water is produced by Dr Rao Holdings in Singapore. The product has been given the `Healthier Choice' seal of approval by the Health Sciences Authority of Singapore and the department store Mustafa has agreed to sell the water.

The recently-created health products division is to be hived off into a separate company. The division produces a range of health products such as sodium-free salt, carbohydrate-free sugar, membrane-filtered and refined edible oil. A foreign tie-up for this business is in the offing.

Diversification: Alongside the proposed capacity expansion, Chemfab is also looking to diversify into other chemicals. Four options are being examined. One is a Linear Alkyl Benzene plant abroad, probably in South East Asia.

Discussions are on with UOP of USA for technology to produce the chemical from Olefins. Another option is Monochloro acidic acid (MCAA), which will make use of the chlorine that comes as a by-product from the caustic soda plant.

Dr Rao believes that the demand for chlorine from the paper industry would come down once paper mills start using chlorine di-oxide as mandated by law. Besides, an MCAA unit will be able to absorb the post-expansion increase in chlorine production.

Apart from these, Chemfab is also examining the possibility of setting up a zeolite plant or a hydrogen peroxide unit.

Any or all of these four options could materialise, says Dr Rao. "We will no more be a single product company," he says.