The Hindu Business Line : Chemplast secures raw material supplies

Chennai, Nov. 20 Last year, Chemplast Sanmar produced 10,000 tonnes of PVC resin, which was less than its capacity, because ethylene di chloride (EDC), a key raw material, was not available for some time.

The company is now adding 2-lakh tonnes to its existing 65,000-tonne capacity and the new plant should go on stream in June 2008.

It is all the more important that Chemplast ensures availability of raw materials at all times and the company is undertaking a few plans to do just that.

First, its recently-commissioned jetty at Karaikal would enable the company to import ethylene and convert it into EDC. Typically, the price difference between imported EDC and that produced from imported ethylene works out to around $150 a tonne, leading to a saving of around Rs 50 crore.

However, the Chemplast’s Managing Director, Mr P.S. Jayaraman, stresses that such savings are incidental — the idea is more towards ensuring that the company has no shortage of raw material.

vinyl chloride monomer

Second, Chemplast-invested joint venture in Egypt will produce four lakh tonnes a year of vinyl chloride monomer, the intermediate chemical between EDC and PVC. Half the production will be supplied to Chemplast’s upcoming project at Cuddalore.

In addition, the company has expanded its caustic soda capacity at Karaikal to 150 tonnes a day—three times the capacity of the plant when Chemplast took it over from the Kotharis in 2005. A caustic soda plant will also produce chlorine, another raw material in the making of PVC.

Therefore, both of the company’s PVC units — at Mettur and Cuddalore — will in future never face the problem of raw material shortage.

Rights issue

Chemplast will come out with a rights issue by the end of the financial year, to raise Rs 160 crore, Mr Jayaraman said. This is to part-fund the Rs 520-crore Cuddalore project. A consortium of four banks has agreed to lend Rs 300 crore to the project. The rest of the funds will come from internal accruals.

Egypt project

On the Egypt project, Mr Jayaraman said that so far investments of $150 million (Rs 400 crore) have been committed and another $50 million will be, in the next few months. Indian suppliers/contractors get about 40 per cent ($80 million, or Rs 320 crore) worth of business, out of the committed investments, Mr Jayaraman said.

Greenfield project at Belgaum

Chemplast is also putting up a greenfield pipes project at Belgaum, Karnataka, at an investment of Rs 20 crore. The backward integration unit will manufacture PVC pipes out of the resin produced by the company.

Last year, Chemplast tookover a Chennai-based unit, Trubore, which produced PVC pipes. Trubore is an established brandname in the southern markets. Chemplast has since expanded the capacity of the unit from 15,000 tonnes a year to 33,000 tonnes, investing Rs 20 crore for that purpose.

The proposed unit at Belgaum is expected to be production ready from the beginning of next financial year. Chemplast will then have a capacity to produce 53,000 tonnes of pipes. The company intends to start brand-awareness building activities in North India, to be able to market Trubore in that market.

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