Having set up a plant in China to tap the East-Asian markets, the Rs 1,100-crore Kolkata-based Himadri Chemicals and Industries Ltd, plans to expand its coal-tar distillation capacity to 10-lakh tonnes by March 2016. Once the capacity addition is complete, the company, which has an annual coal-tar distillation capacity of 250,000 tonnes at present, will be able to expand its product bouquet by introducing downstream products of coal-tar pitch in the niche category like carbazol, phenolex and fluorine. In an exclusive interview with Business Line , Anurag Choudhary, Chief Executive Officer, charted out the roadmap for the company’s growth.

Excerpts from the interview:

You are aiming to increase your coal-tar distillation capacity four-fold in the next four years. But do you think there is enough demand from the market?

We are having 100 per cent plus capacity utilisation in coal tar at present. In carbon black also we are doing well (capacity utilisation). Demand is not an issue. The capacity addition has been planned keeping in mind the demand from the user industry.

Himadri is looking at greenfield expansion in Odisha and brownfield expansion at our existing unit in Hooghly for coal-tar distillation. The investment for this expansion will be around Rs 1,700 crore over the next two to three years.

The problem that the industry is facing at present is that of margin erosion. The user industry is not doing well and hence it is affecting our industry. Raw material prices have increased, and we are not able to pass on the corresponding hike to our users because of the economic conditions.

What has been the impact on your margins? How do you plan to offset it?

We reported an EBITDA margin of 15 per cent in the first quarter of this year, compared to 23 per cent last fiscal. There is a pressure on margins and it is primarily because of the rise in raw material prices.

Raw material costs have increased 10-15 per cent, but we have been able to pass on only a portion of it.

To shore up our margins, we are going in for complete integration in operations and are looking to derive value from each and every part of coal tar. At a capacity of 250,000 tonnes, we cannot manufacture a lot of products that have a share of one to three per cent (niche segments) in coal tar. It’s not economically viable.

But once you are at a capacity of one million tonnes, then you can derive niche products like carbazol (used for making violet blue colour), fluorine (fine chemicals that are then used in mobile camera lens) and phenolex fractions. These are high-value products and are not produced in huge volumes. So there will be an existing demand for them irrespective of the volumes. Niche products will add to our bottomline rather than the topline.

How has the China unit shaped up?

The China unit went on-stream this year. It is a different market altogether. We have plans to play a big game in China. The raw material availability in China is nearly 10 times that of India. The user industry is larger. But the coal-tar pitch available in China is not always up to international standards.

Our idea is to bring into focus a quality consistency in the market. Like in India, where it took us nearly a decade to differentiate between Himadri and Chinese products, things can not happen in China immediately. But this apart, our aim is also to spread to the global market from China. We will tap the Australian, West Asian and African markets through our China plant.

You recently formed a new subsidiary for your carbon black unit. What are your plans for the carbon black business?

We formed a 100 per cent subsidiary for our carbon black business. The unit has a capacity of 120,000 tonnes per annum capacity. We are planning to move that into a separate unit called Himadri eCarbon. We are now in the process of getting our required approvals.

Capacity at our existing unit in Hooghly, West Bengal, will be increased to 200,000 tonnes per annum. But such an option will be exercised once the economic conditions stabilise. We are also eyeing greenfield expansion in China, Eastern Europe and Africa. Locational and feasibility surveys are being carried out.

But considering the poor run in the tyre industry, is expansion of carbon black facilities a feasible option?

In Europe and the US, capacities for carbon black have closed down over the years. These were old plants and cost of production went up substantially. If we are able to set up capacities near these markets but with a lower cost of production, then we might be able to cater to these markets.

>shobha.roy@thehindu.co.in

>abhishek.l@thehindu.co.in

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