`Gulf Oil entry into new areas to unlock shareholder value'

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Good prospects for speciality chemicals division


V. Rishi Kumar

New projects

Planning a

base oil refinery and special distribution points

Speciality chemicals

: Evaluating buying a formulation unit

Realty venture

: Develop knowledge parks, SPV for infrastructure development

Hyderabad, March 16

For Gulf Oil Corporation Ltd, part of the Hinduja group, the transformation from an explosives maker into a diversified company catering to lubricants, explosives, mining and speciality chemicals had been a major challenge since 2002.

Having tackled this, the organisational transformation and foray into new areas including realty will unlock shareholder value in the coming years, says the company's Managing Director, Mr Subhas Pramanik.

Excerpts from an interaction with Mr Pramanik.

What are Gulf Oil's new thrust areas?

The experience we gathered over the last 40 years is being used for diversification and harnessing our knowledge into a business opportunity. The Contracts Division has been growing at 60 per cent per annum and accounts for Rs 70 crore. With Government initiatives in the mining sector, we expect to tap this market.

After we exited Astra IDL Ltd, we created the speciality chemicals division, focusing on active pharmaceutical ingredients (API), which is poised to take off. Gulf Oil is set to diversify into realty, unlocking the potential of real estate assets.

The speciality chemicals division will help tap contract research activities. This business will grow as we expect to see a major shift in research activities in Europe and the US, as they would be looking for economical research sites and pilot plant work at competitive rates.

What about the infrastructure diversification?

Gulf Oil's contracts division has completed the underground station and tunnelling work for the Delhi Metro International Consortium and we are looking forward to assignments in other cities. Development of knowledge parks (IT and biotech parks) forms part of the realty initiatives.

During the previous AGM you cleared an enabling resolution to borrow up to Rs 1,000 crore. Where do you see this being deployed?

We have increased our borrowing powers from Rs 500 crore to Rs 1,000 crore. This was necessitated due to fund requirements to grow businesses of existing divisions and for implementation of new projects.

We are planning a base oil refinery and special distribution points and expect to invest in the Contracts Division for mining. In the specialty chemical division, we are evaluating acquisition of a formulation unit. For the realty ventures division, we propose to develop knowledge parks and special purpose vehicles for infrastructure development.

Gulf Oil expects a turnover of Rs 1,000 crore (from Rs 500 crore) by 2008-2009.

Most of the growth has been organic. We are looking at some inorganic operations mainly in our lubes and speciality chemicals divisions.

What are your plans for R&D?

R&D expertise covers lubricants, commercial explosives, pyrotechnic devices, chemical synthesis and agro. The R&D group has developed special devices for very stringent applications of the defence establishments and the paramilitary forces.

We expect to start major deliveries in 2006.

Trials of these APIs have been completed and we expect to get commercial orders in the second half of 2006. Similarly, in the lubes division our R&D has resulted in several customised products for emerging applications.

What about the lubricant division?

This is the second largest lubricant oil manufacturer in the private sector. This has diversified into automotive accessories and recently expanded operations to China. The company has approved the acquisition of 51 per cent of Gulf Oil Yantai (Co) Ltd.

The potential in China is huge at 4.3 million tonnes per annum, around 3.3 times the Indian market. This division is eyeing share of the lubricating oil market in India and the neighbouring countries.

(This article was published in the Business Line print edition dated March 17, 2006)
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