Companies

GACL to invest Rs 2,500 cr in venture with German giant

| | Updated on: Apr 18, 2011

Gujarat Alkalies and Chemicals Ltd (GACL) will invest Rs 2,500 crore in a joint venture with German specialty chemicals major Evonik-Degussa GmbH to diversify product portfolio and cut dependence on caustic soda.

GACL will invest Rs 1,800 crore to set up a plant to manufacture polyols at its Dahej complex in Bharuch district of Gujarat. Evonik will invest Rs 700 crore to supply basic raw materials for polyols.

The investments would be spread over three years.

The capacity of the polyols plant will be 1.5 lakh tonnes per annum (TPA) and it will produce import substitutes for Indian industries, Dr Guru Prasad Mohapatra, Managing Director, told Business Line here.

The two partners had signed an MoU in this regard at the Vibrant Gujarat Global Investors' Summit at Gandhinagar in January 2011, he said, adding that the facility is expected to commence production in 2014.

Widening Portfolio

GACL manufactures 27 products. About 50 per cent of its revenues come from sale of caustic soda, which has seen a volatile market and sluggish growth since the 2008 global recession. In 2009-10, GACL's revenues were Rs 1,278 crore with PAT of Rs 171 crore. In 2010-11, its revenue projections are Rs 1,420 crore with an estimated PAT of nearly Rs 100 crore, mainly due to improvement in the last quarter.

The average cost of caustic soda in the last two fiscals was Rs 16,000 a tonne, which has, since March this year, increased to Rs 22,000 crore a tonne due to higher input costs like prices of salt and natural gas, he said.

In order to reduce its dependence on caustic soda, the PSU is now diversifying its product portfolio, including the polyols manufacturing project.

In addition to the joint venture on polyols, GACL is investing Rs 250 crore. This includes Rs 100 on the sodium chlorate project of 20,000 TPA capacity by 2012.

It will also set up a facility with an investment of Rs 65 crore in an 8,000-TPA plant to produce hydrogine hydrate by 2013, making it the sole manufacturer of this import substitute product in India.

Besides, it is expanding caustic soda production by another three lakh TPA to add to its existing 6.23 lakh ton capacity to supply chloromethane and other raw materials for captive use to GNFC and the Dow-GACL joint venture.

Funding

In recent past, GACL commissioned the 8,250-TPA capacity calcium chloride expansion project for Rs 10 crore and a project of stable bleaching powder project of 15,000 TPA was set up with Rs 15 crore, Dr Mohapatra said.

With this diversification drive, GACL is expecting to increase its turnover to Rs 4,000 crore by 2014, reducing its dependence on caustic soda from 50 per cent to 35 per cent. Recently, GACL has bought an additional 1,500 hectares at Dahej for these projects.

To fund these projects, GACL has tied up 70 per cent cost through debt while 30 per cent will come from internal accruals.

Published on April 18, 2011

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