DCM Shriram unlikely to invest more in urea business

TOMOJIT BASU RICHA MISHRA New Delhi | Updated on January 23, 2018 Published on May 17, 2015

Chairman & Senior Managing Director Ajay Shriram (left) with Vice-Chairman & Managing Director Vikram Shriram.

Twenty five years on, the ₹6,400-crore DCM Shriram Group has set its sights firmly on the future with its commodity interests in sugar, seeds and farm solutions set to expand over the next 3-5 years.

The conglomerate, however, will not invest resources to further its urea manufacturing business.

“We’ve taken a conscious view not to invest more in fertiliser since there’s too much Government control, while investments in the segment are significant, a 1.2 million tonnes plant can cost as much as $1 million,” said Ajay Shriram, Chairman and Senior Managing Director.

While recognising the potential of the new four-year urea policy approved by the Cabinet earlier this week to raise domestic output and achieve energy efficiency, Shriram told BusinessLine, “The devil is in the detail…we have to read the fine print. The Government said the new policy can save ₹4,500 crore in subsidies. The cost of domestic production is lower than the price of imported urea; so, it’s sensible to have policies which could raise output.”

A nutrient-based subsidy (NBS) scheme was necessary in the long run if subsidy outflows, which worked out to more than ₹1 lakh crore annually, were to be checked, he said.

Sugar woes

However, a depressed domestic market and the cyclical issue of outstanding sugarcane dues are not deterring the group from investing in the segment particularly, as it is using it for power generation from bagasse. The current installed co-generation capacity is of 94.5 megawatts (MW), of which 51.5 MW is supplied to the national grid. The group expects to raise it by 17-18 MW with ₹120 crore of planned investment.

Talking about the issues faced by sugar industry, Ajit Shriram, Joint Managing Director of the Group, said, “Sugar as an industry is in trouble. But, we – through our bagasse business – clear farmers’ arrears.”

“We have diverted substantial sums of money from other businesses to pay cane farmers on time but there are standalone sugar companies which don’t have that option,” said Vikram Shriram, Vice-Chairman and Managing Director of the Group.

Hybrids hurt

Policy dithering on the question of field trials for genetically-modified (GM) crops had also frustrated Bioseed’s efforts to conduct research. Unlike the Monsantos and Syngentas which can test GM seeds in the US or Brazil, Indian companies’ investments into R&D had largely been held up, said Vikram.

“There’s been some movement of late but it’s slow. In addition, sales of hybrids in key South-East Asian markets were hit due to drought in the Philippines, Vietnam and Indonesia. In India, demand for hybrid corn went down 15 per cent but it should pick up soon since it’s an essential product,” he explained.

Earlier this month, the conglomerate reported a consolidated total income from operations of ₹1,309.3 crore and a net loss of ₹40.19 crore for the quarter ended March 31.

Published on May 17, 2015
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