Chemicals company GHCL Ltd, amongst the largest soda ash and industrial salt-makers in India, will invest ₹6,500 crore to set up a one-million-tonne soda ash plant in Kutch, Gujarat, over a six-year period. The company will be nearly doubling its production capacities targetting a 30 per cent market share in India.
The greenfield unit will be built in two phases. In the first phase, the capacity addition will be 0.5 million tonnes per annum (mtpa) and will be built at ₹4,500 crore; while phase II will see an addition of another 0.5 mtpa at ₹2,500 crore.
“Work is already on at our greenfield soda ash plant near Kutch and in three years the first phase will be commissioned. We would be ready to tap the increasing demand in Indian markets with Phase 2 being ready and commissioned by 2030,” Ravi S Jalan, Managing Director, GHCL, told businessline.
The company’s current soda ash manufacturing facility at Sutrapada, also in Gujarat, stands at 1.2 mtpa.
According to Jalan, , the company’s existing market share is 26 per cent and capacity expansion will help increase its market share not just in India, but also help tap neighbouring markets such as Sri Lanka, Nepal and Bangladesh.
Soda ash demand
A growth in demand is anticipated on account of rising demand for solar glass and lithium ion batteries.
India’s soda ash consumption is currently at 4.3 mtpa and is expected to reach 7 mtpa by 2030. Global consumption is 63 mtpa, and is expected to touch 80 mtpa by 2030.
According to Jalan, investments will be made with a mix of debt and equity. The annual free cash for the company, which remains debt free, is about ₹1,000 crore.
“Ideally, we would look at a maximum debt to equity ratio of 1:1, which means we can raise up to ₹5,000 crore or so,” he explained.
GHCL saw a 50-per cent increase in standalone revenue for FY23 at ₹4,584 crore, while EBITDA grew 106 per cent to ₹1,520 crore. The company’s profit after tax grew 159 per cent to ₹1,092 crore.
In FY24, while the company expects “slight softening in margins” on the back of lower commodity price – limestone – and lower electricity cost, there will also be excess supply in the global markets due to additional capacities coming up in China, and slowdown in demand because of global downturn.
Nearly 70 per cent of GHCL’s limestone requirements are met through imports from West Asia.
Soda ash prices saw a decline of 2.5-3 per cent over the last month. “Margins are expected to be in the 30-32 per cent range this year,” Jalan said.