Gujarat Narmada Valley Fertilizers and Chemicals Ltd (GNFC), which faced a heavy debt burden and consequently a hefty interest outgo leading to net losses, has made a swift turnaround to join the club of Gujarat’s State-run companies with a billion-dollar market cap. Managing Director Rajiv Kumar Gupta shares insights about the efforts on the marketing and strategic fronts that made the PSU profitable and long-term debt free. Excerpts:

GNFC has shown a remarkable financial turnaround from a debt-laden, loss-making unit to a profit-making company. What led to this turnaround?

To come out of liabilities worth ₹7,000 crore a few years ago, we worked towards making non-operational and unproductive assets operational and productive. The TDI (toluene di-isocyanate) plant at Dahej had seen cost and time overruns. We restructured the product mix, implemented a new pricing strategy and expanded exports to turn profitable. For the past few quarters we have been posting record numbers every quarter.

We made the TDI plant operational. Simultaneously, we focussed on non-TDI revenues, which have paid off, and revenues from other chemicals such as concentrated nitric acid (CNA) and weak nitric acid (WNA) have grown by almost 90 per cent. We also started trading in methanol imported from Iran. This clearly led to the revival of GNFC after the net loss of ₹452 crore posted in 2015.

What is the revenue composition at present? Going forward, what will be the focus areas?

There are two segments to our revenues, fertilisers (35 per cent) and chemicals (65 per cent). We discovered that cheap TDI imports from China, Korea and Japan were posing a stiff competition and we were unable to compete with them. For diversified and stable revenue sources, we have started expanding the export market.

Earlier, GNFC was exporting to about six countries. We have made the TDI vertical profitable by not just operational efficiencies but by selling more in overseas markets. We opened new avenues in Africa, Latin America, West Asia, Europe and the Asia-Pacific.

Today, we export to 66 countries, including China and Korea. Last year, we exported 26,000 tonnes. This year's target is 30,000 tonnes. We also promote export of non-TDI chemicals. After a gap of 10 years, we started formic acid exports and are also expanding export of ethyl acetate and methyl formate.

Looking at India’s GDP growth projections between 6.75-7.5 per cent, how do you see growth happening for you?

Considering the current scenario and the future demand, we believe our growth should be more than GDP growth. The demand for chemicals is increasing and there are new areas coming up. It is wrong to attribute chemical demand growth to closures in China. As of now, demand is opening up in new regions of the world. Our focus is on Africa, where the demand for chemicals and other products is growing exponentially.

Fertiliser growth depends on many factors such as the monsoon and production facilities. It cannot be treated on a par with GDP growth. However, for GNFC, fertiliser revenues grew by over 4 per cent last year. But the fact remains that revenues and profits in fertilisers will grow at a much slower pace than in chemicals.

For a PSU, there are concerns on slippages and financial inefficiencies. How do you address such issues?

For transparency in financial operations, we have adopted e-tendering in all procurement and created a multi-level hierarchical committee system for approvals. We have put in place a concept of ‘extra savings’, where rates are re-negotiated so as to achieve the lowest possible ones. By this, we have saved ₹700 crore in the last few years.

Secondly, we have implemented reverse auctions to sell chemicals, and also introduced the system in procurement. This way, we have been able to achieve significant savings.

In the past couple of years, GNFC has launched several initiatives in the digital and FMCG space. Are you redefining the company?

There is a misconception that GNFC is just a TDI maker. GNFC is much more than that. The company has to be looked at holistically. The cashless drive that we took up earlier through our digital intervention is still going on. Every day, we are selling fertilisers at GNFC outlets on digital payment. So far, we have sold fertilisers worth ₹113 crore to almost 3.18 lakh farmers.

For our value-added, neem-based products, we see phenomenal growth going forward. The segment has the potential to touch ₹500 crore in revenues in the next two-three years. We are ramping up production capacities and seed collection. This is aimed at generating livelihood for rural women.

What are your capex plans?

We have received the board’s approval for projects, including greenfield and brownfield expansions. We are planning expansions for formic acid, CNA and acetic acid production. We don’t have much CNA to sell because most of it is consumed by our TDI unit.

There is potential for CNA in the domestic market. We also plan to take over the formic acid unit of a fertilizer company.

We are looking at a greenfield project in acetic acid as it is an important area where India is highly dependent on imports. Against the 1 million tonne demand, India (GNFC) produces,50,000 tonnes. The rest is imported, costing ₹5,000 crore. We want to replace these imports and fulfil the ‘Make In India’ vision.

We plan to invest about ₹150 crore to expand ammonia production capacity, besides ₹200 crore for TDI plant expansion.

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