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Richa Mishra

`Our successful implementation of strategic and corporate initiatives in the areas of supply-chain, manufacturing and distribution has facilitated sharp improvement in our net profits. Besides, we have a very strong in-house R&D.'

Mr Shyam Bhartia, CMD, Jubilant Organosys Ltd

NEW DELHI, Jan. 27

ARMED with a new corporate identity, Jubilant Organosys Ltd, the erstwhile Vam Organic Chemicals Ltd is confident of continued growth and improved manufacturing performance through its thrust on speciality chemicals and exports. And in terms of end-use segments, its customers would come from pharma, agro and construction industries.

In an interview to Business Line, Mr Shyam S Bhartia, CMD, Jubilant Organosys Ltd, unveiled the future plans of the company. Excerpts:

Last year has been one of restructuring and change in corporate identity for the group. How would this impact the future growth of the company?

The restructuring exercise has been undertaken with a growth-oriented perspective and with a view to making our operations globally competitive. It will allow us to have clear focus on our core operations and implement a progressive strategy for the future.

Our new corporate ID signifies our moving up the value chain and our continued emphasis on R&D, which enables us to develop new products to service our customers in the pharma, agriculture, construction, textiles and paper & packaging industries.

Jubilant Organosys is the flagship of a diversified group, which has interests in chemicals, IT, food and ventures. It was, therefore, decided to create a group brand identity to focus and establish common corporate values across different businesses.

How do you rate the Q3 performance of the company? The total income shows a dip of three per cent? Is it because of change in the business mix? If yes, what are the changes?

From our perspective, it is important to focus on earnings, margins and core growth operations. Our Q3 and nine-month results in the current financial year clearly reflect earnings growth and greater contribution from value-added businesses. The growth in revenues is inconsequential, as long as there is healthy growth in earnings.

Our revenues from speciality chemicals have risen 20 per cent to Rs 291.53 crore from Rs 242 crore. Specialty chemicals contributed to 44 per cent of revenues compared with 38 per cent in the corresponding nine months ended 31st December, 2000.

However, revenues from commodity chemicals have declined by three per cent to Rs 376.69 crore from Rs 387.91 crore primarily due to subdued international prices. Commodity chemicals contributed to 56 per cent of revenues compared with 62 per cent in the last year for the corresponding period.

Total revenues reflect the changing business mix in favour of specialty chemicals and have grown by 6 per cent.

The company has managed a sharp improvement in its net profits in the first half of 2001-02. What is behind this?

It is because of our successful implementation of strategic and corporate initiatives in the areas of supply-chain, manufacturing and distribution, which improve our efficiency and competitive position. Besides, we have over the last few years developed a very strong in-house R&D, which plays a key role in developing and optimising processes to achieve cost-efficiency. Simultaneously, we have focussed on improving our market presence and strengthening our distribution network.

You had plans for further enhancing the promoters' stake in the company from the existing level. What is your stake at present and is it through the creeping acquisition route?

We have increased the promoters' stake in Jubilant Organosys from 37.14 per cent as on March 31, 2001 to 39.76 per cent as on September 30, 2001 through the creeping acquisitions route. Thereafter, four lakh shares were issued through preferential allotment (on conversion of fully convertible warrants), increasing the promoters' stake to 43.38 per cent of the enhanced equity capital as on December 31, 2001.

Your company is one of the major players in speciality chemicals, otherwise a largely unorganised sector. On behalf of the industry, you have been pressing for imposition of anti-dumping duty. Are the levels of duty sufficient?

To encourage fair play in this sector, we petitioned the Government for an anti-dumping duty on choline chloride imports only. Choline chloride forms an essential supplement of boiler chicken feed. The dumping of choline chloride by international manufacturers had assumed alarming proportions before the Indian Government imposed an anti-dumping duty.

The product was being sold at prices much below its manufacturing cost abroad. This was being done to monopolise the market for this essential feed supplement in the fast-growing Indian poultry feed market. We are in favour of continuity of this anti-dumping duty until such time that prices from the international providers reflect their manufacturing costs accurately, so that we or any other domestic player in this sector is not put to unfair disadvantage.

Do you think `Jivanjor' will generate the same brand identity as Vamicol? In the rural market your company is identified with Vamicol brand. How do your propose to market Jivanjor. Are you planning to come out with any print or visual advertisements for the same?

The initial market response to the launch of Jivanjor has been very encouraging. Keeping in view the success of the initial launch and the market feedback we expect our brand to perform outstandingly well in the future.

The brand values embodied by the name Jivanjor seek to go beyond the products themselves and be identified with the everyday lives of the actual user community of artisans. The Jivanjor ethos is designed to be a two-way commitment between Jubilant Organosys and the user community encapsulated in the Hindi tag line `Paarkhi karigaron ka bejor saathi.'

We have a strong communication campaign in place addressed primarily at the carpenters who use our products as well as the architects, interior designers and the household segment.

VAM plans to reposition itself from a commodity chemicals company to one making speciality value-added products. Speciality chemicals is a field dominated by MNCs such as Ciba, Clariant and BASF with strong MNC parents and large R&D budgets. How does VAM plan to counter them with limited financial muscle?

Our competitive advantage comes from our vertically integrated production facilities, our use of local raw material and above all our knowledge base, which we have developed through several years of R&D. Our R&D spends might be much less than those of large MNCs. However, the fact that 44 per cent of our current turnover comes from Speciality, Fine and Performance chemicals is a testimony to the effectiveness of our research and commercialisation efforts.

Over the years, we have acquired deep knowledge of customer needs which enable us to proactively develop new products to better service our customers. This also helps us to stay ahead of our competitors. We have also achieved a global scale of operations in a few selective businesses.

What are your plans to fight market leader Pidilite in the adhesives business?

We have focussed on developing a product range to deliver enhanced consumer benefits especially when compared to competition products. Besides, through our in-house R&D and application expertise, we will continue to introduce new and innovative products to ensure maximisation of benefits to consumers.

We are expanding our distribution and market reach and focusing on building meaningful relationships with carpenters, wood-workers who are the actual users of this product range.

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