Financial Daily from THE HINDU group of publications
Friday, Nov 11, 2005
Financial Daily from THE HINDU group of publications Friday, Nov 11, 2005 |
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Corporate
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Outlook `TCC has to expand capacity to meet growing demand' G.K. Nair
Kochi , Nov. 10 THE State-owned Travancore Cochin Chemicals Ltd, which has improved its performance during the first seven months of the current fiscal, will have to expand its capacity in line with the ongoing expansion of its major customer, Kerala Minerals and Metals Ltd (KMML). Mr N.R. Subramanian, Managing Director of TCC, told Business Line that KMML was in the process of expansion and hence its demand for chlorine and acids would go up and correspondingly "we will have to expand our capacity in the coming years." At present, KMML's offtake is around 50-60 per cent of the chlorine produced by TCC. The main advantage of KMML to lift the product from the company at nearby Eloor is the savings on transportation cost. Besides, if KMML at Chavara in Kollam district brought these hazardous materials from outside the State, in addition to the increased freight, the transportation of it would involve a longer time, he pointed out. Similarly, Hindustan Newsprint Ltd (HNL) at Velloor in Kottayam district is also in the process of expanding its capacity. It is also a major buyer of caustic soda from TCC. Added to this, the proposed revival of FACT would also push up the demand for caustic soda. Thus, TCC is well placed given the increased future demand for its products in the captive market here, he claimed. He said the total production of the unit, which is operating only its energy-efficient membrane plant from August 1, stood at 28,655 tonnes in the first seven months of the current fiscal as against 28,737 tonnes in the same period last year. The membrane plant's capacity has since been raised to 125 tonnes per day from 100 tpd and it is in the process of being expanded to 150 tonnes, he said. The company's turnover during the period has gone up to Rs 73 crore from Rs 58 crore in the corresponding period last fiscal. The unit has made cash profit to the tune of Rs 9.5 crore and after depreciation of Rs 5.61crore the profit has come to Rs 3.89 crore, he said. The company had made a substantial saving on power consumption ever since it had started operating the new membrane plant only. The power consumption had dropped to 7.6 crore units from 8.8 crore units in the previous year and thus made a saving of Rs 3.5 crore on power cost alone, he said. He said, "there was excellent market for its products until few months ago. However, it is steady." The major problem faced by the company at present is the high cost of the raw material, salt, which is being brought from Gujarat involving high transportation cost, resulting in an increase of Rs 30 lakh per month in the raw material cost. The unseasonal rains in the Tuticorin area from where TCC used to procure its salt requirement has affected its raw material supply. In fact, following disruption due to the tsunami, it has been procuring salt from Gujarat. The company's restructuring proposal submitted to the Government two years ago, aimed at extricating the unit from the red, is still under consideration of the authorities. "If the loan is converted into equity or a soft loan is provided to liquidate the high cost loan then the company could make a turnaround," Mr N.R. Subramanian pointed out. The company is dolling out Rs 6 crore towards interest every year on the Rs 47-crore loan availed for setting up the membrane plant, he said, adding that if the restructuring proposal were implemented the company would have posted net profit.
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