The Hindu Business Line : GACL raises $40 m via ECB route to fund expansion

Vadodara, March 10 Beating the global economic recession blues, State-promoted Gujarat Alkalies and Chemicals Ltd (GACL) is forging ahead with its product diversification projects involving investments of Rs 2,500 crore by 2011, and has drawn $40 million (nearly Rs 200 crore) recently through the external commercial borrowing (ECB) route to part-fund the expansion.

Confirming this, Mr Guru Prasad Mohapatra, Managing Director, told Business Line that GACL is moving ahead with its plans, but he declined to elaborate on the ECB-related queries. “We have no financial debt problems and GACL will be debt-free by the next financial year (2009-10),” he added.

GACL has taken fresh debt of $40 million to finish the ongoing projects in time with the objective of tripling its 2008-09 turnover, from Rs 1,300 crore to around Rs 4,000 crore.

Its debt-equity ratio was 0.16 in the quarter ended September 30, 2008, compared with 0.30 on March 31, 2008.

Currently, 60 per cent of the company’s profits come from caustic soda, the main product in a basket of 26 products. With the new diversification in projects undertaken recently, 30 per cent profits would come from each of caustic soda, new products portfolio and the other existing products as part of a long-term strategy to bring down risks and dependence on caustic soda, he pointed out.

Mr Mohapatra, who is also Chairman of Dow GACL Sol Venture Ltd (DGSL), formed last year as a joint venture with Dow Europe GmbH, a wholly-owned subsidiary of

The Dow Chemical Company, said three directors each have been appointed by the two partners and various studies have been taken up. GACL has sub-leased 10 hectares of land to the 50:50 joint venture at Dahej in Bharuch district where the new plant would come up with an investment of Rs 600 crore.

Financial closure for DGSL, which was planned by the end of 2008, is, however, yet to be completed. The debt-equity ratio for the new entity would be 70:30.

The two partners would be putting in equity in the new company which would take debt. “In fact, this is the best time for us to go ahead with our projects. We know that the current regime of low costs, prices and recession would eventually come to an end.”