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Virendra Pandit

Vadodara, Aug. 4 Worried over its net profit plummeting by 29 per cent in the first quarter of the current financial year due to global economic recession and the resultant slowdown in industrial production, Gujarat Alkalies and Chemicals Ltd (GACL) plans to outsource manufacturing of its new toluene-based products.

It proposes to outsource them to small and medium enterprises to increase revenues till its ongoing expansion plans, worth Rs 2,600 crore, begin to show results in 2011-12.

Confirming this, the GACL Managing Director, Mr Guru Prasad Mohapatra, told Business Line here that it is at present only a “short-term measure”, meant to partially offset the losses and improve the company’s topline until the next three fiscals. “Once our projects are completed, GACL’s current turnover of Rs 1,400 crore is likely to quadruple to more than Rs 5,000 crore given the projected market demands,” he added.

The proposed toluene-based products of the benzene chloride group, including benzyl chloride, benzaldehyde, and benzene alcohol, used in industries such as perfumery, pharmaceuticals and agro-chemicals, will be import substitutes.

Recently, the company decided to manufacture new products such as calcium chloride, bleaching powder and toluene-based chemicals to improve its topline. Of these, it has already started manufacturing bleaching power at its Dahej complex and calcium chloride at Vadodara, with small investments, as value-added products.

Now, with GACL deciding to outsource toluene-based products, it has identified SME partners to contract-manufacture these products and would shortly sign contracts with them in a mutually-beneficial pact, he said. These products will be sold under the GACL brand.

The BSE-listed company sees this as a fine example of “good synergy” between public and private sectors. The domestic production of toluene-based products in India is nearly 45,000 tonnes per annum, of which around 20 per cent is imported. GACL is looking to replace these imports with its own products.

In the first quarter results announced last week, GACL’s net sales went down by 4 per cent to Rs 328 crore (Rs 343 crore) and net profit dropped 29 per cent to Rs 38 crore (Rs 54 crore).

During the current financial year, the company plans to commission an additional 100 tonnes per day (TPD) flaker unit, and another 50 TPD caustic soda unit by de-bottlenecking, so as to further improve the top- and bottom-lines.

The company’s projects involving investments of about Rs 2,600 crore are progressing as scheduled and are expected to go on stream by 2011-12. These include a 90 MW captive power project, a 600 TPD chlor-alkali project, projects for manufacturing hydrazine, hydrogen peroxide, polyols and phenols.

Besides, GACL had, last year, formed a joint venture with Dow Chemicals to invest Rs 600 crore at Dahej complex for manufacturing chloromethanes, and had formed another joint venture for phenol group with GNFC and GSFC, which are all under various stages of development.

More Stories on : Outsourcing | Chemicals

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