Mr. BM Bhorania, Executive Director of Finance, GSFC Ltd. Mr. Bhorania served as General Manager of Finance at Gujarat State Fertilizers & Chemicals Ltd. Previously, he was Director at GSFC Agrotech Ltd.
Gujarat State Fertilizers and Chemicals (GSFC), since its beginning, in 1962, has consistently translated the facet of care in its every activity. In offering its care to an even larger section of society, GSFC has transcended the boundaries of the ordinary to be able to truly fulfil its goal of being “Basic to India’s Progress”. Initially with the equity structure, comprising of 49% of State Government participation and 51% of Public and Financial Institutions, today the Government’s involvement has come down to 38.4%. As an organization formed for supporting the farmers, GSFC’s every act revolves around the avowed goal of “not only selling fertilizers, but also offering happiness.”
In an interaction with Anil Mascarenhas and Manu Kaushik of IIFL, Mr. BM Bhorania says, “The capex for Dahej plant will be huge; it would be too early to quantify the same. Yet, I would estimate it would be in the range of Rs.80bn for the four units put together.”
GSFC has been in business for decades. Briefly walk us through how the company has evolved over the years.
GSFC was the first successful joint sector company promoted by the Gujarat government in 1962. We started our phase-I fertilizer operations in 1967 which was expanded in 1969. Later, we diversified into other areas; GSFC was the first to set up a 20,000 MT per year Caprolactam manufacturing facility in 1974 which was further expanded to 70,000 MT per annum in 1993. We also put up Nylon-6 manufacturing facility at Vadodra which is forward integration of Caprolactam. We also acquired two organizations of Gujarat government- Gujarat Nylons Ltd, near Surat which has yarn manufacturing facility and the Polymer unit which manufactures Acrylics. In 1987, we setup Sikka, DAP manufacturing plant. GSFC has a healthy mix of fertilizers and industrial products. We have managed to remain debt free and are now looking at expansion.
Could you elaborate on your expansion plans?
We have set up a joint venture in Tunisia to manufacture Phosphoric Acid which is under commissioning and we are expecting the first shipment in December / January this year. The manufacturing capacity is 3,60,000 tons. The entire production would be available 50-50 to GSFC and Coromandel International. With this availability, our Sikka plant production capacity would go up by around 4 lakh tons of additional DAP. The basic purpose of such a venture was to secure the availability of raw material. Phosphoric acid has a huge demand in India but unfortunately the start to this project had been delayed due to the unrest in Tunisia.
Our second project is a Methanol plant at Vadodra. We had defunct ammonia plant which we converted into a Methanol production facility . By December 2012, it would be commissioned commercially. We have already commissioned the modernization of Cylohexanone plant which is an intermediate of caprolactam. This will result into saving in consumption of Benzene in this plant.
What about your power requirements?
GSFC has also commissioned 123MW of electricity production through wind power in the Kutch-Saurashtra region. We aim to increase this capacity by another 29MW by the end of this year. This is inline with the company’s focus on green technology and sustainable means of manufacturing.
Apart from this we have setup GPICL (Gujarat Industrial Power Company) which caters to the power needs of our plants;. The power generated from our windmills are used at four locations; the main plant at Vadodra, our polymer unit which is just 4km away, our Kharach plant near Surat and the fourth plant at Sikka near Jamnagar.
We are also increasing our manufacturing capability at Vadodra plant to produce 15,000 tons per annum of Nylon-6. The capex for the same is ~Rs.1.25bn and could take around two years for completion. We have also undertaken Sikka DAP expansion project to manufacture different grade of NPK. This would raise our capacity to 0.5mn tons. We have revamped the infrastructure extensively. This upgrade and capacity increase would require a capex of Rs.6bn.
We are aiming to completely replicate the Vadodra units at Dahej, Gujarat. We have completed the major task of land acquisition. Ammonia, urea, melamine and caprolactam would be produced from these units. We are anxiously waiting the urea policy clearance which would allow us to go full stream with this project.
What would be the capex for Dahej unit and how do you intend to raise the money?
The capex will be huge; it would be too early to quantify the same. Yet, I would estimate it would be in the range of Rs.80bn for the four units put together.
What would be the course of action if the urea policy gets delayed?
Land acquisition is the most time consuming task, which we have successfully completed. It’s now a good asset for our company. If the urea policy does get delayed indefinitely then we are in the process of exploring other avenues as well. Let’s wait and see how things unfold as it would be too premature to assume that the Urea policy would not come through.
How do you plan to raise this money?
We are a debt free company and have a surplus of over Rs7bn parked with banks. We would do some borrowing for the Dahej unit but would remain conservative and avoid crossing the 1.5 debt equity ratio.
What are the projections in terms of volumes for the second half of the year?
The availability of phosphoric acid has improved. We have tied up with three international suppliers to ensure smooth supply. We reckon our manufacturing capability would certainly be higher for the second half.
What is your message to shareholders?
As a company we strive to efficiently produce an array of valuable, superior and reliable products which enrich the lives of millions in farms, industries and homes. The company envisions operating in synergy with its environment and seeks to be recognized as an enterprise that is for total customer satisfaction and creates credible long term value for its stakeholders.