R Mukundan, Managing Director and CEO, Tata Chemicals, talks about the chemical sector and the growth drivers in 2021, soda ash demand, export markets, CapEx and debt situation of the company during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:
Q: Chemical sector has emerged as a hot sector this year. The company has performed well in 2020 and do you think that that 2021 is looking promising, if yes, then how much growth are you expecting from here? What is going to be growth drivers of Tata Chemicals in 2021?
A: At the start of the year, everyone knows that there was a fear about how the demand situation would be and how the market will behave. Luckily for the chemical industry, the demand has been fairly good and the market was not as bad as it was for other sectors. So, we have got this benefit. The situation was bad only in the chemicals which were going into real estate or auto sector because they were badly affected but other sectors, where it is a matter of consumption, like food, pharmaceuticals, all those chemicals and intermediary chemicals, all did well. So, I think that trend is going to continue. The good news is that the auto sector is back and real estate is also coming back. The demand is fully back. As of the latest information, we are almost close to sector-to-sector anywhere between 90-100% of what we ought to be at this point of the year. So, the market is looking good. On top of that, I think, the pressures that were there earlier have decreased because the prices of many of the raw materials have fallen.
We also have to reduce our prices to the customers because the customers have been under pressure. But of late, the raw material prices are going up, so that is a big cause of concern. Hopefully, it will keep pace for the demand growth so that the customers can also afford to pay a bit more. That is the broad trend. This is a sector, especially I would say within the chemical sector, especially the speciality chemical will have a stable growth for the next 15-20 years in India. India is a big opportunity and we have a very small percentage of the global number and we will grow at least five times in the next 10-15 years, in my view, broadly in this sector.
Q: How do you see the demand for the Soda Ash? What is your outlook on the new markets and how much growth are you predicting from the export market?
A: Soda Ash market has seen demand fall mainly in the sectors, which I explained, which is auto and real estate, mainly for freight class, and that demand has come up. And, clearly, all across the globe, not just in India, the demand is moving back to normal. We had a shortfall of about a 10% demand falling in a 60 million tonnes market 6 million tonnes went off the market. I think, that is slowly coming back, so, we are coming back to a situation where demand is back. Because there was access demand fall and price also came off from the peak but now, the prices are beginning to climb up. We believe that prices will go back to normal, maybe in another 6-9 months, and demand will come maybe in a 3-4 month, fully back to where it used to be. So, it is returning fast to normal. Most countries have seen no shortfall in the domestic market. Some export markets have seen some issues but for India that has been a very-very minimal impact, I would say that.
Q: What is your CapEx plan and update us about the debt situation of the company? Going forward what are the plans and what is your view on performance for the next year?
A: I would say, the company is investing very fast and we have put out approximately Rs 3,500 crore of investment of which Rs 2,600 is in Tata Chemicals and Rs 900 is in Rallis, which is our subsidiary. And, the company is sitting today in standalone on net cash of about Rs 2,000 crore and that cash is being deployed for growth purposes.
The debt is mainly overseas and debt will be paid from the earnings of our overseas entities over a period of time. As far as the key issue growth trajectory is concerned, one big element of this growth is mainly around the nutrition business, where we are expanding the salt capacity from one million tonnes to one and a half million tonnes, which will be sold primarily to Tata Consumer Products. We are also expanding and growing our business Prebiotic and Probiotic and other food-related and pharma-related products. So that is a big growth area. And, Rallis would also grow and is investing about Rs 900 crore in its manufacturing facility because most of our plants are running at almost 100%.
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We don’t have the spare capacity today to grow further, so we need this investment. The next 18-20 months you would see all these capacities coming on stream, which will lead to both top-line growth and bottom-line growth. We see this as a company which is not going to shareholders and ask for more money or raise fresh debt but will use the capital that we have to grow in a judicious and safe manner.