GNFC now a debt-free company, says Gupta
Rajiv Kumar Gupta, managing director of Gujarat Narmada Valley Fertilizers and Chemicals Ltd (GNFC), expects revenue to rise to Rs500 crore in the next three years and is focused on cutting costs and increasing operational efficiency. Edited excerpts from an interview: Tell us more about Toluene Diisocyanate (TDI) pricing?
TDI prices have been stable and they have been hovering in the range of about $4,200$4,500 during the last three months but more importantly the demand has been picking up. There have been more export inquiries with us and we have observed new trend that countries from Africa have been demanding more and more TDI.
So we are exporting to all continents. From an export to six countries we are now exporting to 66 countries and from an export in terms of value of about Rs10-12 crore, we hopefully are expecting to achieve almost Rs600 crore but more importantly, the demand trend has been very positive and very significant. What was the total debt in the books? What was the working capital and what has it come down to?
When I joined this company we used to take away about Rs1.5 crore per day by way of interest. From that level of almost Rs4,000 crore we are a debt-free company as far as long-term debt is concerned at the end of 31 March 2018. Working capital utilization used to be over Rs1,700 crore and that has come below Rs300 crore. So from level of debt of almost Rs4,000 crore, the company is now practically debt free.
What is GNFC going to do with the cash it is going to generate?
As far as dividend is concerned, it is for the board to decide. We are doing well. The board may take a call on that and we are going to have the board meeting in a couple of weeks from now, but as far as the company’s growth is concerned we would definitely like to consider a few options of growing in certain known areas. We would not like to go into unknown territories. We are very strong in acetic acid, we are very strong in formic acid, we are very strong in weak nitric acid and concentrated nitric acid.
But is there a possibility that shareholders could be expecting a bigger dividend payout? Could there be some value return to shareholders?
We are a listed company, we are a government company so I would not like to comment on that but definitely our board has full authority to consider that and since we are doing very well the board might take a call.
For the next year, the Street wants to understand, is Rs45-50 earnings per share (EPS) possible given that now you are saying that you are virtually debt free?
I would like to comment that how much of EPS we will end up with is still not certain but we are doing very well and we should do better.
You are mentioning formic acid. Report suggests that maybe Rashtriya Chemicals and Fertilizers (RCF), one of their units was not functioning...maybe there is a possibility that they will sell out. Will GNFC be interested in that particular unit? Is that a possibility?
It is not only a possibility, we have asked them many a times to take over their formic acid plant. Now they have to take a call.
Since we are the largest player in formic acid and since their formic acid plant has been closed for a long period and they have not been doing very well, their operational cost of production of formic acid is very high, so we had made a demand to them.
Now being a government company they have to follow a process and at the end of the day if things turn out positively, we would definitely be interested in that.
The other big factor that the Street is looking forward to in FY19 is the Ecophos joint venture (JV). Currently there is money being spent on taking out the hydrochloric acid. In the coming year whenever that gets commissioned is there going to be a big delta over there? Currently we are paying negative premium of anything between $50 and $80 on hydrochloric acid and with the commissioning of this JV definitely that will become a positive contribution. As far as progress is concerned, we are planning to commission that plant towards the second half of 2019.
The other big area has been the Neem Project. Last year you did around Rs40 crore-odd. What is the vision there? Honourable Prime Minister took a historical decision of 100% coating of neem on urea and we embarked on a massive backward and forward integration project just to fulfil that vision... by not only collecting neem seeds but producing neem oil, and not only producing neem oil to coat our urea but also to use that neem oil to produce various kinds of products and right now almost every fortnight we have been adding one more product to our basket. This year our target had been about Rs40-50 crore which we should reasonably achieve.
Fy20—what kind of a number are you looking at?
It has a potential for achieving Rs500 crore turnover in next three years. So we are gradually increasing. We cannot fix up any figures of Rs100 crore or Rs200 crore for one financial year but definitely once it picks up it will pick up very fast.
You have been at the helm of GNFC for the last few years. If you could tell us your most satisfying experience?
From a company which was completely written off with the first ever and highest ever net loss of Rs450 crore with almost Rs2,500 crore of assets—with time overrun and cost overruns just lying idle, rusting—to something which we have achieved now: completely debt-free status, highest ever profits, highest ever dividends, highest ever bonus to our employees. It has been a very satisfying journey.
Rajiv Kumar Gupta, managing director of Gujarat Narmada Valley Fertilizers and Chemicals Ltd.