CEO SPEAK — SHYAM SUNDER BHARTIA

‘Wider reach and new products will drive Vam’

Shyam Sunder Bhartia, chairman and MD, Vam Organic Chemicals Ltd.

Shyam Sunder Bhartia (49), chairman and managing director of Rs 840 crore Vam Organic Chemicals Ltd, these days, is trying to strengthen the company’s core businesses of specialty, performance and fine chemicals both in the domestic and international markets. At the same time, however, he is busy evolving a new identity for the Vam group, which in order to reflect its involvement in diversified areas such as information technology, food and other ventures.

Profitability has been improving over the past two years rising to Rs 10.12 crore in the first half of the current fiscal compared with Rs 6.70 in that period last year. In fiscal 1999-2000, the company’s bottom line was Rs 10.32 crore. Dumping by international players has been squeezing margins, especially in the absence of anti-dumping duties. VOCL’s takeover of a couple of sick companies and poor recovery from distributors and dealers in insecticides and pesticides have also exacted their price.

Mr Bhartia took over as vice-chairman and managing director of VOCL in 1997 and was redesignated CMD in 1999. A golfer and connoisseur of music, he speaks with Sangeeta Singh of The Financial Express about the company’s plans for its various businesses and overseas ventures. Excerpts:

Vam Organic India Ltd (VOCL) is one of the biggest producers of specialty chemicals in India. How do you think the company’s business has taken shape in the last 10 years?
VOCL has forward integrated to move ahead along acetyls value chain and from being a domestic leader in acetyls to becoming one of India’s leading and fastest growing specialty chemicals company. This has been achieved through a strong focus on R&D which has enabled us to enlarge our product portfolio. In the last financial year almost 44 per cent of our sales of Rs 840 crore came from specialty chemicals. Another significant development that drove growth at VOCL has been our performance in exports which have seen a compounded annual rate of growth (CARG) of 52 per cent in the last four years.

VOCL has also diversified into agribusiness, feed additives, latex and organic intermediates. What is the synergy in these businesses and how has one business helped the others grow?
VOCL began with basic chemicals like acetic acid, acetic anhydride and vinyl acetate monomer. These chemicals are used as inputs in the pharma, agricultural, textile, paper, packing and paints industries. The basic idea behind diversification was to meet customer needs for high performance chemicals within these industries. While these businesses may appear diverse, there is a commonality both in terms of the end use industries as well as in terms of the manufacturing facilities for the specialty chemicals. For example, alpha picoline is one of the key raw materials for the latex industry and we are its 3rd largest global manufacturers. The other top two companies are US-based Reilly Chemicals and Napera Inc. Latex, in turn is used for a variety of applications ranging from tyre industry, to coatings for paper, textile and carpet backing.

In this age and time, corporates are looking at consolidating their businesses. What is Vam’s plan in this area?
We are consolidating our commodity chemicals business by de-bottlenecking and moving up the value chain and introducing greater cost efficiency measures. At the same time, we are expanding and investing in specialty, performance and fine chemicals. These businesses are R&D driven and the thrust is on exports.

With liberalisation Vam has started looking at the overseas market in a big way. What is your expectation from the overseas market in the coming two years?
At the beginning of last year, exports accounted for about 14 per cent of our total business, which grew by 98 per cent in the past one year. For the coming two years we will expand our market presence through both extension of distribution also through introduction of new products for the overseas market.

With the specialty chemicals already contributing almost 50 per cent to the total turnover, what is the kind of growth do you see in this business?
Nearly, 44 per cent of our turnover came from specialty, performance and fine chemicals, last year. And this business has grown at a CARG of 34 per cent in the last three years. Though it is difficult to predict growth we are developing our new products, growing our market share in different products and are expanding our distribution channels.

Though we will bank on these very businesses for future growth we have also made a beginning in bioinformatics through a subsidiary, Jubilant Biosys. Based in Bangalore, this business is expected to provide quality, timely and cost effective solutions for the early stages of drug discovery processes to the pharma industry.

What is Vam’s market share in the domestic specialty chemicals business?
VOCL has a diverse portfolio of specialty, performance and fine chemicals and our market shares vary across different product market segments from about 30 per cent to well over 90 per cent.

Do you think the chemicals business you are in could have achieved better growth had it been given a better industrial climate?
We would have certainly seen higher growth rates in Vam Organic if our user industries had been growing faster. What we seek from the government is stable and modern infrastructure by way of good roads, ports, a steady supply of electricity and so on.

How do you rate Vam’s specialty chemicals, organic, intermediate and feed additives vis-a-vis international players? What is the competitive edge that it enjoys in the international markets?
VOCL is globally appreciated for the quality of its specialty chemicals such as Pyridines and Pyridine derivatives. That is why we are at present in the third position globally in this area. We expect to consolidate our position further over the current year and in the future. Also, we expect to be very competitive in the international arena with a number of fine chemicals being developed by our in-house R&D.