After overcoming the controversies surrounding its greenfield PVC project at Cuddalore in Tamil Nadu with clearances from both the Supreme Court and the Tamil Nadu Pollution Control Board (TNPCB) recently, Chemplast Sanmar Ltd, a leading manufacturer of PVC and caustic soda in India, is bullish about the prospects of its area of business. Having spent over $860 million into the acquisition and capacity expansion of Trust Chemical Industries of Egypt over the last two years, the company hopes to become one of the top 20 PVC makers in the world. In an interview with FE?s R Ravichandran, the Rs 3,600-crore Sanmar Group vice-chairman Vijay Sankar and Chemplast Sanmar Ltd chairman PS Jayaraman talk about the industry scenario. Excerpts:
What was the whole controversy surrounding your greenfield PVC project at Cuddalore?
It is more of a situation created by some so-called NGOs. Being a responsible corporate group and one of the leading PVC manufacturers in India, Chemplast has invested a huge amount of money to make the plant among the most modern in the world. With the latest technology we have ensured that the production processes of the plant meet the mandated environment and pollution norms of the regulatory authorities.
The company has taken initiatives including bringing in membrane cell process, putting up zero liquid discharge facility, setting up an uninterrupted power supply system to check gas leakage, and a sea-water desalination plant. For the first time in India, Chemplast introduced double-walled pipes to unload the raw material for PVC, vinyl chloride monomer (VCM), at atmospheric pressure and at a low temperature, a most advanced method in transferring VCM through a 2.5 km pipeline from its own jetty. After nine months of battle, the company proved that its plant is totally safe from all environmental concerns and the plant?s trial production and processes were also inspected by the officials of TNPCB which found them satisfactory. We have lost over Rs 100 crore due to delay in commissioning of the plant.
Please tell us about the demand and supply gap for PVC in India and the growth prospects.
The PVC industry in India is estimated at 1.4 million tonne per annum and is growing at a CAGR of 13%. The total demand for PVC in India is a little over 1.6 million with a shortfall of over 2 lakh tonne and is being met through imports. With no major players coming into picture in the near future, the demand for PVC will grow along with the of GDP growth. We see the demand for PVC to be on the upper side at least for next 10 years.
Where do you see growth coming from?
The growth will be driven by PVC pipes, PVC profiles, footwear, ladies vanity bags, syringes (medicated), blood banks among a host of applications. With the boom in real estate and the government?s focus on irrigation, infrastructure developments in a big way the consumption level of PVC will go up substantially. With its longevity, flexibility and cost effectiveness, the awareness on PVC usage has improved and it is started replacing wood at all levels. The per capita consumption of PVC in India is low compared to the global level of 1.4 kg. There are plenty of opportunities to grow.
What?s the score on your specialty chemicals business?
This is the next big growth area for the Sanmar group. Driven by increased consumption from the makers of soaps and detergents, along with the soaring demand from the pharmaceutical industry, particularly those involved in contract research and manufacturing services business, and from producers of silicon wafers, the demand for specialty chemicals (including caustic soda and chloromethane products) is on the rise. There are only a few players, including Sanmar, that produce close to 1,00,000 tonne of specialty chemicals against a national demand of 2,00,000 tonne per annum. Given the volatile market conditions across the globe coupled with an annual growth of 15% in demand, the Sanmar group sees a huge opportunity to partially offset import by increasing its capacity to a reasonable level.
You have a number of joint ventures under Sanmar Engineering. What has been their performance like?
Being one of the largest manufactures of engineered valves, sealing and safety instrumentation systems targeting the energy and process industries in India, the engineering arm sees immense growth opportunities. Our JVs with leading players such as Crane Co, Fisher, Tyco, Flowserve are over three decades old and are growing as per our expectations. With both private and public sector companies involved in augmenting power capacity at greater levels, Sanmar Engineering is set for major growth in the years to come.
It is almost two years since the acquisition of Trust Chemical Industries in Egypt by the Sanmar group. Can you explain in detail the progress made so far?
We have acquired TCI at its early stage and ramped up capacity of both vinyl chloride monomer (VCM) and caustic soda to 4,00,000 tonne and 2,75,000 tonne respectively with an overall estimated investment of $860 million. The plant is ready and geared up to meet the demand from neighbouring countries, which is robust. Being the raw material for PVC, TCI will use 50% of VCM production to meet local and neighbouring PVC market demand while the remaining 2,00,000 tonne of VCM will be exported to Cuddalore?s PVC plant. The capacities of Chemplast Sanmar and TCI will make Sanmar group one of the top 20 PVC makers in the world.
