Tata Chemicals aims to shed Rs 4,400-cr debt in 5 years

Written by Promit Mukherjee | Mumbai | Updated: Jan 25 2014, 02:47am hrs
Tata ChemicalsTata Chemicals is planning to stop investments in its core business of chemicals and fertilisers as they are capex heavy and margins are less.
Tata Chemicals, the flagship fertiliser and chemical company of the Tata Group, is planning to bring down its debt by Rs 4,400 crore in the next five years. This will be mainly driven by a renewed focus on its consumer products segment which comprises seeds, pulses, salt and water purifier Swach and reduced investments into the core business of fertiliser and soda ash.

We are planning to focus more on consumer products segment now as they are low-asset, low-investment and high-return businesses. They will help in deleveraging the company to a large extent, Tata Chemicals, MD R Mukundan told FE on the sidelines of an event organised to commemorate 75 years of successful operations of the company.

In fact, the company is planning to stop investments in its core business of chemicals and fertilisers as they are capex heavy and margins are less. Also, they are highly dependent on macro-external factors such timely subsidy, availability of gas and international price trends.

The company has already planned an array of products to be introduced from April in the food segment and will continue with the exercise over the next five years.

Chief financial officer PK Ghose said the consumer product segment offers high margins and is less capital intensive, which helps in stacking good margin figures.

Tata Chemicals broadly has two main business segments, fertilisersand chemicals. It has yet another business of consumer products, under which it manufactures and markets products such as salt, seeds, pesticides, pulses and its water purifier brand, Tata Swach.

Our non-subsidised business have grown from zero to R600 crore in the last three years and with Rallis and Metahelix, the total revenues from this segment stands at R2,200 crore, Mukundan said.

Rallis and its subsidiary Metahelix are under the Tata Chemicals umbrella and largely produce pesticides and seeds.

Ghose said the company has decided that in the next five to 10 years there will be a major push in terms of its consumer offerings with a primary focus on food-based products. There is an entire pipeline of products which we will start introducing from April onwards. These products will also help de-risk the consumer portfolio in times of a down cycle, said Ghose and added that the strategy will help in maintaining and strengthening margins.

In fact in March 2014, the company will be commissioning a neutraceutical centre in Chennai accompanied by an innovation centre which has been developed to work on high demand consumer products to be rolled out from April onwards.

We launched Swach three years ago and pulses two years ago and took the time to stabilise the business. Therefore, now the focus is on margin and reducing debt, said Mukundan.

Out of the total consolidated debt of R6,900 crore, R2,000 crore is the debt on its domestic balance sheet.