Tata Chemicals's consumer biz will grow at an excellent pace, says R Mukundan

R Mukundan, managing director and chief executive, Tata Chemicals, in an interview with Swati Khandelwal of Zee Business, talks about the revenues during the second quarter, future plans and capex for different segments.

What have been the growth drivers?

Revenue growth has been between 10-22% in various segments. Ebitda (earnings before interest, taxes, depreciation and amortisation) margin has improved due to a good performance from India, especially in consumer and speciality business. Broadly speaking, Ebitda should have been even higher. We were impacted by 3% broadly in terms of margin because of energy cost increase and I feel that energy cost will not have its impact on Q4 results, taking the margins above the present levels.

How did you manage to increase the cost and revenue on a sequential basis?

The standalone improvement is backed by increased dividends from the subsidiaries, which has come in this quarter and will not continue. Out of Rs 154 crore improvement in standalone margin, about Rs 75 crore is because of dividends. The other half is because of operations. Going forward, the improvements will go down because the dividend income is one-time income. But the improvement in margins will continue on a consolidated basis, as I explained.

Liabilities of the speciality segment have gone down. Do you see some spikes in the segment during the H2FY19?

Certainly, I think we will continue to improve. If you look at the speciality segment, Rallis has played a role in it and the issue is related to the increased credit in the marketplace. It occurred due to the pressure on the agriculture sector in India, which was created due to the monsoon, which was uneven. During the period, we increased credit but I think that it should track back to normal. We are focused on collections so the impact of working capital in the speciality segment should trend towards where it was in the past.

When it comes to boosting the consumer business then what is your look at the existing salt distribution network and what are your expectations during the ongoing festive season?

See, our consumer business has grown at 22% and the growth is similar to what we achieved in the first quarter. I feel it will continue to grow at an excellent pace because stores are increasing the demand and simultaneously we are focusing on adding the number of stores. Presence of both will drive growth going forward. I feel that the consumer business is going to continue to track excellent performance. For the chemical and chemistry business, both speciality and basic chemistry, the market demand is very strong. So all three segments are going to display strong demand conditions. Today, we are constrained by the capacity. That is why the Board has approved additional investment of Rs 2,400 crore to increase the capacity so that we can meet the market demand.

How much is the debt at present? How do you plan to reduce it?

We don't have debt in standalone. We have a cross cash position close to Rs 3,500 crore. The net cash position is almost close to Rs 2,500 crore. So there is no debt in the standalone books. As far as the net debt is concerned on the consolidated basis, it is about Rs 2,500 crore and debt reduction on a consolidated basis is happening year on year. We said we will be net cash positive in domestic and we achieved it last year. We had also said in the next four-five years even the global business will tend towards net debt position being positive. I think that it is a track that we are seeing. So if you look at our balance-sheet, you will see that our debt ratio is zero in India and it is approximately 0.2% as far as global consolidated debt equity is concerned. So we are sitting on a very strong balance-sheet, we are sitting with a very strong demand in the market and the company has to execute just growth now.

What about the capex plans for the next two-three years?

Consumer business doesn't have a large capex. However, the capex for the speciality business stands around Rs 500 crore and the investment is underway. It is going to come on stream next year on investments that have been made in Nellore, Andhra Pradesh and Gudalur, Tamil Nadu. As far as the basic chemistry business is concerned, we are investing Rs 2,400 crore in Mithapur, Gujarat and that should come on stream in three phases and we expect the capex to be distributed equally across three years, approximately Rs 800-900 crore annually.

Do you have any plans to introduce something new in any specific vertical?

In terms of the approvals for new business, the consumer business will continue to grow new categories. We will announce when we enter the category. As far as the basic chemistry business is concerned, the Board has asked us to continue to work on the energy storage business, mainly for battery storage for both stationary and mobile application.