Kanoria Chemicals may enter fine chemicals business, expand Vizag plant

Kolkata-based Kanoria Chemicals and Industries Ltd hived off its chlor chemicals division, one of its most profitable businesses, to Aditya Birla Chemicals (India) Ltd for Rs830 crore.

While the Aditya Birla Group gets an assured supply of caustic soda for its aluminium plants through the acquisition, Kanoria Chemicals will now look at entering newer business segments, especially fine chemicals. In a chat with DNA, NK Nolkha, chief financial officer, Kanoria Chemicals, spoke about road ahead for his company. Excerpts from the interview:

Now that the company has Rs830 crore of cash, where will you be deploying it?
Nothing has been firmed up as yet. The deal happened really quickly and so far we haven’t been able to decide as to where will we go. But yes, with this cash, we are now open to both organic and inorganic options.

But what are the areas or businesses that you might consider?
As far as organic growth is concerned, we have a plant in Vishakhapatnam which has additional land for further expansion. We have close to 30 acres of land there, out of which only 50% is used. So we might put up some additional facilities there. But, as I said, nothing has been finalised so far.

In case you plan to enter new business areas, what will they be?
One area that we might look at entering is fine chemicals, where we are not yet present. Although the market is not very big (it is 10% of the total chemicals market), the margins are good and we have competence in that. This may comprise manufacturing derivates of formaldehyde.

On the inorganic front, will fine chemicals be your focus?
Although we manufacture a lot of chemicals, we are leaders in formaldehyde and manufacture it from both our plants in Vishakhapatnam and Ankleswar. But going forward we might also look at acquisition of new and latest technology on the fine chemicals front.

How did the deal with Aditya Birla Chemicals come through? Was your Renukoot plant on the block for a long time?
No, we were not planning to sell it; in fact, we were looking at expanding the capacity of our chlor chemicals division. But our advisors told us that the Aditya Birla Group was looking at some chlor alkali business and since they offered us a good valuation, we agreed to hive off the division.

Who were your customers from the Renukoot plant?
Almost every player who consumes chlor alkali in the northern part of the country was our customer, including Aditya Birla’s aluminium company - Hindalco. But our business was not totally dependent on them as we sold just 8-10% of the produce. Other customers were Balco, Hindustan Unilever, steel plants and others.