Indian industries should become competitive: Ravi S Jalan, MD, GHCL

Ravi Shanker Jalan, Managing Director at GHCL Limited, talks about the results of March quarter, future outlook, the impact of coronavirus and concerns related to an alleged increase in subsidized import of soda ash among others during an interview with Swati Khandelwal, Zee Business. Edited Excerpts: 

The numbers for the March quarter was quite low. What led to this fall and what is your outlook for the future?
If you have a look at the numbers of the fourth quarter then definitely there is a drop in EBITDA when compared to the corresponding quarter of last fiscal. Three things have led to this drop and they are (i) the margin for soda ash has fallen by 4%, however, there was a price drop of 11% in soda ash price when compared to the same quarter of last year but 7% of the same was recovered by cost. (ii) Our plants were shut down from March 23, due to the pandemic, which means there was a production loss of eight days in all three plants in both textile and soda ash. (iii) We took a prudent decision and took a provision of Rs 20 crore in our balance sheet on the inventory of the textile. But, if these numbers are compared to the third quarter than of the same financial year than you will find that the gap is not so big and stands at just Rs 30 crore. This gap happened primarily due to two reasons (i) provision of Rs 20 crore for textile and (ii) shut down of the soda ash plants for almost eight days in March. There is an improvement in the margin when compared to the third quarter. 

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Do you think that the concerns due to coronavirus have been addressed to some extent and tell about the level to which production capacity has reached?
Situation was looking quite grim some one month ago but we are getting some positive indications in since last one month. Our chemical plant was restarted on April 20 with 40% capacity and has been increased to 60-65% by now. Major consumption comes from two products, detergent and glass. Recovery in demand for detergent has reached 90-95% level, while the demand for glass is opening up. So, we believe that recovery will get better in the second quarter and reach 80-90% by the third quarter. 

Agriculture ministry has come up with a draft proposal to ban 27 insecticides. Will it have any major impact on your soda ash business? 
Soda Ash is not used in agriculture. It is majorly consumed in detergent and glass, which includes container glass as well as flat glass. Demand in container glass will recover as the liquor industry is opening now, while flat glass will recover after construction activity will be reopened. In addition to this, soda ash is also consumed in the textile sector and recovery is visible in this sector as well. Overall, we can see a good recovery of soda ash but agriculture will not have any impact on agriculture. 

The industry in the recent past has raised certain concerns for an alleged increase in subsidized imports of soda ash especially from Turkey, which is affecting the domestic players. What is an update in it and what impact it is having on the business as well as margins?
It is a valid question and we have been representing it in front of the government for the last several months. Some two years ago, a new plant with huge capacity for production of soda ash was installed in Turkey and its capacity is much more than the overall capacity available in India. The Asian market is a big market for them and that’s why their prices are being bumped. At the same time, there is a huge devaluation of their currency in the last few months, which is an advantage for them and its impact is being felt in the soda ash industry of India. As far as the margin is concerned then its price has dropped by almost 11% in the last one year and is falling more. So, it will have an impact on our margins in time to come.

You cater to many sectors through your business so companies like you will have a huge contribution in government’s plan of creating an Atmanirbhar Bharat (self-reliant India), So are you looking forward to duty structure changes and have you some proposals related to it to the commerce ministry?
I’ve always believed that Indian industries should turn competitive. And, we can’t make them competitive by depending on the subsidies and duty structures of the government. We will have to turn them competitive ourselves. However, there are certain issues related to infrastructure which increases the cost structure of the country. To that extent if we get some support from the government than it will be helpful for us. As far as soda ash is concerned then India has the capacity and we are globally competitive in this regard. The government can support us by supporting us in case of (i) It should support us by protecting us from the materials that are being dumped in India from other countries at a very low cost, (ii) transactional cost and (iii) provide some concession in the timeframe in the projects that have been developed in the Greenfield areas.