Gulshan Sugars lines up Rs 37 cr capex plan

To cash in on the forthcoming demand for quality papers in India, Gulshan Sugars and Chemicals Ltd, a Muzaffarnagar-based calcium carbonate producer, is expanding its existing capacity by 20,000 tonnes at a capital expenditure of Rs 37.4 crore. This would take the installed capacity of its plant to 90,000 tonnes per annum.

As part of the expansion, the company will also add a 3-Mw captive power generation to make it 6 Mw per annum.

The project is set to go on stream by April 2007.

At present, the company offers calcium carbonate for application in rubber, poly vinyl chloride, plastic, toothpaste, etc but the additional capacity would purely mean providing calcium carbonate to quality copper producers.

"This is an import substitute as this quality of calcium carbonate would be produced mainly for paper industry using 'wet grading technology' provided by IVA Industries, Broughton (Germany). As the demand for quality paper is projected to remain high due to rising disposable income of the middle-class, the timely expansion would provide us an edge over others," said Chandra Jain, managing director of the company.

As per IDBI's estimates, the total project cost entails Rs 37.4 for which the leading industrial bank has sanctioned a loan of Rs 8 crore. The company is spending Rs 3 crore through internal accruals. It is entering the capital market to raise Rs 26.4 crore.

The issue will open for public on November 22 and closes on November 28.

The public issue of 66 lakh equity shares is being offered at a fixed price of Rs 8 with a premium of Rs 32 each.

"The role of calcium carbonate in paper industry is to purify pulp and remove contaminants. Hence, the potential of this product in India is immense," said Jain.

The company's expansion plan is proposed in the existing plant at Muzaffarnagar because of easy accessibility of its major raw material ie limestone, which is immensely available in Paunta Sahib, Himachal Pradesh.

Apart from this, other raw materials including husk and baggasse are abundantly available in Uttar Pradesh, a rice growing area.

The company proposes to sell its produce mainly to ITC, the existing customer, and West Coast, the two major paper manufacturers in the country.

The calcium carbonate installed capacity in the country is estimated at 4.45 lakh tonnes of which one lakh tonnes is shared by unorganised sector.