Kanoria Chem's Rs 180 cr expansion

Kanoria Chemicals and Industries Ltd (KCIL) on Tuesday announced a Rs 180 crore expansion plan that will see the capacity of its chlor-alkali plant increase by 76 per cent and doubling of power generating capacity to 50 MW.

The expansion plan is funded through a Rs 150 crore debt and Rs 30 crore from internal accruals. The expansion plans that are already underway are expected to attain financial closure by November 2005. The total capacity of the chlor-alkali plant, after expansion, will be 88,000 tonnes per annum against 50,000 tonne capacity now.

R V Kanoria, chairman and managing director, said by doubling of the power plant's capacity, the company will be left with excess power of 12 MW which will be sold to Power Trading Corporation. The company expects to sign a power purchase agreement with PTC that will fetch Rs 2.25 to Rs 2.40 per unit.

KCIL is expanding its capacity to manufacture chlor-alkali with a cleaner membrane cell technology. "By 2008 we expect 75 per cent of our caustic soda production to come from membrane cell technology and by 2012 production from mercury cell technology will be completely phased out," Kanoria said.

As a cost-cutting measure, the company has also identified a new source for salt in Rajasthan. "Our existing source in Gujarat is a bit too far. With the new arrangements in Rajasthan, we expect to save Rs 1.5 crore annually on freight cost," he said.

The company's requirement for salt will be met equally by the source in Gujarat and Rajasthan. The company at present consumes 12,000 tonnes of salt per month.

"Post expansion and at 70 per cent capacity utilisation, we expect to cross the Rs 500 crore topline mark and an operating profit of Rs 100 crore," Kanoria said. The company had for the financial year 2003-04 reported a sales of Rs 360.31 crore and operating profit of Rs 52.4 crore.

The debt fund for the expansion will carry an interest burden of 8.5 per cent per annum. "Despite the higher debt content in funds for the expansion projects, we would remain a low-debt company. We undertook a financial restructuring 18 months ago and the our average cost of debt has been brought down to 9 per cent."

The fresh debt comes with a 3 year moratorium and a 5 year repayment period. The debt fund has been sourced from State Bank of India (Rs 85 crore), UTI Bank (Rs 35 crore) and UCO Bank (Rs 30 crore). The project execution contracts have been awarded to Thermax Ltd and Uhde India Ltd.