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Tata Chemicals aims to become world No 1 in soda ash

Tata Chemicals Ltd aims to become the world's largest synthetic soda ash maker within three years, its chief executive said on Monday.

Managing director Prasad Menon said the company, part of the Tata Group, one of India's largest conglomerates, aims to increase sales and profit by focusing on three areas in which it already holds dominant domestic market shares -- soda ash, salt and fertiliser.

"We believe all three areas have tremendous potential for growth in the years to come," Prasad, who took the helm at Tata Chemicals six months ago, told a news conference called to explain the company's growth strategy.

In those three areas "we have a significant market share, and in most, the dominant market share."

Tata Chemicals held a 65 per cent share of the Indian market for sodium bicarbonate, 42 per cent of the domestic market for soda ash, and 37 per cent of branded salt market, Prasad said.

Soda ash is used to make glass, detergents, paper, textiles and dyes. Sodium bicarbonate is in making ceramics, silk, insecticides, baking powder and fire extinguishers.

The three businesses which Tata Chemicals plans to focus on already account for over 90 per cent of its total revenue.

Fertiliser accounted for about 45 per cent, soda ash 35 per cent and salt 11 per cent of Tata Chemical's overall sales of Rs 15 billion in the past year to March, company financial controller B P Chinoy said.

Divestments

Tata Chemicals previously announced plans to get out of the cement and detergent businesses. Last month the company announced it had reached agreement to sell its detergent unit in Pithampur, central India, to Jyothi Laboratories.

Prasad said the Bombay-based company is still looking for a buyer for its 4.4 million tonne a year cement division.

He said Tata Chemicals wanted to concentrate on businesses in which it was among the top three companies in India in terms of market share or profitability.

It was getting out of the detergent business after concluding investment and advertising costs to achieve that stature were too great.

And it wanted to sell its cement division because it was too small and too far removed from its focus on chemicals.

Core businesses

The three remaining core businesses are all areas in which Tata Chemicals has competitive advantages based on scale and market leadership, Prasad indicated.

For example, the company's Mithapur chemical complex in the western state of Gujarat is the second-largest single-site synthetic soda ash producer in the world.

He said the soda ash market was forecast to grow 8 per cent per year, driven by demand for use in making flat glass and detergents.

Prasad said the domestic market for sodium bicarbonate was not very large. But Tata Chemical, which has a dominant 60 per cent market share, is working to become a very low-cost producer to be able to go after regional export markets.

The company expects the domestic market to grow at 4-5 per cent a year.

In the salt market, Tata Chemicals has membrane cell technology that makes it a very efficient producer.

The company has unutilised salt production capacity which it could use to go after export markets, where international prices for edible salt range as high as $1 per kilogram, five times the Indian domestic price.

Tata Chemicals has the capacity to produce 875,000 tonnes of soda ash and 450,000 tonnes of salt per year.

Fertiliser

Tata Chemicals also foresees strong growth prospects for fertiliser.

"India is projected to need 240 million tonnes of food grains by 2010; it's now struggling to produce 200 million tonnes," Prasad said.

Noting that all the land suitable for agriculture is already under cultivation, Prasad said the only way to increase output is through more intensive use of fertiliser and of high-yielding seeds.

Prasad said Tata Chemicals was well placed to benefit from expanded demand for fertiliser as its Babrala urea plant -- the "most efficient and technologically advanced urea manufacturing facility in the country" -- was located at the centre of the Gangetic plain, the nation's most productive farm land.

Tata Chemicals shares on Monday closed up 3.3 per cent at Rs 46.35, while the benchmark index fell 1.67 per cent.

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