Heavy chemicals major, GHCL Limited will set up a greenfield soda ash plant of 0.5 million tonnes capacity in Kutch, Gujarat to increase its manufacturing capacities from 1.1 million tonnes per annum to 1.6 MTPA. This is seen as a move to help reduce the import dependence of the key ingredient for glass, ceramics and detergent industries.

The greenfield plant, to be set up with an investment of ₹3,000 crore, will require about 800 acres of land, of which about 70 per cent has already been acquired.

“We are in the process of taking the necessary government approvals and filing for the Environment clearances for the proposed plant,” RS Jalan, Managing Director, GHCL Ltd told Businessline .

The company, with its current 1.1 million tonnes facility at Sutrapada in Gir Somnath district in Gujarat, caters to about 25 per cent of domestic Soda Ash demand in the country.

During Vibrant Gujarat Summit in 2017, GHCL had signed a memorandum of understanding (MoU) with the Gujarat government to set up a Greenfield Chemical Complex in Kutch, Gujarat. GHCL looks to set up 11,00,000 tonnes per annum Light Soda Ash, 5,00,000 TPA Dense Soda Ash, 2,00,000 TPA Sodium Bicarbonate manufacturing plants besides a solid fuel-based 120 MW Captive Co-generation Power plant and other utilities in Mandvi taluka of Kutch district.

“Further expansion wasn’t possible at the current location. So, for the future growth, we needed an extra location. At the new plant, we would still have the scope for future expansions,” Jalan said.

The required investments will be met through a mix of internal accruals and debt. “The plant will take about 3-4 years to be ready. We have annual cash generation of around ₹500 crore. So, we will be able fund the plant with our internal accruals along with debt. We plan to maintain 1:1 D/E ratio,” he said.

In 2019-20, India imported record 9.5 lakh tonnes of soda ash, while domestic production stood at 33.8 lakh tonnes. The annual consumption hovers around 40 lakh tonnes. An increase in the domestic capacities will reduce the dependence on cheap imports to meet the consumption, which is growing at the pace of about 200,000 tonnes per annum.

“Consuming sectors such as glass - construction glass, flat glass etc are recovering from covid impact. The demand growth will continue and there will still be room for fresh capacities. So, this will continue to be a promising space for all the players,” said Jalan.

It is evident from the stock movement of GHCL, which has gained by nearly 200 per cent from its lows of ₹141 in October 2020 to ₹416 on September 17, 2021, thereby outperforming the index Sensex which gained about 47 per cent during the same time.

Even as GHCL moves ahead on the growth trajectory, there are some headwinds coming its way, which includes volatile prices, import dependence on limestone - a key input for soda ash and costly transport to Southern markets, which makes imports cost-effective over domestic sourcing.