A company that faced a heavy debt burden and extensive interest outgo leading to net losses, Gujarat Narmada Valley Fertilizers and Chemicals Ltd (GNFC) has made a swift turnaround to join Gujarat's state-run companies in a billion-dollar market cap club. Speaking to BusinessLine, Managing Director, Rajiv Kumar Gupta, shares insights about the efforts on the marketing and strategic front that made the PSU profitable and long-term debt free. Edited excerpts:

GNFC has shown a remarkable financial turnaround from a debt-laden, loss-making unit to a profit-making company. What led to this turnaround?

To come out of liabilities worth Rs 7,000 crore a few years ago, we worked towards making operational and productive existing non-operational and unproductive assets, i.e. the TDI (toluene di-isocyanate) plant at Dahej, which had seen cost and time over-runs. We restructured the product mix, implemented a new pricing strategy and expanded exports to turn profitable. For the past few quarters we have been posting record numbers every quarter. We made the TDI plant operational. Simultaneously, we focused on non-TDI revenues, which have paid-off, and revenues from other chemicals such as concentrated nitric acid (CNA) and weak nitric acid (WNA) have grown by almost 90 per cent. We also started trading in methanol imported from Iran. This clearly led to the revival of GNFC after the net loss of Rs 452 crore posted in 2015.

What is the revenue composition at present? Going forward, what will your focus areas be?

There are two segments to our revenues, fertilisers (35 per cent) and chemicals (65 per cent). We discovered that cheap TDI imports from China, Korea and Japan were posing stiff competition and we were unable to compete with them. For diversified and stable revenue sources, we have started expanding to export markets. Earlier, GNFC was exporting to about six countries. We have made the TDI vertical profitable by not just operational efficiency but by selling more in the overseas markets. We opened new avenues in Africa, Southern Latin America, Middle East, Europe and the Asia-Pacific. Today, we export to 66 countries, including China and Korea. Last year, we exported a total quantity of 26,000 tonnes. This year's target is 30,000 tonnes. We also promote exports of non-TDI chemicals. After a gap of 10 years, we started formic acid exports and are also expanding exports of ethyl acetate and methyl formate.

Looking at India's GDP growth projections between 6.75-7.5 per cent, how do you see growth happening for your segments?

Considering the current scenario and future demand, we believe our growth should be more than GDP growth. The demand for chemicals is increasing and there are new areas coming up. It is wrong to attribute chemical demand growth to closures in China. As of now, demand is opening up, hitherto in unknown regions of the world. Our focus is on Africa, where demand for chemicals and other products is growing exponentially. I feel that the chemical sector will grow at a higher rate than GDP in the next two years.

Fertilizer growth is dependent on many factors such as monsoons and limited production facilities. It cannot be treated on a par with GDP growth. However, For GNFC, fertilizer revenues grew by over 4 per cent last year. But the fact remains that revenues and profits in fertilisers will grow at a much slower pace than in chemicals.

For a PSU, there are concerns on slippages and financial inefficiency. How do you address such issues at GNFC?

For transparency in financial operations, we have adopted e-tendering in all procurement and created a multi-level hierarchical committee system for approvals. We have put in place a concept of 'extra savings', where rates are re-negotiated so as to achieve the lowest possible ones. By this, we have saved Rs 700 crore in the last few years. Secondly, we have implemented reverse auctions to sell chemicals, and also introduced reverse auction in procurement. This way, we have been able to achieve significant savings.

In the past couple of years, GNFC has launched several initiatives in the digital and FMCG space. Are you redefining the company?

There is a misconception that GNFC is just a TDI maker. GNFC is much more than that. The company has to be looked at in a holistic perspective. The cashless drive that we took up earlier through our digital intervention is still going on. Everyday we are selling fertilizers at GNFC outlets through cashless. So far we have sold fertilizers worth Rs 113 crore to almost 3.18 lakh farmers. We have made townships 100 per cent cashless and we guide and handhold other townships for technical guidance.

For our value-added neem-based products, we see phenomenal growth going forward. The segment has the potential to touch Rs 500 crore in revenues in the next two-three years. We are ramping up production capacities and seed collection. This is aimed at generating livelihood for rural women.

What are your capex plans?

We have received the board's approval for projects, including greenfield and brownfield expansions. We are planning expansions for formic acid, CNA and acetic acid production. We have less CNA to sell to our customers because most of it is consumed by our own TDI unit. There is a potential demand for CNA in the domestic market. We are also planning to take over the existing formic acid unit of one of the fertilizer companies in the country. But that is in the discussion stage right now. Of the formic acid consumption of 36,000 tonnes, GNFC produces 22,000 tonnes, with the rest (about 14,000 tonnes) being imported.

We are looking at a greenfield project in acetic acid as it is an important area where India is highly dependent on imports. Against 1 million tonnes of consumption, India has acetic acid production of 1,50,000 tonnes, which GNFC produces. The rest (850,000 tonnes) is imported, costing Rs 5,000 crore. We want to replace these imports and fulfil the 'Make In India' vision. We plan to invest about Rs 150 crore for expansion of our ammonia production capacity, besides Rs 200 crore for TDI plant expansion.

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