Indo-Jordan Chemicals mulls expansion

By K. T. Jagannathan

CHENNAI, JUNE 18. Indo-Jordan Chemicals Company (IJC), a joint venture between fertilizer giant Southern Petrochemical Industries Corporation (SPIC), Jordan Phosphate Mines Company (JPMC) and the Arab Investment Company SAA (TAIC), is contemplating to double phosphoric acid capacity at its Eshidiya facility in Jordan.

The plant has a capacity of 700 tonnes a day. Though there appears to a broad consensus within the board for doubling the capacity, IJC has chosen to await the green signal from JPMC, a public sector undertaking in Jordan, before proceeding to draw up a clear road map for implementing the same.

According to Mr. Babu K. Verghese, Deputy Chairman and Managing Director of the company, the IJC proposal will have to go in tandem with the expansion plans of JPMC, among the largest producers of high quality rock phosphate in the world. For JPMC, which holds 34.8 per cent stake in the joint venture, supplies IJC the critical raw materials - water and rock phosphate.

A commitment to supply these on a sustained basis for a long time is a sine qua non for the joint venture to go ahead with its expansion plans. Currently, JPMC is supplying 3.5 million cubic metres of water and 1.8 million tonnes of rock phosphate to the venture. IJC may need twice this much once it doubles its capacity.

Naturally, Mr. Verghese feels, JPMC will have to the weigh the pros and cons before giving its consent for IJC to go ahead with expansion plan.

The joint venture is a unique one. While the majority partner SPIC, which holds 52.2 per cent stake, is the buyer of the finished product, JPMC is the supplier of inputs for IJC. The rest of the equity is held by TAIC, a joint stock company owned by 15 Arab States. The $170 million project with a debt-equity ratio of 60:40 went commercial in July 1997. The French firm Kremps did the process and design engineering. Kremps had sub- contracted a part of the work to SPIC-SMO. A part of the SPIC equity into the venture came via equipment supply to IJC.

Mr. Verghese is optimistic that JPMC will give its nod for the expansion plan. In his reckoning, it should not cost more that $170 million to double capacity. The execution time, however, should shrink considerably since IJC has already the design and capability. The initial project took 30 months to fructify.

According to him, International Finance Corporation (a World Bank affiliate) has shown interest in the expansion proposal and has indicated its inclination to participate in the equity. If cleared, the expansion, Mr. Verghese says, will be funded by a combination of sources - internal accruals, promoters' contribution and other means.

While cautioning that the capacity doubling proposal is subject to JPMC clearance, Mr. Verghese, has said that IJC is not in favour of going into any downstream products. In his view, IJC is better served by focussing on the single product it has on hand than dissipating its time on small investments in downstream ventures.

Mr. Verghese, who has just joined the board of SPIC, has indicated in a chat with this correspondent that IJC may consider going public. It is contemplating a listing on Jordan stock exchange. For one, this should enhance its image. For another, it will help IJC to take advantage of market capitalisation. He has, however, not indicated any time frame for this to happen.

The strength of the IJC board, in the meantime, has been increased to seven from the existing five following a change in the Government rule in Jordan. Consequently, JPMC presence has gone up to two from one. TAIC has one nominee. The SPIC group can have three representatives as against two now. The Chennai group has not yet increased its strength on IJC board.The joint venture posted a turnover of $88.20 million in 1999 ($82.73 million in 1998). It earned a net profit of $11.14 million ($13.10 million).

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