Ambarish Mukherjee

We plan to have around 30-32 stores operational by March 2006 in north India. The petrol pumps are set up by Bharat Petroleum, while we run them. We sell all products required by farmers such as seeds, fertilisers, farm equipment and we have agronomists in every store to give farmers the right technical advice.

Mr Ajay S. Shriram, Chairman & Senior Managing Director, DCM Shriram Consolidated Ltd

Mr Vikram S. Shriram, Vice-Chairman & Managing Director.

New Delhi , Feb. 6

DCM Shriram Consolidated Ltd has spread its activities in areas as diversified as chemicals and fertilisers, rural retailing, manufacturing of doors and windows, running of petrol pumps and manufacturing cement.

This is apart from the traditional commodity businesses that it pursues. The company has shown spectacular growth over the past few years. The company's Chairman, Mr Ajay S. Shriram, and Vice-Chairman, Mr Vikram S. Shriram, share their thoughts on the present and future of the company.

Excerpts:

While other companies of your size have shifted focus to core areas, your company appears to be very diversified. What is the philosophy behind such an action?

We don't look at it that way. I think if we look at history, what is important is to look at what constituted the company when the restructuring took place. What is the performance of the various divisions and how are things moving vis-a-vis what we consider to be satisfactory. Then considering the businesses we are in, they have potentials for growth and they are the types of businesses where they can add value to total networth and growth of shareholders' value.

The second parameter why the company is into such diverse activities is because of the strong inter-linkages between the businesses.

Then there is the question of management focus and constant monitoring of various businesses. We have divided all the businesses into strategic business units.

What are the interlinkages?

We have a chlor-alkali plant, we get chlorine which is piped directly into the PVC plant. So there is a direct movement of material.

Similarly, in the PVC process, we have the acetylene plant. Now the sludge that is left after making acetylene becomes the raw material for making cement. So factually speaking our cement plant is more like a pollution control plant rather than a stand-alone cement plant. We also have an advantage as the sludge is much whiter and consequently the cement is much whiter. It commands a premium in the market due to that. And the biggest advantage is that we generate 85 MW of power at our complex in Kota and this is used by all the plants in the complex.

What are the tax advantages or disadvantages of having so many business units under the same company?

As one division's output is used by another, it is tax efficient. If they were separate companies there would be incidence of sales tax or other forms of taxation. Also overhead costs would go up if we had different companies. Plus, the benefits of size and scale give you a much better cash flow situation.

Your company's latest effort is the Fenesta brand of doors and windows. This marks your entry into the consumer products segment. What prompted such a decision?

We wanted to move up the value chain in as many businesses as possible to add value to our commodity businesses. In the PVC plant, we already make PVC compounds that are used for making end products such as automobiles, cables and computers. So we thought since we are moving up the value chain by making compounds, why not move up the value chain further to consumer products. With that objective we went in for Fenesta where we have collaboration with a UK-based company.

You have also entered retailing through setting up the Hariyali Kissan Bazar stores. You are also setting up petrol pumps alongside them. What other plans do you have for these stores?

We plan to have around 30-32 stores operational by March 2006 in north India. The petrol pumps are set up by Bharat Petroleum, while we run them. We sell all products required by farmers such as seeds, fertilisers, farm equipment and we have agronomists in every store to give farmers the right technical advice.

We are examining what new products can be added in our stores. We have already introduced veterinary medicine but have not yet decided whether to retail human medicine.

Whatever we may do we have to do it in a well thought out and structured way after a market survey because ultimately we have to ensure that the farmer wins. If the farmer wins, only then will it be a win-win situation.

Is your proposed expansion, worth Rs 340 crore, of the Kota plant with credit from International Finance Corporation on the cards? What are the benefits you hope to obtain from it?

The company expects multiple benefits from the expansion. We are replacing the mercury-based caustic soda plant with membrane-based technology and increasing the capacity from 135 tonnes per day (tpd) to 250 tpd. The calcium carbide capacity is being increased by an additional 30 mega volt ampere (MVA) besides the present 32 MVA. PVC plant capacity is being increased from 110 tpd to 170 tpd along with upgradation of technology.

Cement plant capacity is being increased from 2.75 lakh tonnes a year to 4 lakh tonnes a year.

You have already recorded close to 40 per cent growth during the first nine months in terms of turnover compared to the last fiscal. What are the year-end projections like?

For the financial year 2004-05 we expect to clock a turnover of around Rs 1,700 crore. But once all our expansion plans are through, by March 2007 our turnover would be in the range of Rs 2,200 crore to Rs 2,300 crore.

The fertiliser industry during the current fiscal had undergone rough times. What are the issues still pending and how are they affecting your company?

Yes. The fertiliser industry has its own typical problems. As of now there is no urea policy beyond March 2006. The Alagh Committee has been set up to formulate what has to be done after March 2006 and hopefully things would be in place by then.

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