G.K. Nair

Kochi , July 14

THE State Government is likely to consider favourably the debt-restructuring proposal of the State-owned Travancore Cochin Chemicals Ltd (TCC) at nearby Eloor.

The Chief Minister, Mr Oommen Chandy, is understood to have taken a positive approach to ease the company's debt burden as it might block its capacity expansion, which is necessary to meet the potential increase in demand in its captive market.

A capital-restructuring proposal was submitted to the Government about two years ago and it is still under consideration of the authorities. "If the loan is converted into equity or a soft loan is provided to liquidate the high-cost loan then the company could make a turnaround," the TCC Managing Director, Mr N.R. Subramanian, told Business Line on Thursday.

The present capacity of the unit is 150 tonnes a day and that would be raised to 175 tonnes by July next year. The current demand in the State is met by operating its only plant throughout the year at a higher capacity. In fact, to meet the current demand the capacity should be 175 tonnes. Then only the plant could be shut down for a month for annual maintenance, he said.

According to him, the company's major customer Kerala Minerals and Metals Ltd (KMML) at Chavara in Kollam district is in the process of expanding its capacity to 60,000 tonnes by next year and to one lakh tonne by mid-August 2007. KMML absorbs 60 per cent of chlorine and acid produced by TCC and when its capacity is expanded to 60,000 tonnes the demand for these products would also go up correspondingly.

Another customer of chlorine and acid Cochin Minerals and Rutiles Ltd (CMRL) is also in the process of expansion, he said. Besides, Hindustan Newsprint Ltd (HNL) at Velloor in Kottayam district, a major customer of caustic soda, is also in the expansion mode. Given this scenario, expansion of TCC's capacity by 50 tonnes a day has become inevitable, he said.

Though the company has been making cash surplus the heavy burden of debt servicing has pushed it into the red. Once the loan of Rs 47 crore taken for setting up the membrane cell plant in 1995-96 is converted into equity or an interest-free loan is arranged for 4-5 years, the company would be able to liquidate the debt, he said. TCC had already paid over Rs 50 crore towards interest alone so far, he claimed. The unit had to provide Rs 13 crore for depreciation while the annual interest of Rs 6 crore was doled out towards interest on loan. These factors had resulted in the company making a net loss of around Rs 4 crore in 2004-05, he said.

Further capacity expansion could be financed by the company's own resources if it came out of the debt burden, he said. During the first quarter of the current fiscal it has made a cash profit of Rs 4 crore and a net profit of Rs 1 crore, he said.

On the raw material availability, he said, the supply has been affected by unseasonal rains in the Tuticorin area where from TCC used to procure its salt requirement. Following disruption after the tsunami, it has been procuring salt from Gujarat. The consequent rise in cost due to increased freight is offset by the superior quality of the salt, which reduces the requirement of other chemicals used in the manufacturing process, he said.

The turnover of the company in 2004-05 stood at Rs 107 crore as against Rs 109 crore the previous fiscal. The decline, he said, was because "only the membrane plant was running during the last financial year with a lesser capacity". During the current fiscal, it would be able to operate above the installed capacity of 150 tonnes a day, he said.

© Copyright 2000 - 2009 The Hindu Business Line