ANNUAL REPORT - 2001
INDIAN ORGANIC CHEMICALS LIMITED
Ladies and Gentlemen,
I welcome you to the 41st Annual General Meeting of your Company. The
Directors' Report and the Audited Accounts for the period ended 31st March
2001 have been with you for sometime and. I hope you had an opportunity to
go through the same.
The slow down in the world economy coupled with the liberalization of
imports and tariffs have affected many industries and your industry is no
exception. It is further compounded by the tragedy, which happened in USA
on 11th September 2001. The impact is already reflected in the stock
markets all over the world. There is widespread concern of a possible
recession in US economy, which would have adverse effect on other economies
as well. We have to assess how these developments would affect the Indian
industry. We have seen press reports that the Government of India is
considering stringent measures like increase in oil prices, which may
further aggravate the situation. We are constantly reviewing the situation
and will take all possible measures to overcome the difficulties, which the
Company may have to face as a result of the above developments.
As you are all aware, the mainstay of the Company for several years has
been the manufacture of alcohol-based chemicals in our Chemicals Division
at Khopoli and the manufacture of polyester staple fibre in our Synthetic
Fibre Division in Chennai.
Both these businesses have faced a tremendous change in the the marketplace
over the last decade. With globalisation and the opening up of the Indian
economy, we have seen falling duty protection and increased competition,
not only in our Industry but in virtually every business! This was
inevitable and we had forseen these changes well ahead of others.
As a result, we had taken steps in both the Divisions to transform them
into globally competitive businesses. The implementation of the ideas and
strategies, which we have been presenting to you in the past, has taken
many years, but change for an Organisation does take time. It is now
extremely heartening to see that the Company is globally competitive in
each of its business lines.
My colleague, Mr. M. D. Dalal will give you a detailed presentation on each
business after my speech.
But, in brief, in the Chemicals business, alcohol-based Chemicals have
sustained this Division for over 30 years. However, these are all commodity
Chemicals and with globalisation, it was clear that this activity was not
going to remain viable. Hence, as mentioned in the Directors' Report, this
unprofitable activity is being phased out. Over the last few years, we have
systematically implemented strategies to transform this Division's focus
into Knowledge-based Chemistry intensive businesses like custom synthesis,
toll manufacture, contract manufacture and contract research. The Agreement
signed with Ciba Specialty Chemicals Ltd., Switzerland last year was
implemented successfully. The commercial production has already commenced
and the quality of the finished product has been well accepted by Ciba. We
now look forward to expand this relationship with Ciba. Besides this, we
are confident of adding new customers to this business. We are also
focussing on nucleoside chemistry as a major thrust area. This has
applications in gene-based therapy and diagnostic tools for detecting and
alleviating major diseases afflicting today's world.
The polyester fibre industry in India has seen major upheavals over the
last decade. From the 10 players that existed through the '80's there are
only 3 or at best, 4 left, with one being the dominant market player. It
was clear to us that if we were to survive in this business, we had to move
away from commodity fibres and get into niche markets. It was also evident
that we had to reduce costs in general and look for markets outside India
if we were to fully utilise our capacity and last but not least, use as
much of alternate raw materials as possible. It is with the implementation
of these strategies that we have been able to remain globally competitive
and survive during these difficult days of intense competition.
The Company's subsidiary, Futura Polymers Ltd., is engaged in the
manufacture of PET resins and preforms. It continues to operate to full
capacity even after Pepsi has exited the joint venture in 1998. This plant
has the unique advantage of tremendous versatility and we are capitalizing
on this strength by offering globally a wide variety of value-added resins
for different applications. In the domestic market we are the largest
supplier of high quality preforms to the main MNC's both for carbonated
soft drinks as well as for purified water. This is a high growth area and
we intend to maintain our leadership position in this field.
The unadjusted combined gross turnover and aggregate net profit of IOCL and
FPL for the year ended 31st March 2001 were Rs.408 crores and Rs.13.76
crores respectively. The networth of IOCL (less miscellaneous expenditure)
as on 31S' March 2001 was Rs.130 cores; for FPL it was Rs.106 crores. There
has been an increase in borrowings mainly to finance additions to fixed
assets. This has resulted in some increase in interest burden. During the
past few years, the Company has faced competing demands on its resources.
On the one hand, we had to take steps to phase out unprofitable plants
while on the other, we had to make strategic investments for future growth
and cost savings (like energy). We have also dramatically reduced manpower,
while improving productivity. Overdue loans and interest thereon were paid
by means of one time settlement with financial institutions with benefit of
some interest waiver. The steps needed for a total transformation are by no
means complete, but we have come a long way in restructuring the Company
into a position of strength to take advantage of global opportunities.
All these have meant investment for future; money has been spent on
measures that will ensure the Company's growth, not leaving enough surplus
for dividend. I trust that you would appreciate that the internal
generation has been. fruitfully utilized in the long-term interest of the
Company and its members. I would, therefore, request you all to bear with
us for some more time and your patience will be rewarded.
During the first quarter 1 April to 30 June 2001 the sales turnover was Rs.
4167 lacs. The turn over of FPL for the first quarter is about Rs.3980
lacs. As I mentioned in the beginning, there is a cloud of uncertainty
about the likely slow down of the US economy and its impact on other
economies around the world. We may assure the members that we will leave no
stone unturned to meet the challenges that may be imposed by such
I believe that the various efforts made by the Company In Improving the
operations and the profitability have helped the Company to sustain Itself
during the most difficult period in the past. We are moving forward with
the same confidence, with which we have weathered the storm and I am sure
we will continue to receive your co-operation to our efforts.
In conclusion, I would like to sincerely thank our shareholders for
extending their valuable support and reposing their confidence In the
Company. I also wish to express our thanks to the Central and State
Governments especially to Governments of Maharashtra and Tamil Nadu. We owe
our heartfelt thanks particularly to financial Institutions and Company's
bankers who have extended support and assistance during difficult periods.
In conclusion, I would like to sincerely thank my colleagues on the Board
for their wise counsel and support and to our employees for the devotion to
work and sincerity they showed inspite of severe constraints.
S. B. GHIA
Place : Mumbai
Date : 26 September, 2001.