Philips Carbon plans Rs 9 bn investment to increase production capacity

Optimistic over the rising demand for carbon black, driven majorly by the tyre industry and specialty black users, Philips Carbon Black (PCBL), India’s largest carbon black producer, has decided to up its existing capacity by 49 per cent from the current 0.47 million tonnes (mt) to 0.70 mt in the next two years.

It will entail an investment of Rs 9 billion by the company, which will be funded by a mix of internal accruals and a debt-equity financing.

PCBL is setting up a 60-acres greenfield plant in Ennore in Tamil Nadu at an investment of Rs 6 billion, which will have a production capacity of 0.15 mt. This plant is expected to be commissioned by 2020.

“Previously, we roughly used to sell around 26,000 tonnes of carbon black per month but now sales have touched 36,000 tonnes a month. A large part of the demand is driven by the tyre segment and since a lot of tyre producers are already in Tamil Nadu and expanding their capacity, it makes sense for us to set up a plant there”, Sanjiv Goenka, chairman of the RP-Sanjiv Goenka Group said.

PCBL is an RP-Sanjiv Goenka Group company.

Besides, it is also upping its capacity in its Mundra plant in Gujarat by 50,000 tonnes by December this year and in the Palej plant in the same state, another 30,000 tonnes capacity will be added by March 2019. Gujarat is another state where automotive manufacturing has a strong presence. Currently, the Mundra plant has an installed capacity of 0.14 mt and the Palej plant can produce 95,000 tonnes per year.

* Revenue from operations not comparable on account of GST roll-out | Source: PCBL

Its other plants in Cochin in Kerala and Durgapur in West Bengal, however, will not see any capacity enhancement.

Despite the rubber industry facing a shortage of carbon black, an essential component in reinforcing filler in tyre and other rubber products, PCBL continues to export 23-24 per cent of its production. Goenka reasoned that it is on account of long-term contracts signed with foreign buyers, which have to be honoured. 

It is estimated that in the last fiscal year, production of carbon black in the country stood at 0.84 mt while the consumption stood at RS. 0.9 mt. The deficit in production was majorly met by imports. However, against an annual demand of 1.29 mt, the industry can produce 0.95 mt.

According to a report from TechSci Research, the carbon black market in India is poised to grow at a CAGR of 8.78 per cent to reach $ 2,003.14 million by the end of 2026 from the level of $ 879.26 million in 2016.

Backed by increased sales volume, cost efficiency, debt reduction and higher focus on specialty black, which churns higher margins, PCBL posted a 234 per cent increase in its consolidated net profit at Rs. 2.30 billion during the year ended March 31, 2018. The same in the 2016-17 fiscal year stood at Rs. 0.69 billion.