Seya Industries to invest Rs 580-cr on capacity expansion

To capture the space vacated by China following stringent environment norms

City-based chemicals manufacturer Seya Industries Ltd (SIL) has chalked out Rs 580 crore investment plans for capacity expansion and to meet growing chemical demand for exports and local consumption.

To meet its captive demand, SIL plans to set up a sulphuric acid and specialty chemicals unit at its existing location in Maharasthra at an expenditure of Rs 370.53 crore. Apart from that, the company proposes to enter into backward integration through setting up a para nitro chloro benzene (PNCB), ortho nitro chloro benzene (ONCB), a raw material for sulphuric acid, at an expenditure of Rs 142.63 crore. Additionally, a sum of Rs 67 crore is proposed to be spent on ortho anisidine / fast red B base (forward integration into specialty chemicals).

"We have envisaged forward integration and to increase our product mix of specialty chemicals, the need based expansion of its intermediates capacity, ie, PNCB, ONCB and backward integration into manufacture of sulphuric acid. We have also included a horizontal integration into sulphur based products at an accumulative investment of Rs 580 crore without land cost," said Ashok Rajani, Chairman, SIL.

The company proposes to to fund the expansion through a mix of debt, equity and internal accruals for which a formula is currently being worked out. SIL promoters has already spent Rs 150 crore in the form of preference shares.

"The expansion will reduce the cost of raw materials, energy and logistics. The implementation will increase SIL's presence in end-user spectrum like specialised pigments, personal care, paints, printing inks, and textiles," said Rajani.

With Chinese government shutting many small and medium size units demand of chemicals from India has increased suddenly. To meet rising chemical demand, therefore, Indian chemical manufacturers have ramped up the existing capacity and entered into backward and forward integrations.

Most of the players in India are compliant to the international environmental norms. Their capital expenditure and operational expenditure are already factored in.

"This is the advantage of Indian players. The new norm introduced by the government of China to treat the waste coming out of the factories, will add cost to Chinese manufacturers resulting in increased cost of production. India will have an advantage as the government was very stringent with compliance of these standards and all the manufactures have been following the same. Hence, Indian manufacturer will have a cost advantage over Chinese manufacturers," he added.

With raising debt, there will be an increase in debt in absolute terms, but the debt-equity ratio will not change. Overall the management's endeavor is to maintain sustainable level of debt which will support substantial quantum of debt repayment over the years.