Tanfac sees over 50% erosion in net worth

Company was adversely affected due to increase in interest rate on account of poor credit rating on continued losses and the resultant erosion in net worth

Tanfac Industries Limited, a joint venture of the Aditya Birla Group and Tamilnadu Industrial Development Corporation Limited (Tidco), has intimated to the Board for Industrial & Financial Reconstruction (BIFR) on erosion of more than 50 per cent of its peak net worth.

The company said it was adversely affected due to the increase in the interest rate on account of poor credit rating on continued losses and the resultant erosion in net worth.

Tanfac manufactures inorganic fluorine based chemicals. According to its annual report 2013-14, the net worth for 2013-2014 eroded by more than 50 per cent during the immediately preceding four financial years. It reported a 19 per cent drop in sales at Rs 116.32 crore as against Rs 143.42 crore, a year ago on account of sluggish demand. Export turnover was at Rs 17.13 crore as compared with Rs 15.64 crore in the previous year, an increase of 10 per cent.

An email sent to the company seeking its comment on this remained unanswered till the time of going to press.

The volatility of rupee against the US dollar also raised the premium for cover charges. It reduced its short-term loan by Rs 6 crore to Rs 63 crore at the end of the financial year as against Rs 70 crore, a year ago.

The company’s most significant exposure relates to dollar since key raw materials -- Fluorspar  and Sulphur -- are imported or linked to international prices and foreign currency movements. China is a major producer of acid grade fluorspar and so it continues to determine the international prices of fluorspar. Similarly, the demand-supply position of sulphur sets the sulphur price.

“We plan to continue to work closely with our key suppliers to mitigate the impact. We intend to continue to hedge our imports through forward contracts in line with the company’s hedging  policy,” it said.

On the outlook, Tanfac said the company was considering moving to new-generation products using the existing infrastructure to ensure growth.  “The company will continue to focus on moving up the value chain in speciality products where it can have competitive advantage and grow sales volumes and margins”.

For optimum utilisation of its isobutyl acetophenone (IBAP) plant, it has signed a memorandum of understanding (MoU) with an interested party for producing IBAP on a  long-term conversion basis.

The company is hopeful of improvement in demand in 2014-15 in the domestic market. It is planning to give more thrust on improved price realisation and market enlargement along with focus on operational efficiency and cost-effectiveness.