Crispy days over for starch makers
Demand dip, high input cost weigh on margins; manufacturers forced to sell at reduced prices.
Demand from major consuming industries, including textiles and food processing, has taken a beating due to an overall industrial slowdown. According to industry insiders, the demand for starch and liquid glucose has dipped by 25 per cent in the past three months. The industry was also bleeding due to steep cost escalation of key inputs like maize.
“The input cost is hitting our margins. On the other hand, the demand from domestic and international markets is weakening. Manufacturers are forced to sell their produce at reduced prices. This is no longer viable for the industry. We have demanded an immediate ban on export of maize and reduction in excise duty on starch from five per cent to two per cent,” said Vishal Majithia, president, All India Starch Manufacturing Association.
Manufacturing capacities are also on the rise, with several new projects lined up for commissioning in the next two-three years. “We are also concerned about the new capacities being added. This will increase the maize grinding capacity from 1,500 tonnes per day (TPD) to about 3,000 TPD,” said Majithia, who is also managing director of Sahyadri Starch and Industries.
Persistently high input costs and low demand has led starch makers to incur losses. Some units have started downsizing production fearing further losses. “We are selling at much lower price just to stay operational. Starch prices have dipped to Rs 18 per kg recently from Rs 25 per kg two or three months back. There are no visible signs of revival in the near future. Hence, we are considering a in production by about 30 per cent for at least two months,” said Gautam Chaudhary, MD, Santosh Starch Products in Ahmedabad.
With the cost of raw materials, coal, logistics and labour high, starch makers are finding it tough to compete in the international market as well. West Asia, African countries and Southeast Asia are major starch consuming markets, where Indian starch players are facing stiff competition from French, German and Chinese suppliers.
However, some starch makers are comfortable even in the current scenario. BSE-listed Anil Limited sees no threat from a rise in new capacities and said the demand for starch products will increase in domestic and international markets.
“There has been no impact on demand for our products, as we mainly cater to paper, food, pharmaceutical and other industries besides textile. There is a marginal decline in demand from composite mills and more from the decentralised sector in the textile industry, but as we cater mostly to composite units, there has been only a nominal decline in our sales to textiles. Overall, the demand scenario for us is quite good,” said Amol Sheth, CMD of the company.
The stock prices of the company have, however, witnessed a fall on the bourse in the past one month (August 1 to August 30) — down almost 19 per cent in the past one month. Share prices of other starch makers have also witnessed a dip during the period — Riddhi Siddhi Gluco Biols Ltd lost 17 per cent, while Sukhjit Starch and Chemicals Ltd fell 14 per cent during the month.
“We are heading towards over-capacity in the starch industry. At such a crucial stage, the government needs to consider banning corn exports, even though there are attractive prices in the international market. The domestic industry should not be starved to cater to international buyers,” said Priyambhai Mehta, CMD, Maize Products.
As many as 12 projects are to be commissioned in the next two-three years. “What is attracting them to starch making is still a mystery for us but there had been a perception of corn being yellow gold for the processing industry. But the days are no longer the same, and the rising competition and high input costs is spoiling the pot for all,” said Mehta.