Urea Plant Show Boosts Indo Gulf Bottomline

Indo Gulf Fertilisers and Chemicals Ltd has significantly improved overall its performance in 1997-98. In the previous year, the performance of the company was not at the expected levels due to the breakdown in its ammonia converter basket which hit urea production.

In 1997-98, the Aditya Birla group company's urea plant operated at 120 per cent capacity producing 9.33 lakh tonne of urea against 6.68 lakh tonne in the previous year. So, armed with the higher production and increased demand for urea, the company recorded its highest-ever sales turnover in 1997-98.

During the year, sales turnover increased by over 36 per cent and net profit grew by more than 30 per cent. In fact, a 33 per drop in interest burden and a nearly 3 per cent fall in depreciation helped the company improve its bottomline. But, Indo Gulf Fertilisers net profit margin declined to 23.58 per cent in 1997-98 from 24.69 per cent in 1996-97.

 

The decline in profitability ratio indicates that the performance of the company in 1997-98 was not as spectacular as it appears to be. However, this can only be ascertained when the full audited results are available.

Indo Gulf Fertilisers was promoted in 1983 by a consortium comprising Grasim, Hindalco, Indian Rayon, Picup and Gulf Consolidated Co, Bahrain. Altogether the promoters hold a 51 per cent stake.

The company's 0.73 million tpa gas based integrated urea plant was set up at Jagdishpur (UP) under technical collaboration with Topsose, Denmark. This plant was completed in record time at costs which were lower than the budgeted Rs 850 crore _ making it one of the lowest cost urea producers in the country by virtue of using natural gas as a fuel.

The company's manufacturing cost is comparable with Middle-East countries where natural gas is plenty. Indo Gulf Fertilisers sells its urea under the `Saktiman' brand name, which after a brief stoppage, was relaunched in 1996-97.

The company will stand to benefit from the Hanumantha Rao Committee recommendation of a uniform retention price scheme (RPS) of Rs 6,050 a tonne.

The company's present RPS stands at Rs 5,900 a tonne. According to the Rao panel recommendations, the higher output over the norm will fetch higher profit for the company.

Apart from fertilisers, the company also manufactures chemicals, alkalis and allied products. However, fertilisers contributed more than 80 per cent of its turnover.

After the demise of Aditya Vikram Birla on October 1, 1995, his son Kumar Mangalam Birla has taken charge of the company as the chairman of the board. The Aditya Birla group has recently increased its holding in the company from 26 per cent to 32 per cent through a preferential allotment at Rs 53 per share.

The company, towards the end of the 1992-93 fiscal, successfully tapped the GDR market raising $100 million which was used for its copper smelter project at Dahej (Gujarat).

For early implementation of the project, the company plans a Rs 200-crore equity issue at a premium this year to part finance the Rs 1850 crore project.