GHCL will invest Rs 400-500 crore in FY22: Ravi S Jalan, MD

Ravi S Jalan, Managing Director, GHCL, talks about Q4FY21 numbers, outlook on price, demand, and textile business, the second wave of CORONA, debt, CapEx and expansion plans among others during a candid chat with Zee Business Executive Editor Swati Khandelwal

"The CORONA, particularly of the local lockdowns, has had an impact but I feel that it will not have a long term impact. Maybe, there can be a 10-15% downward demand in the first three months – April to June," Ravi S Jalan said

Ravi S Jalan, Managing Director, GHCL, talks about Q4FY21 numbers, outlook on price, demand, and textile business, the second wave of CORONA, debt, CapEx and expansion plans among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: We saw a good set of numbers this time. Going forward your demand on price outlook, especially for Soda Ash? What is your view on realization?

A: Rightly said that our performance for the quarter has been a good one. If I will talk about the top line then there is a growth of around 12% and overall profit after tax has jumped around 30%. The three months period has been satisfying. As you know that the first six months of FY2020-21 was quite impacted due to the CORONA but it bounced back well in the second six months and we were able to maintain our profitability. We achieved profitability of around Rs 450 crore. A significant improvement was seen in textile, which is worth noting, where we registered a revenue growth of around 35% and the EBITDA stood at around 18%, which was around 8% last year, and this was a good jump. As far as outlook is concerned, prices of soda ash are upward although it was moving downward in the last one to one-and-a-half year. In comparison to the same quarter last year, there was a drop of around 4% in this quarter.

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But the current prices are looking upward, there is an improvement and demand is completely back, except in the container glass where there is slight slowness. But detergent and flat glass among others, there is a good improvement. Even textile is doing well and overall both segments spinning and home textile, both are doing well. So, I think the period of 2021-22 will be a good period for us in both the businesses.

Q: What impact the second wave of CORONA will have on your business and what s your internal working as the situation is quite volatile and almost every state is opting for the lockdown?

A: The CORONA, particularly of the local lockdowns, has had an impact but I feel that it will not have a long term impact. Maybe, there can be a 10-15% downward demand in the first three months – April to June. On the second hand, supply – the goods that come through import – will reduced but it will not have a major impact on the sales of the domestic industry, as far as the chemical is concerned. As far as the textile is concerned, you know that Europe and the US have opened completely and demand is good there, so, I don’t think that there will be a major impact on textile in the coming times. Possibly, there can be some impact on the factory output due to the COVID, which is likely to be short-term. So, I am not seeing a huge impact of CORONA on our business.

Q: You saw good growth in the textile business. How much growth should we expect in FY22 and what are the factors that will make this growth sustainable? Also, update us on demerge plan of the textile business and what are the timelines?

A: As I have said that structural changes have been there in the textile industry due to the geopolitical situation in which the products which were being imported to other countries from China is shifting now mainly to India, Vietnam and Bangladesh. These three countries are getting their advantage, so, talk about any garment or home textile, a good demand will be seen in a slightly longer time. The textile industry will definitely get that advantage structurally in the time to come. Spinning is doing good as overall demand has been good. So, 2021-22 is looking great from the point of view of textile. As far as demerger is concerned, as you know that court has asked to hold a meeting of shareholders, secured creditors and unsecured creditors on April 8, 2021, and the shareholders and unsecured creditors have approved it but the secured creditors asked for a 90-days time due to the COVID and they have been provided that time. Now, they are scheduled to meet on 8 July and if they get approval on that day then I believe that the entire process of demerger will be completed by November.

Q: You have managed to reduce a good amount of debt this time. In FY22, how much debt reduction can we expect? Also, what are your expansion plans for FY22?

A: Rightly said that we have made debt repayment around Rs 772 crore and now, the debt stands around Rs 800-850 crore. Our debt-equity ratio is 0.29, which is quite low. Now, we are focusing on growth and now, we have taken a good growth target in textile and are making a Brownfield expansion in Soda Ash, which was not done last year. At the same time, we are also trying to expand our basket. From here, we will be on a journey of growth, so, I don’t think that we should reduce the debt but our investment will be towards growth. Going forward, it will bring a good improvement in our top line and bottom line. We are working on our roadmap for five years in which we will look forward to increasing the basket of our products, increase our investment in textile and make backward integration in soda ash, which will increase our margin. And, we are working on those.

Q: You are making a five-year plan. So, let us know about the CapEx that is being planned for the purpose and also provide a break-up in terms of CapEx for textile and chemicals?

A: We will invest around Rs 400-500 crore in the ongoing financial year 2021-22. If I will have a look at our cash flow then the expansion and growth will happen from the internal accrual. As far as the next four-five is concerned, we are working on it, therefore, I can’t provide exact numbers in terms of what amount will be invested in which area but soda ash Greenfield is also its part. So, as I informed you that we will manage everything and complete this journey through the internal accrual. Also, we have a discipline for debt and will not break that discipline and will not be extra leveraged but within the parameters, we will grow in both sectors, namely textile as well as chemicals.

Q: Are you looking forward to inorganic growth opportunities, if yes, is there anything on the radar and where the possibility is more either in the textile or the chemical segment?

A: Definitely, all the options are open. Inorganically, we are also looking towards chemicals, but one thing is very clear that whatever will be done will be related to our core competency and the chemical space where we are and we will invest only in the industry that is similar to us and going forward, it will have a larger platform to increase the business. So, we are looking for opportunities in both organic and inorganic areas.

Q: Promoter holding stands at 19.24%. Do you have any plans to increase the promoters stake in the company?

A: As far as the promoter is concerned, investment is the decision of the promoter and it is a professionally managed company. As you know, our investor, which includes, FFIs, Indian domestic mutual funds, has increased a lot in the last two-three years. A large part of our holdings is with good mutual funds and FFIs.

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