DCM Shriram bets on value-added businesses to fund future growth

is betting on newer value-added businesses, such as specialty chemicals and other downstream segments, to drive growth in a chemicals market where several pockets have been commoditized, crimping profits and underscoring the need to differentiate for building sustainable competitive advantage.

The company has already invested in capacities to make Epichlorohydrin and Hydrogen Peroxide. Although not specialty chemicals, these are value-added products for its core chemicals business. It will soon also manufacture epoxy. It is also investing in a research and development laboratory for developing more specialty chemicals.

“We are looking at various chemistries – value-add chemistries, intermediate chemistries, and even base chemistries. Because while we want to go up the value chain, at the same time we are looking at going up the scale levels also,” Vikram Shriram, vice chairman and managing director told ET.

The business conglomerate has its fingers in several pies like chemicals, sugar, alcohol, fertilisers and even PVC doors and windows under the Fenesta brand. But spinning off businesses into independent companies was not on the cards.

“Our board has raised this issue once or twice, but we have not had a discussion or any serious look at restructuring the group,” said Ajay Shriram, chairman and senior managing director.

The company presently has several new projects ongoing at an investment of Rs 2,350 crore. These include an investment of Rs 2,100 crore in the chemicals business toward a new power plant, capacity expansion for caustic soda and aluminium chloride and investments in the epichlorohydrin and hydrogen peroxide business. The company was also spending Rs 150 crore on a new distillery.

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DCM Shriram pared its debt from Rs 1,167 crore a year ago to Rs 122 crore at the end of the June quarter due to several positive factors. The government recently cleared all the pending dues of fertiliser companies. The company also had low sugar stocks, which helped with additional cash flow. That, coupled with other internal accruals, drove down debt.

However, the company was open to taking on more debt again to fund expansion.

“We are not scared of debt. This low level of debt currently is going to come back to normal levels with commensurate investments,” Vikram Shriram said.



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