Chemplast Sanmar’s Rs 600 cr PVC plant goes on stream

Hemamalini Venkatraman, ET Bureau

CUDDALORE: Chemplast Sanmar began trial production at its greenfield PVC (poly vinyl chloride) plant at Cuddalore on September 9, 2009, making the flagship of Sanmar group a leading producer of PVC in the south. The plant with a capacity to produce 1.70 lakh tonnes entailed an investment of Rs 600 crore.

The company conceived the project in 2004 and after receiving approvals, started the groundwork in mid-2005. Thereafter, it faced a series of political and environmental hurdles, before the project finally took off. At one time, it had planned to locate the project in Andhra Pradesh.

The original cost was Rs 520 crore and production should have commenced in October 2008, but various delays made the company to suffer Rs 80 crore loss, Chemplast Sanmar chairman P S Jayaraman told visiting media persons here. The new plant will be inauguarated on Monday by Tamil Nadu deputy CM M K Stalin.

"This plant (on 69.5 acres of 90 acres allotted by Sipcot) means a lot to Chemplast. We are the pioneers in the manufacture of PVC in the country and have been present in this industry for 40 years now," he said, adding the annual capacity of its existing plant at Mettur was also increased to 65,000 tonnes .

Though it considers its current debt:equity ratio of 4:1 not a healthy sign, the company is confident of improving its position to 2.5:1. "Once the plant is commissioned, we would have a proper gearing and the position will improve," Mr Jayaraman said.

Its average cost of debt for the project has been hovering around 10% with funds tied up for 11 years apart from meeting its working capital needs.

It is upbeat on the prospects banking on volume growth and backward integration. This is expected to protect its bottom line and help the company in tapping the opportunities in the growing PVC business. The company is hoping to leverage on its its strengths as a leading PVC producer in the south. On a base turnover of Rs 800 crore, Chemplast Sanmar is looking to add Rs 1,000 crore every year "with a decent profit."

India’s PVC market is estimated to be one million tonne, whereas the global production across 50 plants is pegged at 35 MT. The per capita consumption of India is a meagre 1.2 kg unlike other countries like the US (19), Germany (17.4) and Thailand (9.3).