"Everything was new to us at every stage and there were no precedents to take inspiration from, no one to seek advice from and no competitor to learn from. That is why it took us a fairly long time to get going," says Harivallabhdas.
The product line he had chosen did not make the task any easier. "But these are very versatile products," he says animatedly. Giving details, he says dimer fatty acids find application in epoxy resins, surface coatings, industrial lubricants, greases and corrosion inhibitors.
Linoleic acid is used in resins (paints), polyamides, surface coatings, inks, flexible packaging. Tocopherol is used for extraction of natural source vitamin E, which finds use in various fields like pharmaceuticals, cosmetics and food products.
Initially, HK had to struggle hard to find buyers. "Globally, there are three main producers who dominate the field of vitamin E - US-based ADM, Cognis Corporation (a Henkell spin-off), and Cargill.
"When HK approached Cognis, the latter was reluctant to start with a new supplier. But we succeeded in convincing them about our quality and after seeing things first-hand they had no doubts at all. Eventually, Cognis turned out to be a good business partner for us. They even helped us to fine-tune our operations," says Harivallabhdas.
Expectedly, in the first year of operations, HK suffered losses. "Our response was to infuse more funds into our business," says Nahoosh Jariwala, executive director of the company. "In the meantime, we entered into a pact with Cognis and became their dedicated suppliers. For three years, we did good business and then the dream-run ended with Cognis expanding its business and, in the process, cancelling our contract."
"Though Cognis gave us Rs 85 lakh as compensation, the cancellation of the contract put us in a tight spot as we had to start all over again, looking for new clients and new business. Of course, we managed but in the process learnt a valuable lesson: never depend on only one client," says Harivallabhdas.
After HK broke up with Cognis in December 2000, sales dropped immediately by 50 per cent. "Till then, we had been going nicely, after making losses in the first year. In 1998-99, we had a turnover of Rs 18 crore; in 1999-2000 we improved it to Rs 21 crore; 2000-01 was steady at Rs 21 crore again. Then, suddenly, 2001-02 saw us take a plunge at just Rs 11 crore," says Jariwala.
"Moreover, till the Cognis break-up, our profits were fairly steady - in 1999-2000, our profit after tax (PAT) was Rs 1.94 crore; in 2000-01, it went up to Rs 2.05 crore and in the year after the break-up, that is, in 2001-02, we posted a loss of Rs 56 lakh," he adds.
"But we have bounced back this year and our turnover in 2002-03 is Rs 17.50 crore. This year, we will wipe off the loss of the previous year, since our profit figure is Rs 1.20 crore," Harivallabhdas says.
After the Cognis episode, HK continued its search for new clients, and today the client list for tocopherols and sterols includes Riken Chemicals and Tama Biochemical (both from Japan), Cargill and even Cognis. Dimer fatty acids, monobasic, linoleic and oleic fatty acids are sold in the domestic market and clients include the likes of Asian Paints, Goodlass Nerolac, Atul (dyes) and Simpol.
"We are now looking ahead," he says. "We are exporting tocopherols containing sterols and are in the process of expanding capacity from 5,000 tonnes to 7,000 tonnes. We will be taking an additional loan of Rs 2 crore for our expansion project. In the long run, after the expansion is over, we will separate the two, that is, we will manufacture tocopherol feed without the presence of sterols, which is a fairly complicated task."
For the future, HK intends to depend on its trusted in-house technology to take it into the next league. Sums up Harivallabhdas: "Our manufacturing ability and technical skills, which are on par with global standards, have enabled us to see off our bad phase. We are now looking ahead."