GFCL awaits pre-expansion environment sanctions

Chennai: The Rs82-crore expansion project of Godavari Fertilisers and Chemicals Limited is awaiting the environment and forests ministry's sanction. Sometime back a public hearing was successfully held seeking comments on the proposed project.

According to managing director K A Nair, the company is planning to expand capacity by 4.25-lakh tonne. The proposed project would manufacture granulated complex fertiliser. "Post expansion the company's annual capacity will go up to 1.5-million tonne.

For this Murugappa Group company the expansion is important as the current capacity utilisation is nearing the optimum level and for the future growth.

"It will take two years to complete the expansion project once the sanction is received. The project will be funded out of internal accruals and to a small extent through debt. Our primary objective is to expand the market," adds Nair.

Godavari Fertilisers which cut the interest costs drastically last fiscal is seeing a reverse trend. The company's interest cost during the current year has gone up by 122 per cent.

Speaking about that Nair says, "Nearly Rs500 crore government subsidy is pending from the government. The non-realisation of the huge sum forced the company to borrow more. "The loans are of various tenure – short and long term. The average interest cost works to 9 per cent."

As the railway freight has increased by 24 per cent owing to reclassification of goods, Godavari Fertilisers s dependent on road transport by restricting distribution only to nearby locations. Similarly, the company has consistently reduced the cost of production in the last three years.

Meanwhile, the company has posted an improved performance for the nine-month ended 31 December, 2006, this fiscal. Production increased to 8.94-lakh tonne and sales of manufactured product increased to 8.76-lakh tonne as compared to 7.52-lakh tonne and 7.65-lakh tonne respectively.

Consequently, the company's turnover increased to Rs1,419 crore during the first 9 months as against Rs1,113 crore posted during the corresponding period last fiscal. The after tax profit is Rs43.08 crore, after providing for depreciation of Rs4.94 crore and interest charges of Rs25.07 crore (previous year: Rs.6.32 crore and Rs.11.30 crore, respectively).