Tata Chemicals seeks to reposition itself as a consumer goods firm

Mumbai: Tata Chemicals Ltd, the maker of Tata Salt, is trying to position itself as a consumer goods company rather than a fertilizer maker.

Tata Chemicals is in a transformational mode, said R. Mukundan, managing director of Tata Chemicals which makes products ranging from water purifiers to urea.

“We are instituting changes from an organizational culture point of view, and we have created a full-time position of chief transformation officer to support, guide and facilitate cultural transformation within the company from a commodity mindset to a consumer and technology mindset,” Mukundan said in an interview published on the Tata group’s website.

For instance, Tata Chemicals has recently entered the spices market, with the initial rollout happening in Punjab and North India. A phased rollout across India will happen this year.

It is evaluating staples like rice and atta, and other value-added products.

“These are all natural extensions of our long-term presence in the food segment. From being a company which added taste and flavour to the food on your table, we will be the company that provides the food on your table,” Mukundan said.

Tata Chemicals’ business has been facing problems for some time.

In the year ended 31 March 2014, Tata Chemicals restructured operations at its two foreign plants—shutting down one and suspending operations at the other.

This was followed by a change in strategy by world’s second largest soda-ash maker, focusing on consumer and agriculture-led businesses moving away from segments driven by government regulation.

“We had restructured our Kenya and UK businesses a few months ago. Kenya business is out of the woods after a painful restructuring and has made profits in the last three quarters. We expect the UK business to move from negative to neutral this quarter, and become positive by the next quarter,” Mukundan said. However, he cautioned that the situation in Europe remains difficult.

Mukundan said the company is present in “the LIFE business segments—living, industry and farm essentials. It is focusing on the living essentials business, which comprises the consumer goods offering daily household nutritional needs.

Tata Chemicals’s food business—dals (pulses), gram flour and spices—has been growing at a healthy rate of 10-15% year-on-year, making it the most vibrant part of Tata Chemicals, he said.

A senior analyst with a domestic brokerage said Tata Chemicals is taking all the right steps, but the company will have to wait to see a turnaround in its pulses business.

“Tata Chemicals has done a good job with salt. It is trying to replicate the same in pulses. But it will take at least two to three years for the pulses division to turn profitable,” the analyst said, requesting anonymity.

He added that the fertilizer business is still facing problems though the worst is over. The company has at least Rs.6,000 crore of working capital locked up in the highly regulated fertilizer business.

“This continued pressure has led many in this sector to question the wisdom of continued investment in a regulated and subsidy-ridden business. We do not foresee any change in the situation in the near future because fertiliser subsidy is a political issue,” Mukundan said.

Tata Chemicals has decided that we will not invest any more capital in the fertilizer business, he said.

Mukundan said soda ash continues to be the firm’s cash engine. “We expect that it will continue to grow at a pace of about 2-3%, and demand supply is in balance despite a global slowdown. The cash generated should help us pare down the debt we had incurred when we had grown this business inorganically around 2006-08,” said Mukundan. Tata Chemicals debt as on 30 September 2015 stood atRs.7,092.71 crore.

Nanotechnology and biotechnology are two spaces that Tata Chemicals is evaluating, according to Mukundan.

“The biotechnology plant in Chennai has been working on nutraceuticals and we hope to introduce a suite of nutritional solutions in the market soon. We are already present in the B2B space, supplying oligosaccharides to some of the biggest brands in the market today. We have more products in the pipeline, such as diet sugars and wellness products that impact a range of bodily functions. Nanosilica technology is another product with great potential,” he added.