Rakesh Sharma / Reuters
New Delhi: DCM Shriram Consolidated Ltd is set to grow 2007-08 revenue by 15% as capacity expansion in sugar offsets loss from suspension of imported bulk fertilizer trading, its managing director said.
“We had a large amount of trading income which has been suspended on lack of clarity of government policy...Even then I would say our increase will be about 15% due to increased turnover from sugar,” Vikram Shriram told Reuters in an interview.
Diversified DCM, which makes fertilizers, plastics, chemicals and cement earned 24% of its Rs29.4-billion ($744 million) revenue in 2006-07 from the imported bulk fertilizer trading business and about 13% from sugar. However, profits will be hurt due to soft sugar prices, he said. India produced a record 28.4 million tonnes of sugar in the year to September 2007 against the annual demand of around 20 million tonnes, which has led to lower returns for millers.
“Our operations have been affected by downtrend in the sugar industry. That has severely affected the profitability of our ongoing businesses. The remaining two quarters will continue to have impact of soft sugar prices,” Shriram said.
In the first half of 2007-08, the firm posted a loss before interest and tax of Rs423.1 million in sugar business, which resulted in drop in profits before interest and tax by 63% to Rs423.4 million from year ago period.
Despite the downturn in sugar, the company will see a jump in net profits in 2007-08, helped by a one-time gain from the sale of land for Rs8.38 billion to DLF Ltd, he said.
DCM Shriram sees its rural retail venture, Hariyali Kisaan Bazaar, and fabricated windows business, Fenesta, to be the growth drivers going ahead.
“These businesses, which were initiated a few years back, are long term growth businesses in which we are in the phase of investment right now,” DCM chairman Ajay Shriram said.
DCM plans to spin off Hariyali as a separate company. “The idea is to grow it at much faster pace with independent financing for retail business,” Vikram Shriram said.
DCM, which in August bagged a Rs7 billion hydel-power project in Himachal Pradesh, will bid for more of such projects and also coalfields for its thermal power projects.
Demand for power in India is set to grow in pace with the expansion in the economy, which has seen an average growth of 8.6% in the last four years.
“In last several years our turnover has grown at a compounded annual rate of 20% and profits at 13-14%. We want to maintain this momentum if not better it. We have teams working on what our future expansion should be,” Ajay Shriram said.