Beginning with trading in chemicals in the late 1950's, today the Pune-based Deepak Groupcompanies has a manufacturing presence in diverse areas like petrochemicals, fertilisers, dyes, intermediates and aromatic chemicals. Deepak Nitrite Ltd, the flagship company of ls one of the leading manufacturers of organic, inorganic, fine and speciality chemicals and has the unique advantage of backward integration right up to natural gas through its group company - Deepak Fertilisers & Petrochemicals Ltd. Diversification across the value chain coupled with strategic acquisitions have been the hallmarks of the group's steady growth. In the recent years, the charismatic Managing Director of the two companies, Deepak Mehta, is seen as the driving force behind the group's growth and activities. Kuntal Shah caught up with him during one of his recent visits to Mumbai, to know about the group's focus areas in the wake of the competitive era as also his views on Indian chemical industry.

Excerpts:

Q. Can you take us through the major milestones in the growth of Deepak Nitrite Ltd?
Deepak Nitrite is an ever-evolving company. It started off as a company manufacturing two chemicals - sodium nitrate and nitrite - which were import substitutes way back in 1972. Global suppliers like BASF and ICI, were supplying a bulk of sodium nitrite to India and by manufacturing these two chemicals indigenously, we managed to make a dent in their market share. In the first six months itself, we were able to convince the customers about India's potential to offer International quality products. Since then, Deepak Nitrite has grown continuously across the value chain integrating forward, backward and lateral and this has instilled increasing confidence in developing newer technologies.
Until 1979, we were basically moving through the value chain of usage of ammonia. Around that period, in view of the shortage of ammonia, Deepak Group thought of integrating backwards, to manufacture ammonia - a primary feedstock for the fertiliser industry. Eventually, Deepak Nitrite promoted Deepak Fertilisers & Petrochemicals Ltd and set up the first gas-based ammonia plant in Mumbai in 1982.

Q. Deepak Nitrite has been active on the acquisition and diversification fronts. How has this two-pronged strategy helped in the growth of the company?
In 1984, Deepak Nitrite acquired Pune based Sahyadri Dyestuffs, as a part our diversification plans. As Sahyadri Dyestuffs became a division of Deepak Nitrite, gradually it was primed to produce unique products - wherein there were few global players. We undertook a lot of R&D work and set our eyes on making exclusive products having special applications such as colours for the paper industry, colour intermediates having high-tech applications like colour fax papers, etc. These requirements were essentially for the export market. Thus from a commodity player, we became a speciality player, competing with the world's best players.

In the late 80's (1988-89), in line with our thinking on forward integration, we went on to make nitrochlorobenzenes and nitrotoluenes by setting up perhaps India's first multi-purpose nitration plant in collaboration with the Biazzi of Switzerland. This was a shift from inorganic nitration to the organic nitration. With the entry of Deepak Nitrite and a few other manufacturers, India that was importing nitrochlorobenzene, not only became a large producer of downstream dyestuffs and pharmaceuticals based on the nitrochlorobenzenes but also started exporting it. Thus India became a regional player in the derivatives of nitrochlorobenzene.

The last and recent step in the direction of value addition was acquiring Aryan Pesticides Ltd. We intend to be a process specialist rather than a product specialist. In other words, from just manufacturing bulk volumes of nitro derivatives like nitrochlorobenzenes and nitrotoluenes, we are now looking forward to broaden our expertise in the process of nitration per se.

So while moving from product to product, we have ensured a synergistic integration of the process and the market place. Our core competencies now include processes rather than the products. All along as we have moved forward, Deepak Nitrite is becoming more and more focussed on fine chemicals - we started off with bulk intermediate, then moved to intermediates in mid-value, and today our investment is increasingly into fine chemicals.

Q. .....so there has been a definite shift in the company's focus?
There has been an increasing shift towards exports and meeting international customer needs including a substantial thrust on R&D. We have moved from being a commodity oriented bulk volume product company to a fine intermediate company. However, this shift has been seamless. Hence there are no 'turning points' to say, as the company has been evolving from one to another.

Our focus has been to be a world-class supplier and manufacturer. We consider the world's biggest players as our major competitors in each and every product we manufacture. Moreover, with import duties coming down and exports finding easy entry into the country, we need to be competitive. We are aiming to become a regional player rather than just a player in the Indian market. So we will keep evolving according to the prevailing conditions.

Q. What is your vision for Deepak Nitrite?
We aim to become a world-class producer. We are moving towards meeting the needs of international companies in the field of performance chemicals and we hope to play a much more aggressive role to become a long-term partner with these companies. I envision Deepak Nitrite to be an important source for intermediates and fine chemicals. I would like Deepak Nitrite to be seen the world over as a resource of unique process strengths and technical abilities.

Q. Tell us something about Deepak Fertilisers & Petrochemicals Ltd.
Unlike Deepak Nitrite, which has been more of an extrovert company - in terms of exports, Deepak Fertilisers is an inward looking company - concentrating more within the country. It is keen on meeting Indian needs with respect to petrochemicals like methanol, nitric acid for industrial chemicals and fertilisers, etc. Deepak Fertilisers is a net importer as compared to Deepak Nitrite, which is a major exporter. Therefore, the focus has been to make Deepak Fertilisers a cost-efficient producer of fertilisers and industrial chemicals.

At Deepak Fertilisers, the focus now is more on debottlenecking and maximising capacity. Today, the pace at which the Indian market is growing, it may not be viable to put a grassroots plant. Therefore, one should look at the maximum returns through minor investments like debottlenecking, wherein one can get more value from the existing plant(s) itself. So, currently the focus at Deepak Fertiliser would be to enhance our capacity by 30-50 per cent with marginal investments.

Q. You have been actively involved with the Indian Chemical Manufacturers' Association (ICMA). Could you share your experience with our readers?
ICMA has different types of subgroups, viz, functional subgroups, business subgroups, just like the inorganic, organic and dyestuffs sub-committees. Functional subgroup further comprises international relation expert group, the trade business development expert group, etc. I had an opportunity to work as the Chairman of 3-4 of these committees such as the inorganic sub-committee, international relations sub- committee and recently the trade and business development expert committee, which focused on making the Indian chemical industry a part of the global milieu.

The thrust area at ICMA is to help India compete globally. It is striving to make the world players look at India more seriously as well as helping the Government to make Indian companies more competitive.

"I feel that Indian chemical industry needs to find ways to grow significantly in capacities. Also where there are large numbers of small companies making the same product, we need to synergise into a few major players to avoid undercutting of prices and to spread the overheads over larger volumes"

Q. Having spent almost two decades in the chemical industry, what radical changes do you find in this sector? And what needs to be changed to make the industry more competitive in the future?
The concern for the environment is increasing significantly in the Indian chemical industry. At the same time, the need to fulfil customer needs in terms of both competitive pricing and quality is becoming primarily important than what it was a decade ago. All these puts considerable stress on becoming a competitive producer. In line with this, I feel that Indian chemical industry needs to find ways to grow significantly in capacities. Also where there are large numbers of small companies making the same product, we need to synergise into a few major players to avoid undercutting of prices and to spread the overheads over larger volumes. This increase in volumes will facilitate more spending on environment and efficient use of energy.

There are many aberrations in the chemical industry, like for instance the cost of power. When compared to producers from Korea, Japan or China, it is displeasing to pay 2-3 times the cost of power and still be competitive. The Government wants our products to compete with imported goods on which marginal import duties are levied and at the same time bear the cost of power that is double or triple and still be competitive. We have been raising these issues with the Government, asking it to allow for the cross-subsidies. Let the cross-subsidies be clear and transparent. Today, China is registering spectacular industrial growth rate because the Government and industry there work in tandem with each other. Hopefully and optimistically, with the WTO pressure, our Government would also fall in line.