June 2015

Optimistic about Kenya operations

Tata Chemicals' managing director, R Mukundan talks about Kenyan operations, the changing shape of the organisation, and the exciting targets it has set for 2020.

It has been an eventful year for Tata Chemicals. What were the highlights?
For us, 2014 was a special year as it marked our 75th anniversary. Tata Chemicals was incorporated in 1939, taking over the existing Okhamandal Salt Works. The company has come a long way since then. We are the world's second-largest manufacturer of soda ash. We have a complete suite of solutions for farmers in India. And we are increasingly focused on becoming a consumer product company, with emphasis on food and nutrition. There have been some rough patches, too. We went through some painful restructuring of our operations in the United Kingdom and Kenya, but these will soon show positive results. On the whole, the legacy has been glorious and we look forward to the future with eagerness and enthusiasm.

The company's operations in the United Kingdom and Kenya underwent some necessary restructuring. What is the overall health of the company's international operations?
The India and the United States operations are healthy. There were some issues with respect to our operations in Kenya and the United Kingdom, but the restructuring is now complete. I am happy to say that Kenya has just completed its first quarter of profitable operations after six years of losses and the United Kingdom operations will turn profitable by September 2015. Incidentally, British Salt, which constitutes about half of our operations in the United Kingdom, is very profitable and this is one of the reasons why the region has been able to hold steady during these tough times.

Farm inputs and food and nourishment products had been identified as two potentially powerful businesses to fuel growth. How far has the company come in realising its objectives with these?
Our farm and food businesses are our growth engines. If you look at the numbers, our consumer business is growing at about 15-20 percent depending on the product. The farm business is growing at about 15-25 percent. The seeds business has registered as much as 80 percent growth.

Tata Chemicals celebrated its 75th anniversary in 2014, and continues to serve society through science. Watch the video

Can you talk about your newest business, nutraceuticals?
Nutraceuticals is a product born in our innovation centre at Pune, which is mostly focused on biotechnology and nanotechnology. The Tata Swach water purifier is one of the big products developed by our nanotechnology lab. The biotechnology lab has spawned a suite of products in nutraceuticals. The initial range covers digestive system health and we sell to food companies like Nestle and Kellogg's.

Over time we will extend our range to cover other aspects of human health. We believe this business has huge potential. Globally the nutraceuticals business will touch $9 billion in the next three-four years and India will have a large role to play in this sector.

Soda ash and allied alkalis are the lynchpin of Tata Chemicals' operations. What role do you see this commodities business playing in the company's present and in its immediate future?
The chemicals business is our traditional business. It has been performing well and remains our cash engine. We have achieved scale and size in key markets in soda ash, having reached the No 2 position in the global industry. We believe that this business will grow at about 5-6 percent globally.

We would like to grow the value-added products segment in the chemicals business. Sodium bicarbonate, for example, is a unique product because of its varied applications, from animal feed to pharmaceuticals and from food to air-pollution control. We see a big role for this magic molecule and intend to bring more applications to the market. We are also looking at discovering new molecules, and new pathways to molecules, mainly through the biotechnology route. We believe the future of chemistry is green chemistry.

After a growth phase, Tata Chemicals seems to have taken its foot off the pedal with its acquisitions. Does this mean organic growth is the preferred way forward?
As of now, we are focusing on growing organically. We do have investments in mind, and as and when opportunities arise we will make such investments. Our major investments are going to be in the consumer and farm businesses, but none of them is going to be big-sized. In the future the bulk of our business is going to be less capital-intensive than it has been in the past. We do believe that will expand our operations in the United States and Kenya. But barring these two, our India business will grow in an asset-light manner, and mainly in the technology, market or brand spaces.

What does the financial year 2015-16 hold in store for Tata Chemicals?
Fiscal 2016 is going to be a year of consolidation for us. We will ensure that our operations in the United Kingdom and Kenya are nursed back to proper health and that our operations in the United States and India continue on a healthy keel. We intend to make greater investments in the consumer space.

The company has drawn up an ambitious vision called 'Leap 2020'. What is it about?
Leap 2020 denotes where we want to be five years from now. We want to triple our market capitalisation and we want to grow our three business pillars. The target for our consumer products business is to grow from Rs12 billion to Rs50 billion. The exciting task ahead of us is that we want to touch 1 billion people with our food and nutrition products. Tata Salt already goes to 100 million households, which translates into about 500 million customers.

We want to enhance our farm business — at least the non-subsidised, deregulated part of it — from Rs25 billion to Rs80 billion. For our chemicals business, our approach is to remain viable, profitable and vibrant, and the turnover will go to approximately Rs120 billion.

All three businesses will grow but the major share of profits, which currently flows from the chemical business, will shift to the consumer and farm businesses. Going forward, we see the branded businesses of Tata Chemicals comprising 50 percent of our profits. Increasingly, the shape of the organisation will be that of a branded food and farm company. The industrial chemicals business will continue to give the company the cash flow it needs to build the branded businesses.

Our growth will be driven by the values of the company — safety, passion, integrity, care and excellence, what we call 'spice', which is the underlying foundation of our organisation.

How do you intend to achieve these targets?
We are looking at building new technology platforms at our innovation centres. The company is going places where the business is going to be more brand and knowledge driven. Tata Chemicals needs to be more youthful and engaging so that young talent finds it a more interesting place to work in.

We need to be more directly connected to the consumer, which means that we need to build more competencies in terms of customer centricity and consumer insights. India is going through a consumer revolution and we intend to play a bigger role here, especially in food and nutrition. We expect that 'Leap 2020' will drive this company up to 2020 and beyond.