'Almost
30% of our export turnover is contributed by
businesses that
are on long-term contracts'
Interview
What has
been your strategy in the export markets? Is it
opportunistic or is it tied to one or more customers
by way of long-term or medium-term contracts? SG: We realised that it would
be in our long-term interests, if we tied up with
customers of the right size for long-term contracts.
To begin with, we had process expertise in nitration,
oxidation, solid phase catalysis, etc. Initial
customer interest was naturally directed at one
or many of these processes. Based on this process
expertise, we went forward step by step.This approach
helped us and today those early seeds have blossomed
into businesses worth Rs. 20-30-crore with each
customer.Another policy, which we followed right
from the beginning, was in trying to reach the
user directly. So, today almost 95 of our exports
are directly to the user. Trading houses or distributors
are rarely involved. This way we understand our
customers better and are able to service them better.
Therefore, the four-five major customers who were
with us 8-10 years ago are still with us today
- now we might be servicing them on a different product.
We hope to add one or two such relationships every
year.
DM: Almost 30% of our export turnover
of Rs. 110-crore is contributed by businesses that
are on long-term contracts. While these are yearly
contracts, the relationships are such that we are
confident of evergreen contracts. We have been able
to establish relationships with customers such that
we even make commitments to keep on improving and
bringing down costs over a period of three-five years.
Long-term contracts helps us in logistics planning,
strategising, working out similar tie-ups for our
inputs and also gives us a base for providing long-term
benefits to our customers.
When you evaluate export
opportunities, is it always in response to the customers’ needs
or is it initiatives you take on your own?
DM: It is both
ways. If we have certain very important intermediates
that branch out into very high value pharma- or agro-intermediates
then we would certainly look at finding customers
for those, knowing fully well that in those products
perhaps we could be number one or two in the world.
At the same time, our long-term relation ship with
all of the major international companies also provide
us with opportunities, as these companies would prefer
to source new products from Deepak after having satisfied
themselves with the few products that we already
supplied to them.
So the relationship has worked both
ways We are supporting few major giants in the agro
and pharma business and we believe that bulk of our
growth would come from these companies. At the same
time, with the help of new products developed at
our R&D centre,
we wil still look at almost 30-40% of our exports
to new customers.
You have manufacturing facilities
in various places — is there any plan to
consolidate these operations? Are any cost savings
possible?
DM: Rather than looking at rationalising
locations, we have been looking at rationalizing
businesses at each of these locations. Like for
example, some of the business that we are doing
at Roha we may want to rationalise them and bring
them to Vadodara. Things we are doing at Pune,
we might plan to shift to Roha and so on.
All these locations have resulted more out of wanting
to grow quickly into picking or certain strengths,
rather than developing them within. Now, as we
look at merging some of these strengths together
to get greater economic
advantages, we are finding that there would be
good opportunities of swapping some of these businesses
from one site to another. Some of the product portfolios
have already been exchanged among different sites.
While
on the subject of facilities, one of your acquisitions — Sahyadri
Dyestuffs —is in the heart of Pune city.
What are your plans for this unit?
SG: Sahyadri Dyestuffs was put up way
back in the early sixties and at that time it was
outside Pune city limits. We acquired it in the
mid-eighties and today it manufactures intermediate
chemicals for colourants and imagine,chemicals.
As for being located within the city,we will examine
some options. After sometime,the Sahyadri site
could become a good R&D set-up to attract technical
talent, since it is located in close proximity
to National Chemical Laboratory and new R&D
centres coming up near Hinjewadi. So we might retain
it in a different form.
Some of the city issues — like being within
the octroi limits — also have its commercial
competitiveness aspects. But we are continuously
evaluating the future.
