Calcutta, July 10: Nalco Chemicals India, the 65 per cent subsidiary of speciality chemicals major Nalco Chemicals of the US, is considering alternative growth strategies which includes acquisition of efficient units in the industry.

Sean P Hayward, managing director of Nalco Chemicals India, told the Financial Express that the company would be able to bring better value to customers by enhancing overall efficiency through economies of scale. "We are looking at prospective acquisitions in India."

Hayward said since Nalco was a highly focused on-site service-oriented company the ideal candidate would need to have the requisite expertise to service customers by "operating dynamic systems either in industrial water treatment or process treatment".

Besides, he added, the operations of the target company must be perceived to be within the framework of domestic environmental laws and which can "mould easily into our company".

"Since 30 per cent of our costs are on account of training and manpower development we are also interested in acquiring trained manpower," Hayward said.

Nalco Chemicals India, which started off in 1990 as a joint venture with ICI India, has now become a subsidiary of Nalco USA. The original stake of ICI India of 40 per cent in the venture is now diluted to 15 per cent only. Nalco has then acquired the ICI chemicals plant at Rishra in West Bengal.Recalling the company's experience with its joint venture partner, Hayward admitted that it was a very fruitful partnership. "Given a choice, we would love to work all over again with ICI. It has been a rewarding partnership," he observed.

For a company which has invested more in training and skilled manpower and which specialises in providing on-site solutions to customers, it has posted an annual average growth in sales of 20 per cent in the last seven years with a "reasonable" rise in profits. This double-digit growth is likely to be maintained in the medium-term, according to company sources."We have always beaten the domestic inflation and GDP rates. However, in the last two years we have not been able to raise prices to adjust for inflation because the liquidity squeeze created difficult trading conditions for everybody. It affected our cash flows and resulted in an increase in interest costs," Hayward explained.

Almost 70 per cent of the company's customers are in the government sector and they were affected by the central bank's control on liquidity. Besides, the downturn in the steel, alumina and paper industries also impacted the working of Nalco. Hayward observed that as a result "we will have to adapt some of our long- term strategic plans to retain our market position."Exciting developments are taking place in the current year on the product front. Among new products launched during the year is a substitute for pine oil in coal washing. With this, the coal industry can improve yields by 10 per cent and also effectively address the problem of effluent pollution, Hayward said. The Nalco/Exxon Energy Chemicals division, which supplies process chemicals to the refinery industry, has introduced `Actrene' which "is used in very low dosage to prevent `fouling' and `scaling' and helps maintain peak operating efficiencies."

Nalco/Exxon Energy Chemical Company is a 50:50 joint venture formed in September 1994.

between Nalco USA and Exxon Chemical Company (a division of Exxon of USA) to provide speciality chemical products and services to the petroleum and chemicals industries worldwide.

For the year ended March 31, 1997, the company reported net sales and profit after tax of Rs 39.70 crore and Rs 7.58 crore respectively. The net earning per share improved from Rs 12.34 to Rs 15.16. The current market price on the Bombay Stock Exchange is Rs 430. It has repeated a 50 per cent dividend for its shareholders.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.