Companies either downed shutters or as has been the case with stronger ones, chose diversification as the road for growth. One of the areas that promised much scope was the speciality chemicals area. Manufacturing of such chemicals requires either very high technology fees or a good research and development base. Being high-value low-volume products with very low capital cost, the sector offered good returns to companies willing to take the risk.

One such company that had the research capability to develop its own product was TheDharamsi Morarji Chemicals. The company was known more for its fertiliser and bulk chemicals business, however, with an increasing impetus on specialty chemicals, resulting in high growth rates the perception of the company is fast changing.

The company expects the speciality chemicals business to post a 60-per cent growth during 1998-99. Eventually, it is expected to grow at around 40 per cent per annum.

The company is introducing two new speciality chemical products which are expected to contribute around Rs 35 crore to the total turnover estimated at Rs 250 crore-odd during 1998-99. These speciality chemicals are di-chloro fluoro acetophenol (DCFA), an intermediate for the bulk drug, Cipracin, and acetyl sulphonilyl chloride (ASC), a dyes intermediate. The requirement of DCFA in the country is being met almost entirely through imports and offers a vast potential. The company expects sales generation of Rs 20 crore per annum from DCFA while the balance will come from ASC.

In an interview with TheFinancial Express, JL Thakkar, managing director of The Dharamsi Morarji spoke about the reasons for venturing into specialty chemicals business as well as the prospects of the division.

On the reasons for entering the specialty chemicals business. The Dharamsi Morarji was initially more of a fertiliser company, around 15 years back 75 per cent of the company's turnover came from this division. However, with the sector under tight government there was little possibility for the kind of growth a company would look for.

Further the bulk chemicals business, where we manufacture sulphuric acid, oleum, sulfamic acid among others was also getting crowded with a lot of companies, both in organised as well as unorganised sectors, being set up. It was becoming more of a commodity business, with prices being depressed and margins affected.

We had developed the technology for manufacturing specialty chemicals over 10 years back. However, the demand for products in the domestic market was low and the environmentwas not conducive for exports. With the liberalisation process being stepped up in 1991, we decided to go ahead with the manufacture of specialty chemicals. The initial aim was to concentrate more on the developed global market which offered good scope, rather than the local market where the consumption was low.

On the economics of setting up speciality chemical plants in India. It worked out to be more economical for us to set up a speciality chemical plant mainly because we had developed the technology in-house. The project work of designing the plant was done by our own team, further some of the major raw material was produced at our existing plant. Apart from these inherent advantages, one of the main advantages we had were that our plants were designed to be run on a continuous basis as against a batch process plant set up by others in the industry. All these factors resulted in a very low cost for setting up a plant.

We are the only manufacturer of sulfamic acid in the country and the only one inthe world to manufacture it through the continuous route. This results not only in a lower cost of production, but ensures consistency of product quality as well. Earlier, Nissan of Japan used to manufacture this product on a batch process along with two companies in Taiwan using it's (Nissan's) technology. However, the Japanese firm has closed down operations due to uneconomical cost of production, leaving only the Taiwanese in the race. We are in the process of increasing the capacity from 6000 tonnes per annum (tpa) to 10,000 tpa which will be further increased to 20,000 tpa.

Take the case of di-chloro fluoro acetophenol (DCFA). We set up a pilot plant with a capacity of one tonne per day or 300 tonnes per annum. The cost of setting up the plant worked out to Rs 60 lakh. As against this, a well known Indian company planned to set up a 400-tonne-per-annum plant at a cost of Rs 40 crore.

On the money spend in research and development and scope for selling the technologies developed. We in India have apeculiar way of looking at research and development. We gauge it on the basis of money spent as percentage of turnover and reach a conclusion on figures we get. The amount spent by Dharamsi Morarji in research and development is very small, but has given us very high results. We are able to come out with one or two products every year.

As for selling technologies, it is our strategy not to do so. We intend to manufacture products developed on our own depending on the need and requirements of the market.

On the possibility of the product being `copied' and other companies flooding the market as has been the case of bulk chemicals. There is no doubt that the danger of copying exists. It is possible to do so, however, it is not as easy as in the case of bulk chemicals. We have taken this factor into account while deciding to set up a plant. Our assumption of the product life is around seven years, before it can be phased out and replaced by a new product. On the procedure adopted for selecting a productOneof our main strengths is the availability of sulfur trioxide. Our plants at all the four locations have capacities for manufacturing this chemical. Our initial efforts were in utilising this chemical for manufacturing other speciality chemicals (see chart). Take the case of chlorosulhonic acid, we had a virtual monopoly of the product for 10 years. Today, we are the largest manufacturer of this product in the world.

It is not that all our speciality chemicals use sulfur trioxide as base, there are other factors also that determine selection of the product such as market needs, availability of raw materials etc. One of our new products DCFA has been developed by using fluorine, which is recovered as a waste in the manufacture of super phosphate, which otherwise creates disposal problems. Using this fluorine we produce potassium fluoride and then through further reactions manufacture di-chloro fluorobenzene (DCFB) and then DCFA. Other speciality chemicals like resorcinol, which does not has sulfur trioxidebase is also manufactured by us.