GHCL Ltd, one of the largest soda ash and industrial salt manufacturers in India, is planning to invest Rs. 65 billion to establish a one-million-tonne soda ash plant in Kutch, Gujarat, over a period of six years. With this investment, the company aims to nearly double its production capacity, targeting a 30% market share in India.
The construction of the greenfield unit will be carried out in two phases. The first phase, with an investment of Rs. 45 billion, will add a capacity of 0.5 million tonnes per annum (MTPA). The second phase, costing Rs. 25 billion, will add another 0.5 MTPA.
Ravi S Jalan, the Managing Director of GHCL, stated, “Work is already underway at our greenfield soda ash plant near Kutch, and we expect the first phase to be commissioned within three years. By 2030, we will be ready to meet the growing demand in the Indian market with Phase 2 fully operational.” The company’s current soda ash manufacturing facility in Sutrapada, Gujarat, has a capacity of 1.2 MTPA.
Jalan also mentioned that GHCL currently holds a 26% market share and the capacity expansion will not only increase its market share in India but also enable it to tap into neighboring markets such as Sri Lanka, Nepal, and Bangladesh.
The demand for soda ash is expected to grow due to increasing demand for solar glass and lithium-ion batteries. India’s current soda ash consumption is 4.3 MTPA and is projected to reach 7 MTPA by 2030. Globally, consumption stands at 63 MTPA and is expected to reach 80 MTPA by 2030.
GHCL plans to finance the investments through a combination of debt and equity. The company, which is currently debt-free, generates an annual free cash flow of approximately Rs. 10 billion. Jalan explained, “Ideally, we aim for a debt-to-equity ratio of 1:1, allowing us to raise up to Rs. 50 billion.”
In the fiscal year 2023, GHCL witnessed a 50% increase in standalone revenue, reaching Rs. 45.84 billion. EBITDA grew by 106% to Rs. 15.20 billion, and the company’s profit after tax saw a significant growth of 159% to Rs. 10.92 billion.
For the fiscal year 2024, GHCL expects slightly lower margins due to reduced commodity prices, such as limestone, and decreased electricity costs. Additionally, there is anticipated excess supply in global markets resulting from increased capacities in China and a global downturn affecting demand.
Approximately 70% of GHCL’s limestone requirements are met through imports from West Asia. Soda ash prices have declined by 2.5-3% over the last month. Jalan stated that margins are projected to be in the range of 30-32% for this year.