Decision making processes impact, we have to live with them
A well-known name in the chemical industry, BASF is a ‘ manufacturer’s manufacturer’, and supplies products that impact people day in and day out. “We create chemistry for a sustainable future,” says Prasad Chandran, Chairman and Managing Director, BASF India Limited. In Chennai recently for the Indo German Urban Mela, he spoke to The Hindu on a range of subjects.
Is the current state of the economy a cause of concern for BASF, too?
Yes. On a short-term basis, the high interest rates, infrastructure and the lack of progress on infrastructure are concerns. But we do not look at things from a short-term point of view.
From a long-term perspective, we are confident that the fundamentals are very much intact. We see the demographics, especially the 70 per cent working population. Young people have very high aspirations to improve their quality of life. So, we are very confident and not disturbed by the immediate concerns.
That is the reason BASF recently announced a Rs.1,000-crore investment in Dahej, Gujarat, where we are setting up a completely new manufacturing plant. What will come out of that will be for the automobile, paint and paper industries.
The products will improve the quality of paper and paints and also homecare products, which would be detergents and shampoos. In shampoos, what we want to do is to bring in newer products that use less water but deliver the same results.
Beyond the fundamentals, are there other reasons for this optimism?
People want better products - such as those available in Europe and rest of the world. This requires bringing in new technology. We have the ability to bring this, and that is why are investing in manufacturing.
In India, you do business under 14 operating divisions, have eight manufacturing plants and generated a revenue of about Rs.7,500 crore last year. Are all the divisions expanding?
Most of our divisions continue with their growth plans and investment. We will continuously monitor the environment to see what kind of customer developments take place and be ahead of the market. Our idea is also to be always ahead of the chemical industry and the GDP growth. We make sure we have the capacities.
Can you put a figure to your proposed investments?
The only figure that I can put is the Rs.1,000 crore [at Dahej]. We have just started there and levelled the field. With regard to funding, we will be doing it through ECBs (external commercial borrowings). I can take the help of my balance sheet but I do not want to touch it when I get from abroad.
What kind of benefits would the capacity increases offer?
Our idea is to develop two [manufacturing] hubs — the southern hub and the western hub. While the southern hub would reach out to the evolving markets in southern India, the western hub would be for western and northern India. In western India, we have got plants in Dahej, Thane and Ankleshwar, and we have increased our capacity. For the southern hub, we have got (plants) in Chennai and Mangalore, and this is where we will expand. In Mangalore, we have a 200-acre chemical site set up in the context of a global safety standard, meeting absolutely German standards.
For BASF, automobile and construction industries are important customers. What are you doing for them?
In construction, we are bringing in new technologies. What we find is that we are growing much above everybody else. There is lot of scope for growth as long as you bring in new technologies, value-add resources and ensuring conservation of resources for our customers. For example, the special concrete admixtures that we make reduce energy consumption and cost of construction. BASF is also a specialist in underground technologies and involved in metro rail projects.
What is your strategy in the automobile industry?
Exactly the same, in the automobile sector we bring in technology, high quality, customer-oriented solutions and long-term relationships. Our people sit with the automobile manufacturer, look at problems and see if we can work together on a long-term solution. For instance, an automobile manufacturer wants alterations to be made to his fuel tank to reduce weight and thereby improve fuel efficiency and also prevent corrosion. Our team will work with the company and come with a solution and once all the parameters are met, BASF will find a Tier-II manufacturer. We only make the raw material and give it to the Tier-II manufacturer, who will produce and supply to the automobile manufacturer.
Do you work with all the automobile companies?
Yes, but we are governed by a secrecy clause and not able to mention names. If I work with a company in one aspect, I will not work with another [company] on the same aspect.
Are you the first choice for German automobile companies in India? Will you also work with Daimler, whose plant is coming up near Chennai?
By and large yes because we have a relationship with them for 140 years.
With regard to Daimler, hopefully yes. I am saying hopefully yes because with Daimler we have developed a very special [concept] vehicle, the Smart Vision Car. Just like this [Indo-German] exhibition in Chennai, we are going to have one next in Delhi where we will try to get that car. That’s the car BASF has worked with Daimler, with 25 innovations including an all plastic wheel.
Which plant of yours takes care of the requirements of car companies? How much does automobile business contribute to your turnover?
Chennai takes care of the catalyst part, the paints and pigments part is taken care of from Mangalore, while the engineering plastics, lubricants and water coolants are taken care of from Thane. Roughly 12-15 per cent of our turnover globally is from automobiles. It will be the same for Indian operations, too.
Are you looking at acquisitions?
We are continuously looking at acquisitions. But acquisitions have to bring value. When I acquire something, I don’t want to be acquiring problems. Often, when I send my first team to such companies, its report says that for us to bring it to our standards, we have to scrap off the whole place. The day we acquire, from next day onwards it has to meet BASF standards. It is a global standard. But we are continuously looking (for acquisitions).
You were in the task force that evolved the National Chemical Policy. What is its status?
I was the only person from a multi-national company to be represented in the special task force, and, over the last two years, we worked on it and now the national chemical policy is ready. It is very crucial as India does not have such a policy despite chemicals being the most important component for a manufacturing industry to excel. It will be gazetted anytime now.
What are the facets of the policy?
Fundamentally, it is very critical in terms of bringing in safe manufacturing, for bringing in, most importantly, critical raw materials for the Indian chemical industry. We need the building blocks and the government has to provide them. If you do not provide these, Indian chemical in the next 5-10 years will just get killed, and we will completely dependent on China. The policy will also emphasise on R&D so that we find out India’s problems and what are solutions for them, particularly in the context of next 10 years when many new technologies will come up.
In your opinion what are the main challenges for business and industry in India?
The biggest challenge is the old, outdated laws. We need to have more transparent, really identifiable set of laws, and better infrastructure. I don’t think you need subsidies and support, our people are very entrepreneurial. All you need is a safe, stable infrastructure. That’s all.
Is the decision-making process an impediment?
It has been, in infrastructure. Decision-making processes impact. But we have to live with them.