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Sinha's Budget makes NTF import easier

Bhupesh Bhandari

In his Budget for 2000-01, Finance Minister Yashwant Sinha opened the sluice gates for import of nylon tyrecord fabric (NTF) from China and Taiwan by reducing the import duty from 40 per cent to 25 per cent.

Though a week before the announcement the government had imposed an anti-dumping duty amounting to less than 2 per cent of the selling price, it led to a virtual bloodbath in the marketplace.

While prices took a tumble (tags are lighter by 8 per cent since the announcement), imports have come to account for 40 per cent of the Indian NTF market.

The worst hit, of course, was Arun Bharat Ram-promoted SRF Ltd, the country's largest and the world's seventh largest producer of NTF.

From 35 per cent, its market share fell to 27 per cent during April-June 2000. "We waited for a few months for the anomaly to be corrected. But nothing happened," says Ravi K Sinha, chief executive officer of SRF Ltd.

To make matters worse, the tyre industry, the user of NTF, reported sluggish growth during the year and complained of a squeeze in its margins due to the unprecedented hike in petroleum prices. This put a southward pressure on prices. The NTF volumes sold in the country during the current financial year are certain to be less than in the previous year.

Surprisingly, Sinha and his team are a happy lot today. The company's market share has bounced back to 33 per cent and, for the nine-month period ended December 31, 2000, it clocked a profit (after tax) of Rs 280 million as against Rs 241 million during the corresponding period the previous year.

Incidentally, this nine-month profit is higher than the Rs 268 million profit after tax it reported for the whole of 1999-2000. To put it in perspective, take a look at the other players in the market: while JK Synthetics and Baroda Rayon have been forced to shut their operations, Nirlon and NRC reported losses for the last quarter.

The key to the success of SRF Ltd was its attack on costs.

First, the company divested its stakes in loss-making subsidiaries Shriram Bearings and Shriram Needle Bearings Ltd.

"We sold it for a song but at least we were able to cut our losses there," says a company official. The other areas identified by the company top brass to effect savings were: energy consumption, working capital and manpower (over the years, the number of people on its rolls has come down from 2291 in 1996-97 to 1826 now).

"All told, we have saved Rs 300 million through various cost-cutting measures," Sinha says.

Improvement in the efficiency of its operations was the next target. The focus was on removing bottlenecks. The efforts paid off, with the company's gross current assets-sales ratio improving from 28 per cent two years ago to 31 per cent at present.

The company was also helped by the cheap price at which it picked up DuPont Fibres Ltd. It is known to have paid DuPont some Rs 250 million for the plant, though the cost of a greenfield project of the same size can be more than Rs 4 billion. It helped SRF price its products aggressively in the face of cheap imports from China and Taiwan.

China has an exportable surplus of 70,000 tonnes of NTF while in the Indian market, only 60,000 tonnes is sold per annum, according to industry estimates.

At the same time, Sinha decided to take proactive steps to market his products. "We decided that the only way out was to work closely with our customers," he says. According to Sinha, SRF Ltd decided to press on its two advantages over imports: shorter delivery periods and a closer working relationship. The policy sure has paid dividends.

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