Key Sector Data Market Cap (Rs. Crore) 7,867 Market Cap (USD Million) 1,307 P/E 10.0 P/BV 1.0 Debt/ Equity 1.3 ROA (%) 3.7 ROE (%) 9.8 EV/Sales 0.9 EV/ EBITDA 6.6

The Indian Soda Ash industry constitutes of two varieties – Light (used in detergent industry) & Dense (used in Glass industry), with a share of 60% and 40% respectively. Total installed capacity in India was 3.1 Million MT. With an estimated production of about 2.5 Million MT in last financial year (2012-13) the capacity utilization was of only 81%.

The total size of the Indian soda ash industry is about 2.7 million MT and almost all the major industry players are located in the state of Gujarat due to the closeness and ready availability of the main raw materials namely limestone and salt. The Indian industry suffers from the weaknesses of concentration of 95% capacity in Gujarat and the cost of transport to markets in South and East India, which constitutes about 25% of the National consumption, is high as compared to the ocean freights to South and East India where product is imported from China/ Kenya and Europe. Currently around 18-20% of the Indian demand is being met by cheap imports. Import price variance continues to be extremely high.

Domestic production of Soda ash degrew for the fifth consecutive month by 4.87% in January 2014 to 2.10 lakh ton against the 1.69% fall recorded in the same month a year ago. However, on an m-o-m level, the production increased by 1.22% in January 2014 from 2.07 lakh ton in December 2013.

Glass sheet recorded 5.81% rise in the domestic production to 11023 thousand sq metres in January 2014 when compared to the 23.36% growth rate in the corresponding month last year. On an m-o-m level basis, the production slightly decreased by 0.99% in January 2014 from 11123 thousand sq metres in December 2013.

In FY 2012-13, the Indian soda ash market witnessed two contrasting halves. The first half saw unprecedented growth of imports, in spite of trade measures becoming effective in April, 2012. The imports for FY 2012-13 were at a historical high of around 690,000 tons. Low monsoon resulted in the detergent production not dipping during that period. Overall detergent growth was robust and most float and container glass units were operating at nearly full capacity. However, towards the latter part of the year, container glass units were operating at sub-optimal rates due to overcapacity and detergent end-use demand slowed down marginally. The domestic market witnessed an impressive overall growth of 12% for FY 2012-13, however, accompanied by reports of higher inventory levels with customers and in trade markets.

Tata Chemicals, world's second largest producer of soda ash reported 10% increase in its consolidated revenues for the quarter ended December 2013 to Rs 4580.46 crore compared to corresponding previous year period while net profit of the company reported loss of Rs 15.94 crore. The company reported net loss in the quarter due to one-time charge of Rs 82 crore due to restructuring of European operation, besides higher expenditure on interest and taxes. Fertilizer segment sales were up 2% to Rs 1875.79 crore. Other segment revenues rose 145% to Rs 52.47 crore.

Net profit of GHCL, one of the largest producers of soda ash in India, increased by 63.02% to Rs 26.98 crore in the quarter ended December 2013 as against Rs 16.55 crore during the quarter ended December 2012. Sales grew by 12.64% to Rs 545.13 crore in the quarter ended December 2013 as against Rs 483.97 crore during the quarter ended December 2012.

DCW reported 8.58% fall in the Net sales to Rs 331.35 crore during the quarter ended December 2013 against the corresponding quarter last year, while the net profits witnessed 67.96% decline at Rs 9.02 crore from Rs 28.15 crore net profits reported in the quarter ended December 2012.

Global soda ash

China is the largest Soda Ash player in the world, having a capacity of 30 million mt, which is 50% of the global capacity. As per IHS Chemical report China's operating rates were around 80% in 2012, reporting a production of 24 million tons and domestic consumption of 22 million tons, the balance 2 million mt is exported. US capacity is 12 million mt and they produced 11 million tones of soda ash and their annual production represents a 97 operating rate. The US production is stated to have grown by 3.8%in 2012 where as demand in the domestic markets shrunk by almost 5%, the total domestic consumption was estimated at around 5 million tons and they exported 6.2Million tons recording handsome growth.

The global soda ash industry continued to recover from the world economic problems that began in 2009. Domestic residential and commercial construction and automotive industries increased glass usage, which affected soda ash consumption worldwide. At the same time there is an extremely sharp increase in input costs for soda ash manufacturers in all regions. World's total soda ash demand which at present is at 51 million mt is expected to grow by at least 3-4 % over the medium term with more than 50% of it is expected to come from Latin America, India, China and Middle East countries due to a higher GDP growth.

According to the annual report of GHCL, consumption of soda ash per person is expected to register healthy rise in the next few years with China leading the rankings with consumption from 10.85 kilograms in 2007 to an expected 12.00 kilograms in 2012. China is likely to add at least 1.00 to 1.5 Mn MT capacities every year on the back of huge infrastructure investments. The biggest threat to the global soda ash industry is the global economic outlook, which remains quite delicate.

Challenges

Excessive and cheaper imports continue to be major challenge for the industry. Also, sourcing of key raw materials like lime stone and salt are posing a major challenge the industry currently as no fresh lime stone mines or land bank for salt works is being allotted by the Government of Gujarat.

Outlook

The demand for soda ash is expected to gradually in the coming years due to anticipated better economic conditions and better demand from the user industries.

Production of Soda Ash
	2013-14	2012-13	2011-12	2010-11
Apr	193521	187478	204300	190230
May	199013	203022	207034	194400
Jun	185517	195301	192389	180765
Jul	198647	195933	202953	188288
Aug	201202	200975	204387	174143
Sep	195305	201835	179928	161411
Oct	183555	197937	181939	181127
Nov	199144	201158	204456	187218
Dec	207593	216830	211576	212479
Jan	210121	220876	224682	223480
Feb		198709	201666	195938
Mar		215931	211369	208776
Figures in Ton, Source: Capitaline Database