Capturing Potential to Maximum - Vikas WSP

Established in 1988, Vikas WSP is engaged in the manufacture and supply of guar gum powder, primarily for the Indian and international food industry. The company’s guar gum powder is used as a thickening and binding ingredient in bakery products, noodles, diet foods, ice creams, meat and fish products and sausage coatings. Besides use in pet food, it also offers guar gum for various technical applications such as oil/gas wells drilling and fracturing, textile printing, mining, explosives and paper-making applications.

Could you tell us something about the company?
Vikas WSP is one of the world’s leading providers of guar gum polymers, bearing in mind how much traceability means to food and pharmaceutical producers. It offers a complete and trustworthy range of guar polymers whose origins can be fully traced. This traceability serves the regulatory as also the consumers’ requirements. The company is known for its proven production processes, advanced quality systems and reliable supplies.

Because of these reasons the company has acquired a major portion of the expanding market of guar polymers. We are one of India’s foremost guar gum powder (GGP) manufacturers, supplying to all sectors of the food industry with an extensive range of quality products. Besides food, the company also offers guar gum for technical applications such as pet food, oil drilling, textile printing, mining, paper, etc.

What is the potential for Guar products in the international markets?
There is a great potential of Guar products in the overseas market, especially after the recent development involving CMC that is used in the food industry. In fact, Guar products are used as an alternative to CMC in the food industry. CMC is a product which is made from paper pulp after undergoing various chemical processes. Recently US FDA has found a toxic substance called anthraquinone in CMC. They have tested and found out that this toxic chemical residue is very hazardous for human consumption. At present, there in no instrument that can quantify the collective quantum of this toxic substance in the CMC. Therefore, US FDA has instructed the CMC-producing companies to give a method of measuring the collective quantum. This whole incident has created a huge requirement of Guar products that are free from any chemical hazard. If we could be able to substitute CMC in the international market, then it would be a very big market as current CMC market share is around 90 per cent. Our queries have also increased since this finding, which came around 4 months back. If [PAGE BREAK]

[INSERT_1]

somehow we would be able to grab 8% market, then our total sales would double in the coming year.  On the contrary, Guar products’ present share is just 10 per cent which means Rs 1500 crore business. Now imagine the potential. Also, we are exporting 900 tons of de-polymerized Guar to French company Denon for the production of yoghurt for pregnant women. We are also the sole producer of organic guar in the world. From this we can safely say that out of Rs 1500 crore, we have 25% share so we can earn Rs 475 crore topline in this year itself. In the coming two years healthcare and food segment would contribute at least 50% of the total revenue, which is currently at 27%. Our first topline target is Rs 1000 crore.

What is the status of your plants at Bikaner and Baroda?
The Bikaner plant is to cater to the food industry and the Baroda plant is for industrial purposes. The capacity at our Baroda plant is of 12,600 MT and that at Bikaner is of 35,000 MT. The Bikaner plant is expected to go on-stream by next year and the Baroda plant will start in 2012 which is exclusively to cater to the demands of the personal care and oil market.

How are you planning to raise funds for the same?
Recently some institutional investors including Aviva and Reliance Mutual Fund have taken interest in the company. Our aim is that at least 40 per cent of the total shareholding would be with institutions. Fundwise we are planning to go ahead in stages and therefore the need for funds will be gradual. The capacities will be added in phases and we intend to do this by reinvesting the revenues.

Is there any plan for diluting your stakes?
No, we are not looking to dilute our stake although we can do it. The reason is that the guar market is growing and has a huge potential. In 1982, when we started the guar business, the size of the industry was about Rs 8 crore, while today it is Rs 1,500 crore. I very strongly believe that if we have enough money to spend, considering that it is a capital-intensive industry; we can easily cross Rs 10,000 crore mark very soon. It of course depends on how the money flows from the market. However, this may not be the right time since the present equity is more expensive than the debt.[PAGE BREAK]

What about cationic guar?
That comes from Baroda. We do produce it but only in limited quantities. There are many types of cationic guar depending on the degree of substitution. At present, we are manufacturing 0.2 degree of substitution and this can go right up to 0.6 / 0.7. The higher the degree of substitution, the greater will be the enhancement of the emulsifying properties.

How lucrative is this going to be for the business?
It will be highly profitable because of cationic guar, as a result of which the realisation will go up dramatically. Currently we earn around USD 4 per kg and the production of cationic guar will help it increase to USD 25-30 per kg.

What is the current debt of the company?
We don’t have any debts.