RCF forays into cement distribution

ALSO READ See latest News about Rashtriya Chem See previous management interviews See what other Experts & Brokerages are saying about Rashtriya Chem Rashtriya Chem BSE | NSE 13/02/12 Are Mutual Funds betting on Rashtriya Chem?

Over 6,000 dealers of public sector undertaking Rashtriya Chemicals and Fertilisers are likely to double up as cement stockists soon.

The company is aggressively negotiating with seven cement manufacturers to enhance the portfolio of its dealers, said the RCF Chairman and Managing Director, Mr U. S. Jha.

While Mr Jha was unwilling to name the cement companies that the company was negotiating with, it is learnt that the deal has been inked with a few, among which Coromandel Cement is one.

The schedule for a trial run of 1,000 tonnes redistribution has been finalised and RCF as a clearing and forwarding (C&F) agent will forward the quantity to select dealers in Maharashtra by December. Indicative margins are that RCF is not looking beyond Rs 150 a tonne.

The rationale

A senior RCF official said cement makers had been asking the company for some time to work as a C&F agent, given its extensive reach and network. The synergies are apparent.

With cement and fertiliser being seasonal products, the off-season for cement is always the peak sale period for fertiliser and vice-versa. Both happen to be bulk products and, more importantly, many fertiliser dealers in prominent locations are already cement stockists as well.

Mr Jha said the company was looking for more of such products that could add distinct value to its marketing and dealer chain.

Original plan

Sources said the original plan was to import cement, as RCF has cargo handling facilities across ports and there was little need to go in for additional infrastructure facilities. However, the proposal took a backseat as some domestic cement makers were interested in tying up with the company.

On the need for RCF's intermediary function, the official said it benefited the cement manufacturers as there was no need for security deposit/bank guarantee and outstanding payment collection to be made by them.

RCF too is at an advantage, as it is fully aware of its dealer profiles and credit ratings, due to long association. RCF will supply only to its dealer network and bear the entire credit risk involved in the process.

New growth avenues

With the Government keen on shifting to a nutrient-based subsidy regime, it appears that the field is hotting up for fertiliser companies, which would have to look for new avenues for growth and sustainability. Moreover, policy liberalisation measures could also land some chemical and fertiliser products in the open general licence list in April 2010.
Taken from Business Line