Chemplast Sanmar Ltd, the specialty chemicals and PVC manufacturer, has constituted a three-member committee to review its business portfolio and evaluate strategic options, including potential reorganisation and mergers and acquisitions, aimed at enhancing long-term value for stakeholders.
The committee has been tasked with examining the company’s strategic priorities and will present its recommendations to the Board for review and appropriate decision-making. It may also engage external advisers to support the exercise.
Portfolio review
The move comes as Chemplast’s business portfolio comprises three distinct segments — a specialty chemicals portfolio, and two commodity-focused businesses comprising suspension PVC and the vinyl acetate chain (VAC), which includes caustic soda, chloromethanes and hydrogen peroxide.
“While the outlook for the Speciality portfolio is quite strong, the markets for VAC and Suspension PVC are volatile and the outlook is not that great,” said Executive Director (Finance) N. Muralidharan during the earnings call.
“Given that, we thought it is important that we look at the business as a whole and see how best we can reorganise the business going forward and create value — unlock value for all stakeholders,” he said.
Clean slate approach
Asserting that the committee has been given a broad mandate without any predetermined outcome, he said: “That’s the broad objective and that’s the mandate. Beyond that, we have not given any specific direction. So, it’s a clean slate. They will look at the businesses and see how efficiently they can be reorganised to create value for all stakeholders.”
“We’ve also given the mandate to look at possible M&A opportunities. All of that will be considered as part of this exercise. It would be premature to speculate on whether the review would eventually lead to restructuring or portfolio changes,” he said.
“I don’t think we can prejudge today whether any restructuring will happen. The idea is to see whether there is a need for reorganisation and whether that can create value for all stakeholders,” he said.
Capital allocation focus
The company reiterated that its capital allocation priorities remain focused on its specialty chemicals business.
“Our focus has been capital allocation for Speciality. We expanded Paste PVC capacity last year and invested in the custom manufacturing business. We are also investing in refrigerant gases, which broadly form part of our Speciality portfolio,” Muralidharan said.
He added that the company’s priority on specialty businesses would continue even as the committee undertakes a broader review of the overall portfolio.