Caltex pays Rs 200 cr to Spic

Announcing the joint venture here on Thursday, Spic vice-chairman and president AC Muthiah said Caltex Spic India will have a 1:1 debt-equity ratio in which Caltex will hold 51 per cent of equity amounting to Rs 45 crore, while Spic will have the rest pitching in also about Rs 45 crore.

He said the debt portion will amount to Rs 90 crore and this financial structuring has been negotiated to arrive at the contribution of each partner.

Muthiah also disclosed that Caltex has paid around Rs 140crore for taking on the ongoing business and liability.

The joint venture’s chief executive officer (CEO) John Venn said the LPG business in the country was growing so fast that the new venture will consider options for expansions. For example, the existing capacity at Tuticorin terminal was around 200,000 tonnes per annum but sales this year is projected at around 60,000 tonnes.

But further expansion will be considered as market grows. A new terminal will typically cost $20 million to $30 million and investments will be made when future growth demands so. This year sales is projected to grow at 20 per cent to 30 per cent and the company is looking to notch a turnover of Rs 60 crore.

"The strategic objective is to aim for a market share of 15 per cent to 20 per cent and become a leading private marketer of LPG in south India," he said. If government removes the subsidies on LPG, Caltex Spic India products will be more competitive, he added.

The marketing strategy will revolve around affordability andneeds which will determine pricing and special offers and promotions from time to time. Also a new advertising campaign is slated to be released next week.

For commercial sales, the company is looking for a 20 per cent to 30 per cent market share in Tamil Nadu, while for bulk industrial consumers if PSUs continue to sell at lower costs the market share in Tamil Nadu will not be over 50 per cent.

Caltex India Ltd managing director John L Banner said Caltex will source LPG from the west Asian countries and with bulk purchases the cost benefit in such deals will be to the advantage of Caltex Spic India also. For the present Caltex Spic India will continue to market the Spic Jyothi brand of LPG.

A special offer at reduced price of Rs 1,350 for a single connection has been made to new customers. Banner said Caltex will focus on four key areas: lubricants, LPG, fuel supply to industrial and IPP sector and the associated development of port and terminal infrastructure.

Caltex is restructuring its jointventure alliance with IBP to share some facilities and continue marketing of Caltex products through IBP.