DSIJ Interview with,Sanjay Upadhyay Director - Finance & CFO, Deepak Nitrite
Director - Finance & CFO, Deepak Nitrite
"CFO's role has evolved from reporting numbers to managing business"
Sanjay Upadhyay is an Associate Member of the Institute of Cost Accountants of India. He is also a Fellow Member of the Institute of Company Secretaries of India. He has also completed Advanced Management Program from Wharton, USA. He has vast experience in the areas of finance, accounts, commercial and secretarial functions. He is associated with the company since 1994.
How has the role of CFO evolved over several years? How is CFO in general influencing the strategy adopted by the company?
It is a fact that the role of CFO has changed over the past decade and it is still evolving towards managing, growing and diversifying business. The number of CFOs has rapidly grown due to the growing intellectual needs of the businesses. The evolution started with presenting correct numbers, smart reporting, paving the way towards new regulations for a healthy commercial world, installing of cost management and cost leadership in an integrated ERP environment, managing working capital and capital expenditure, enhancing return on capital and adhering to regulatory compliances etc.
Gradually, the role did spread towards a greater involvement in the decision-making of the business and came with an expectation towards providing deep and precise insights. The commercial and financial considerations of all management decisions are vital to enable the collective leadership to steer an organisation forward and this is where the CFO started having increasing strategic relevance.
Today's CFO fraternity is very different from what it used to be. 1. They are able to partner their CEOs in creating a resilient but flexible business model 2. They are analytical about data, regulations, business environment, competition; which helps in effective facilitation of business needs 3. CFOs now analyse their business model and ascertain how the model is amenable towards adapting constant change 4. CFOs are now very cautious about various known and unknown risks (e.g countryspecific risk, product/sector risk, product technology obsolescence risk, cyber risk, etc) and they continuously find out ways to mitigate such risks 5. In recent times, lot of socio-economic-political changes have had severe impact on business and CFOs are now constantly striving towards establishing their business in such a new regime 6. Grasping future technological developments and application of AI in business 7. Developing, managing and retaining a focused team
What are the top three key challenges faced by you as a CFO? Kindly mention your top three priorities as a CFO in implementing the business strategy and technology?
The key challenges are: 1) Monitoring complexity and putting all the assets of the company into maximum and best possible use for return maximisation | 2) Internationally, chemical industry is going through a major change in terms of its geographical and regional presence, catering to the world market from its region and enhancing return to all stakeholders. In our country, our positioning is such that we are endeavouring towards converting such a changing climate into a sustainable opportunity. 3) i) To grow our presence into petrochemical intermediates, which we have embarked into now, through organic/ inorganic route and thus creating a sustainable business model. ii) To assess potential acquisition target and consummate transaction with best possible funding option, wherever feasible.
The top priorities are:
1.The organisation is in the threshold of a quantum jump, which needs a very effective team with some of the finest operating managers. I am concentrating on that currently. 2. Removing some of the potential limiting factors which have a tendency towards becoming impediments on growth plans, which we are currently working on. This includes application of technology and innovation with the focus of creating and sustaining a competitive advantage 3. Making the organisation ready, in terms of financial flexibility, towards funding upcoming projects, which are going to bring in the planned quantum jump.
Please share with us your outlook on chemical Intermediate space in which you operate?
India is the third largest producer of chemicals in Asia and seventh largest in the world. As revealed by the National Accounts Statistics 2017, the chemical industry constitutes 2.4% of India's Gross Value Added (GVA). The chemical industry is a critical component of the Index of Industrial Production (IIP) and has 7.9% weight in the index. Its expansive portfolio of more than 80,000 products makes Indian chemical industry one of the most diversified chemical industries in the world. According to a report jointly published by FICCI and Tata Strategic Management Group, India ranks 14th in exports and 8th in imports of chemicals.
Based on properties and applications, India's chemical industry can be classified into seven major segments – bulk chemicals, speciality chemicals, petrochemicals, pharmaceuticals, fertilisers, agrochemicals and biotechnology. India's chemical industry is projected to double in size to $300 billion by 2025, growing at nearly 10% annually, with specialty and agrochemical sectors leading the pace, thereby outgrowing the pace of growth of other industries across the world.
We are witnessing encouraging opportunities across the chemicals and specialty chemicals landscape. China had been the largest supplier of bulk chemicals for about last three decades, while it used to dominate intermediates and fine chemicals offering low costs achieved with the support of low funding cost, inadequate environmental norms and also government support by way of export/import incentives, whereas countries like India had to maintain sustainability standards at higher costs. Now that the Chinese government has become stricter with respect to environmental norms, such cost advantage disappeared, resulting in level playing field for the Indian chemical industry.
What kind of investment do you envisage for FY19? What will be the company's focus areas for the fiscal?
As you may be aware, we have entailed a capex of Rs.1,400 crore towards greenfield project for manufacturing phenol and acetone. The project is expected to be commissioned shortly, in about couple of months. The greenfield project is now into final round of pre-commissioning activities. In view of the impending commissioning, DPL's leadership team is already in place and the marketing team has commenced customer outreach programme. There is complete focus on operational readiness and flawless start-up, for which technology provider's team is engaged at the project site.
Apart from this, we are implementing brownfield expansion projects across all business segments, incurring capital expenditure of around Rs.60—70 crore to take advantage of strong demand, both globally as well as in the domestic market.
Kindly highlight growth drivers for your company and the future prospects on the backdrop of commissioning of phenol business?
The commissioning of the greenfield project for manufacture of phenol and acetone is one of the foremost growth drivers in the coming years. This project is set to commence commercial operations soon. This will make Deepak Phenolics Ltd the company's wholly-owned subsidiary as a market leader for phenol and acetone in the country and also open up new frontiers of growth for DNL. The outlook remains favourable as phenol is finding new applications, resulting in increased local demand, which has now crossed 320,000 tonnes per annum. As the local supply is limited, the wide demand-supply gap is met by increase in imports. Further, the availability of raw materials in the local market has eased considerably, while margins are improving. The combination of these factors is contributing to a strong tailwind ahead of the commissioning.
We are currently working on few downstream products of phenol and acetone, and once we establish basic operations, we shall bring in those products. There are several other softer sides which have remained and expected to remain strong growth drivers for our company: 1.Sound corporate governance 2.Product portfolio to suit sustainable growth 3.Sound environmental compliance leading to lapels like Responsible