With our planned expansion, we will be the leading manufacturer of industrial gases - CEO Ghani Global Group

Last year when BR Research met with the CEO of Ghani Global Group, the conversation revolved around the group's plans to expand its gases and glass business. A year later, it was the right time for an update on the group's plans. Following is an edited transcript of what Mr. Atique Ahmed Khan, CEO Ghani Global and a qualified mechanical and electrical engineer by profession, shared with BR Research.

<B>BR Research: Tell us about your progress on expansion in Ghani Group's gas business?</B>

<B>Atique Ahmed Khan:</B> There are always two reasons behind expansion; either demand or growth anticipation. Fortunately, we have been struck by both.

Let's talk about demand first. Ghani Gases has two plants for manufacturing of liquefied industrial and medical gases in Pakistan right now, both of 110 tons per day (TPD) capacity. While we originally set up in Lahore, our second plant was set up in 2014 at Port Qasim Karachi. At that time only, we had planned for a bigger plant in Karachi as the city is financially at least five to six times bigger than Lahore. However, eventually we had to compromise on the size due to the prevailing security situation.

The recent improvement of law and order situation in south, particularly Karachi has been phenomenal, and a key booster for demand lately. This demand is not just coming from Karachi alone, but also from coastal areas like Gaddani and Gwadar. We are very optimistic about the Gaddani port being completed at least 90 percent by the end of 2017 or mid-2018 by all means. Our sanguine premise for Gaddani port is based on allotment of oil and gas storage terminals and the construction of an industrial city at the port.

Coming to growth, we see the industrial gases market expanding. We see increased industrial activity spurring growth; iron ore price has seen a stable growth in the last couple of months after a long time; China had to cut some of its production as a result of EU and the West antidumping protests.

Our initial plan of adding another 110 TPD capacity plant in Karachi is based on conservative estimates of growth; however, I believe that we will be able take this up to 200 TPD InshaAllah - almost double. We want to move forward aggressively as the expected commissioning date is only nine months away.

<B>BRR: What is total production of industrial gases in Pakistan today? Where do you stand in terms of market share?</B>

<B>AAK:</B> Total production stands at around 500-550 TPD. Our existing capacity is 220 TPD. Back in 2010, I had said in an interview that we will make Ghani Gases the country's leading liquid manufacturing company in the next five years, God willing. After adding even only 110 TPD capacity soon, we will be the leading manufacturer in the category at 330 TPD capacity.

<B>BRR: What is the cost of this project?</B>

<B>AAK:</B> The cost of a 110 TPD capacity plant is around $9-10 million. Obviously, the cost will increase if the size is double. By how much? We are working on it.

<B>BRR: How are you financing the project?</B>

<B>AAK:</B> We are financing with both equity and debt. For debt, our facilities are approved with various Islamic banks and Islamic windows.

<B>BRR: You see increased industrial activity and demand to drive growth in Ghani Gases. What is the use of industrial gases?</B>

<B>AAK:</B> Industrial gases generally have four key areas of consumption: Ship breaking and cutting industry, process industry, healthcare and oil exploration. Industrial gasses like liquid oxygen and liquid argon is used for hospitals, chemical process, general engineering, fabrication, steel manufacturing, welding industries, and ship breaking industry. Then we have liquid nitrogen used for chemical processes and oil and gas exploration.

Where do we see growth? Our oil exploration is totally nitrogen based, and then there are immense opportunities in healthcare. Another sector that is mostly untapped is food industry; nitrogen is an inert gas that acts as a safety blanket for food. Except for a couple of food companies, no one is packaging food with nitrogen in Pakistan.

<B>BRR: What is the progress in your glass business?</B>

<B>AAK:</B> We entered the glass business in 2007. Today we are the sole manufacturer of glass tubes in Pakistan. Right now we are producing around 400 TPD of glass tubes in both colours: Amber and clear. We have a state-of-the-art, first-ever European technology glass tubing manufacturing plant. We have planned an expansion in this segment as well. In the next phase, we will be producing ampules, vials and cartridges.

Additionally, we will be bringing another tube manufacturing furnace, which will take our total production of glass tubing to 800 TPD by June 2017.
We also have export plans for our glass business. The market is huge out there; we are in correspondence with India, Iran, Saudi Arabia, Tunis and African countries. We have taken 200 TPD market from China in Pakistan because of its substandard glass tubing, where it is left with only 50 TPD now.

<B>BRR: What is Ghani Chemical?</B>

<B>AAK:</B> Ghani Chemical Industries Limited is a subsidiary of Ghani Gases, which has a separate project on board. It will be setting up a calcium carbide plant. Calcium carbide is used for fruit ripening; it is used in the manufacturing of dissolved acetylene gas, which is used in welding. it is also used in the polymer industry. Right now this product is being imported mostly from China. We have planned a 20,000-ton facility in Kasur. We have already acquired the land for the plant. This plant will be an import substitute; it will save the exchequer around $200 million dollar.

<B>BRR: What advantage do you get from CPEC?</B>

<B>AAK:</B> A rule of thumb to check an economy's industrial size is gauging its production of industrial gases. Excluding CPEC mega project, the production of industrial gases today in Pakistan should be at least seven times more. So advantages of CPEC are immense. It is a revolution, which includes roads, infrastructure, industrial cities, oil and gas exploration - all the more need for industrial liquefied gases!