Starting off without loans: Decades-old strategy bears fruit for Paracha Chemical

Soap producer is able to cope with energy crisis due to no debt burden.

FAISALABAD:

A strategy adopted 20 years ago in an attempt to deal with the high cost of capital is bearing fruit for Paracha Chemical Industries at a time when higher interest rates and uncertainty over borrowing costs are diverting away fresh investments and dealing a blow to many running businesses.

Producer of the famous brand Commander Soap, Paracha Chemical Industries of Faisalabad is a rarity in that it was established without making any borrowing from banks and is still firmly following this policy.

Talking to The Express Tribune in an interview, Paracha Chemical Industries Managing Director Shahzad Mushtaq Paracha said most businesses had been hit hard by the energy crisis, especially those which depended entirely on gas, and only the units, which were not burdened with bank liabilities, survived.



“Paracha Chemical was established in 1991 without taking any loans and this strategy is now paying back,” he said. “The factory’s revenues are growing at an annual average of 15%.”

He pointed out that businesses that borrowed money from banks were paying up to 12% markup, which peaked earlier at 18%. This 12% saving, he said, was helping Paracha Chemical to spend on alternative fuels to keep the factory running despite the crippling energy crisis.

The company is working on a plan to set up new units and enter the beauty soap segment – a market left wide open following the closure of some manufacturing units which could not cope with the debt burden and the energy blackout.



Paracha revealed that Afghanistan was becoming a big and lucrative market as exports of laundry soaps to Kabul were about Rs100 million and 440 million pieces annually. He expressed the hope that with a smooth supply of gas, shipments to the neighbour could rise 100%.

In the near term, Paracha is targeting the Afghanistan market as a destination for its laundry and beauty soap products, but he also has his eye on other international markets, besides the domestic market.

He sought priority status for the soap industry in supply of gas in order to get competitive edge over competitors in the international market. He also called for a review of the duty structure for the soap manufacturers.

Published in The Express Tribune, February 10^th, 2013.

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