As a global rout in commodities drives metals traders to close up shop or lay off staff, Indian-owned industrial metals firm UD Group is setting out expansion plans, boosting staff and moving into more countries.
The Singapore-based firm, which has a metals trading arm as well as mining, industrial and renewable units, recently opened an office in Beijing to grow in North Asia and is set to buy a small Swiss trading house, said Chairman Prateek Gupta.
He says a strong balance sheet is giving it the comfort to take a counter-cyclical bet, and grow as others contract.
"People ask us, 'Are you guys crazy, you want to step into China now when everyone is getting out?' I say, that's exactly why I want to get in," Gupta, a third-generation of the family-owned firm, told Reuters.
The Swiss purchase, which is in its final stages, will include 20 staff and seven senior traders, he said, helping to extend the group's reach into Europe, Russia and Africa, as it looks to grow from 250 people to 400 in the next two years.
"We get access to teams and other commodities, like aluminium, tin, lead and zinc and some ferro alloys," he said. "That gives us growth in those commodities. They need additional depth of balance sheet."
UD's expansion comes as trading houses worldwide are facing the worst commodities downturn in a decade and as more banks ditch the sector. U.S. investment bank Morgan Stanley this week said it was closing its base metals trading business.
Gupta said UD has avoided some of the pitfalls faced by rivals as it has maintained a large capital base and lower levels of borrowings, given the lower debt tolerance of banks in India where it has its roots.
At the same time, it has grown big enough to attract larger credit lines from banks elsewhere including in Asia, which are used primarily for working capital as it offers its balance sheet to customers.
"None of the metal market industry can survive without credit... That's where our model offers a better role. We offer credit back up."
UD also takes part in more downstream activities than traditional commodity trade houses, Gupta said, helping to manage risk as it offers an exit strategy in the event of default, where UD will buy its customers' products and sell them.
The firm's Bombay stock exchange-listed unit, Ushdev International, is capitalised at $124 million and accounted for around a third of overall group business last year. Shares have fallen by more than a quarter this year, mirroring the downswing in metals.
