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| Edited By: Sreejiraj Eluvangal |Source: DNA |Updated: Mar 17, 2018, 03:51 AM IST
Indian Oil Corp (IOC), India’s largest petroleum company, has started production at its Panipat polymer factory, marking its entry into a $7 billion (Rs 33,000 crore) market, controlled Reliance Industries.
IOC, which has so far confined itself to smaller scale production of some petroleum-based raw materials for polymer production, will make 1.6 million tonnes of polymers, about 25% of India’s demand, as it ramps up the factory in the coming months. The current market, estimated at around 6 million tonnes a year, is controlled by RIL, which caters to 75-80% of the Indian demand.
To achieve its production of 1.75 million tonnes of polymers, IOC will use around 2.4 million tonnes of naphtha, a by-product of petroleum refining, which is currently sold or exported without value addition.
The ‘cracking’ of naphtha will also produce fuel compounds such as diesel, which will be mixed with ‘regular’ diesel produced at the Panipat refinery.
The capacity of Panipat refinery, which currently accounts for around 12 million of IOC’s total refining capacity of 51 million tonnes per year, will be increased to 15 million tonnes by October, IOC chairman BM Bansal said, flagging off the first consignment of polymers from the ‘cracker’ and polymer unit. The firm took around four years and Rs 14,400 crore to complete the complex, situated adjacent to its refinery in Panipat.
Polymers, which include substances like rubber, polythene, bakelite, nylon and PVC, are among the most widely used synthetic substances on earth, going into everything from chairs to vessels to electronic items and furniture. Compared to around Rs 32 per kg for naphtha, polymers will fetch IOC between Rs 50-60 per kg.
IOC will continue to expand into the petrochem business, bringing it more and more into conflict with Mukesh Ambani’s RIL, as it sees petrochemical production as a natural fit for its petroleum business.
However, Bansal said lack of cash and visibility over revenues are dampening the enthusiasm for expansion. The company currently has Government of India bonds worth Rs 18,000 crore and around Rs 50,000 crore of debt, he added.
Bansal also indicated that IOC and its partner Oil India are ready to play hardball on the acquisition negotiations over Gulfsands
Petroleum, a company listed on the London Stock Exchange, with upstream assets in the Gulf of Mexico and Middle East. “Let us first see if they are indeed interested in selling or only in negotiations,” Bansal said, when asked about Gulfsands position that the current £81 million offer has to be upgraded by at least 25%.
“We don’t see how the offer undervalues [the company] when 20% of the stakeholders are OK with the price,” Bansal said, pointing to the separate negotiations that the two Indian companies have had with Gulfsands’ institutional investors. The IOC chief said the two companies would need at least 30% of the firm to have control and that even the current offer will lapse on Tuesday.
Gulfsands management, meanwhile, on Friday reiterated that it will agree to the current offer.
Bansal did not seem very keen on taking over the company without the management’s consent.
IOC expects to lose around Rs 48,000 crore ($10.2 billion) this year as a result of selling products at prices stipulated by the government, while the other two firms are likely to lose an equivalent amount, Bansal added.
