IG Petrochemicals Ltd is one of the leading downstream petrochemicals company. It is a leading manufacturer of Pthalic Anhydride and also the most cost-efficient producer. Its product portfolio now consists of Maleic Anhydride as well. It is regarded as one of the leading global manufacturers with a production capacity of approximately 1.70 MTPA (million ton per annum).
Replying to Anil Mascarenhas of IIFL, Nikunj Dhanuka says, “We are one of the largest PA manufacturer in the world and the largest in India with an annual capacity of 1,70,000 MT. We are the lowest Cost producer of Phthalic Anhydride (PA) globally.”
Brief us on the changing trends in downstream petrochemicals. Comment on the innovations taking place in the industry.
The downstream industry includes crude oil refineries, gas processing plants, petrochemical plants, transportation networks (truck, rail, pipeline and marine), retail gas stations and natural gas distribution companies.
The oil and gas industry has been instrumental in fueling the rapid growth of the Indian economy. The petroleum and natural gas sector which includes transportation, refining and marketing of petroleum products and gas constitutes over 15% of the GDP.
From strategic oil reserve projects to reduction in customs duty on liquefied natural gas (LNG) and creation of an integrated state-owned oil company, the oil and gas sector received some attention in the Union Budget.
Finance minister Arun Jaitley announced the government plans to create an integrated public sector oil company that will have the wherewithal to match the competitiveness of international and domestic private sector oil and gas companies.
It will give them (the entities which will be merged) capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders.
Walk us through how the company has evolved over the decades and briefly explain to us your business model.
IGPL is the one of the leading downstream petrochemical company and the number one Indian manufacturer of Phthalic Anhydride (PA).
We are one of the largest PA manufacturer in the world and the largest in India with an annual capacity of 1,70,000 MT. We are the lowest Cost producer of Phthalic Anhydride (PA) globally.
PA is a downstream product of Orthoxylene (OX) a basic Petrochemical. It is a versatile intermediate in organic chemistry.
PA is used in a variety of application in both consumer durables to non-consumer durables.
Our facility is Located at MIDC, Taloja in Raigad District, Maharashtra and have 3 units at Single Location and Proximity to India’s Chemical Hub.
We have strong clientele base across industries having very long-term relationships with all of them.
Recently, we acquired the Maleic Anhydride (MA) business from Mysore Petro Chemicals Limited (MPCL) for a lumpsum consideration of Rs. 74.48 crore payable over 5 years as there are great synergy benefits available for us.
Comment on your product portfolio. What is the revenue break-up from the same?
We are leading manufacturer of Phthalic Anhydride and also the most cost-efficient producer. Our product portfolio now consists of Maleic Anhydride as well. Both are, a set of key chemicals that are a critical raw material across a wide range of industries and applications.
Which are the industries you cater to especially with Phthalic Anhydride and Maleic Anhydride?
These have a wide range of applications. It is being used in Plasticizers, Paints, Unsaturated Polyester Resins, Pigments and copper phthalocyanine crude (CPC).
Some of the goods where these chemicals are used, include:
- PVC and Plasticizers, used in making plastic and Polyols
- Unsaturated polyester resins used for manufacture of fibreglass-reinforced plastic for the Automobile sector, Construction, Marine and Transportation industries.
- It is also used in the manufacture of Paints and Coatings
- Copper Phthalocyanine used for making Inks and Photovoltaic cells.
- Personal Care and Home Care products
- Wires & Cables, Pipes, Hoses
- Boxes, Containers, Packaging Films, Packaging Materials
- Medical and Surgical equipment
- Textile Dyes
Comment on your manufacturing units. What is the capacity and utilization?
Our manufacturing facility is strategically located at Taloja in Raigad District, which is in proximity to India’s chemical hub and has all 3 units at a single location.
We have an annual capacity of 1,70,000 MT – the largest in India. We, currently, are optimally utilizing our capacity.
In recent years, a lot of attention is being paid to environment-friendly production. How is IG Petro doing on this front?
As a company, we have given due importance to the environment from beginning and have always re-engineered our process to reduce the waste.
The company has processes where we treat the water waste and recover few chemicals from it and sell in the market. After recovering all the chemicals, the water which is left can be reused again for our production process.
Brief us about your JV with DUGAS (Dubai Natural Gas). By when will the projects come on stream? Share with us some of your plans.
The estimation of the project cost is being worked out by Larsen & Toubro (L&T). We intend to get the final approval of the respective boards during April 2017. It will take 30 months to commence production.
Tell us about your financials. What is the outlook?
The 9-month period ending December 31st 2016 has been stupendous. We exceeded our own expectations both in Revenue and Profit terms.
The company reported topline of Rs. 748.2 crore with EBITDA and PAT of Rs. 118.5 crore and Rs. 73.5 crore respectively for 9M FY17.
EBITDA Margins improved drastically by 363 bps to 15.83% & PAT Margins improved by 327 bps to 9.82% on the back of better Recovery Processes, Operational efficiency, and stringent cost control measures.
We are confident that all measures undertaken by the company will help build a solid foundation for sustainable growth in the future.
What are the opportunities and challenges for the industry?
The company has great opportunities in the coming years. Indian economy is picking up, the infrastructure thrust is turning into reality. Plastic products are expected to pick up due to increase in infrastructure activity. All plastic and plastic-related products require PA as a raw material and there is no substitute for this product. We expect the domestic market to grow exponentially in the coming years.
Our challenges include competition from global players in terms of dumping their products in India, though we have anti-dumping duty. The pace of Infrastructure activity. Stability of the crude price is also very important for us.
What is the demand supply situation at present? Do you still have cases of dumping by Korean and Far East-based manufacturers?
Due to improved market condition, we are seeing good domestic demand during this year and expect the same in the years to come as well.
Yes, there is an anti-dumping duty imposed by the government on Taiwan, Korea, Russia, Japan & Israel.
Is the ‘Make in India’ initiative helping the industry in any way?
With the Make in India initiative, we can become very competitive in the quality as well as the pricing so that we need not depend on cheap imports.
What is your message to shareholders?
We would like to thank shareholders for their support and trust in our business. Looking at the overall situation, we would like to say that ‘Acche Din’ have begun for us.
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