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Reliance set to join global league

BS Bureau

Reliance Industries is expected to have a virtual monopoly in some segments of the petrochemicals industry with the acquisition of the 26 per cent government holding in Indian Petrochemicals Corporation.

The acquisition will also find for Reliance a place in the league of the top 10 global petrochemicals firms: Dow Chemicals, Borealis, Basell, Solvay, BP Amoco, to name a few.

The government, which holds 59.9 per cent in IPCL's equity of Rs 2.49 billion, will be divesting 26 per cent in the firm. Reliance Industries is expected to have a virtual monopoly in products such as monoethylene glycol, polyvinyl chloride, polybutidiene rubber, ethylene oxide and polypropylene.

At present, Reliance is the largest manufacturer of monoethylene glycol, purified teraphthalic acid and paraxylene, with an 80 per cent market share in these products. It has a 50 per cent market share in polymers such as polyvinyl chloride, poly propylene and polyethylenes.

IPCL is the second largest petrochemicals company in India in terms of turnover, sales, net profit and market capitalisation. The acquisition will give Reliance Industries an additional capacity of 1.433 million metric tonnes through eight products: paraxylene, orthoxylene, propylene, ethylene, butadiene, benzene, ethylene glycol and ethylene oxide.

Paraxylene contributes nearly 40 per cent of Reliance Industries' turnover. With the IPCL acquisition, Reliance will get an additional capacity of more than 49,000 tonnes, leading to a combined capacity of 1.69 million metric tonnes. Pre-acquisition, Reliance is the market leader in paraxylene.

Reliance's propylene capacity will stand at 590,000 metric tonnes with IPCL's capacity addition of 225,000 metric tonnes. In ethylene, the combined capacity will increase to 1.58 million metric tonnes, with the addition of IPCL's capacity of 831,000 metric tonnes.

Analysts say Reliance will be in the driver's seat because the IPCL plant at Nagothane is equipped with sophisticated technology.

It will get a toehold in the following products: low-density polyethylene, which IPCL manufactures at Nagothane and at Baroda, certain injection-grade moulds of HDPE, and superior grades such as rotated moulding grades at Nagothane.

"It makes perfect business sense for Reliance to get IPCL," an analyst said.

Besides the polymers, Reliance could lay a pipeline connecting the Nagothane plant to its polyester plant at Patalganga, analysts said.

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