IOC in talks buy Tamil Nadu Petroproducts’ petrochemical plant

IOC in talks to buy Tamil Nadu Petroproducts’ petrochemical plant

10:13 AM, 15th June 2015
IOC in talks to buy Tamil Nadu Petroproducts’ petrochemical plant
As part of a consolidation exercise, IOC has initiated talks to buy out the linear alkyl benezene plant of South India-based Tamil Nadu Petroproducts Ltd.

NEW DELHI, INDIA: India’s Fortune 500 firm, Indian Oil Corp Ltd is scouting around for an acquisition in the petrochemicals segment, three people familiar with the development said. “As part of a consolidation exercise, IOC has initiated talks to buy out the linear alkyl benezene (LAB) plant of South India-based Tamilnadu Petroproducts Ltd. The discussions are at a preliminary stage,” said one of the three sources cited above.

LAB is a raw material used in the manufacture of detergents, soaps and cleaning powders. The LAB plant of Tamilnadu Petroproducts Ltd, located at Manali, Chennai, has an installed capacity of 1,20,000 mtpa. “The location of the Tamilnadu Petroproduct’s LAB plant is strategic as Chennai Petroleum Corp Ltd, a group company of IOC has a 9.5 mmtpa refinery in the same region. This refinery produces fuels, lubes, wax and petrochemical feed stock,” said the second source privy to ongoing negotiations.

Tamilnadu Petroproducts is jointly promoted by Southern Petrochemical Industries Corp and Tamil Nadu Industrial Development Corp. “The company has been tackling rising cost pressures due to the influx of LAB imports, especially from the Middle East,” added the third source.

According to the company’s annual report for 2013-14, the LAB segment’s yearly revenue contribution to the total revenues of Rs 1,16,538 lakh was Rs 94,349 lakh.

“Capacity utilization of LAB facilities was lower due to the domestic customers opting for imports in large scale. Increase in crude price and increase in power cost coupled with uncertainties in uniterrupted supply continued to be limiting factors to recover the fixed costs in full, resulting in losses.The cost of production of LAB in India had been relatively higher than the international standards mainly on account of higher cost of kerosene and quality issues relating to the feedstock,” the annual report said.

“There is scope for ample amount of growth in the LAB segment but price dynamics will continue to remain a challenge for producers,” said Piyush Jain, oil & gas analyst at Morningstar Investment Advisors.

In response to the queries on the potential deal, an IOC spokesperson said “At present we have no comments to make,” and a spokesperson for Tamilnadu Petroproducts said “As a policy we do not comment on market speculation.”

© ET NOW News



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