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RIL blueprint to explore IPCL synergies
E-Tex Staff - Mumbai

Reliance Industries (RIL) has drawn up a blueprint to exploit synergies between the recently acquired Indian Petrochemicals Corporation (IPCL) and its own petrochemical operations. According to group sources, Reliance has set up teams to explore synergies at almost all levels of the petrochemical chain.

While IPCL’s petrochemical operations are spread across Gandhar and Vadodara in Gujarat, and Nagothane in Maharashtra, Reliance’s petrochemical operations are based in Jamnagar in Gujarat and Patalganga in Maharashtra. To start with, the company is looking at expanding capacities to the optimum levels at the IPCL facilities. While the Gandhar capacity expansion is being considered, an option to convert the mono-ethylene glycol (MEG) plant into a multi-feed one is also being explored. Reliance, sources said, is also planning to revive the paraxylene plant of IPCL, which was earlier shut down. Further, petrochemicals and textiles have been bifurcated into separate groups to explore product synergies.

So, IPCL’s dimethyl-terephthalate (DMT) as part of its textile division is being looked into closely by Reliance’s textile division, as to whether integration options can be examined. Not many changes will be undertaken at IPCL’s Nagothane plant, which is fairly modern, but the Vadodara plant would require some amount of modernisation to meet Reliance’s standards, the sources added.

Further, Reliance has started supplying feedstock to Vadodara from its Jamnagar facilities, as the feedstock supply agreement with Indian Oil Corporation (IOC) has expired. Reliance produces naphtha, which is a feedstock for IPCL, and it is also engaged in exploration for oil and gas, which could potentially lead to greater feedstock integration between the two companies. A financial restructuring at IPCL is also on the cards, to bring down the interest outgo from the current levels of about Rs 375 crore by Rs 75-100 crore, sources added. The company would go for new loans with lower interest rates.

Synergistic benefits, increased global competitiveness, cost reduction and efficiencies, productivity gains, and greater feedstock integration and flexibility to enhance profitability of both companies, were spelt out as the strategy immediately after acquiring IPCL. The company, said sources, is hopeful of accomplishing a major part of the task in the next six months. Reliance’s petrochemicals production of 11.5 million tonne per annum increased by over 1.3 million tonne post-acquisition. The acquisition cost for IPCL is estimated at Rs 2,638 crore. Sources said the management may take the lead in acquiring the government’s balance stake of 26 per cent in IPCL two years down the line.