India: Deepak Fertilisers To Set Up Chem Unit For INR2B

(Article first published in Dow Jones International News on 31^st May 2004)

MUMBAI (Dow Jones)--Deepak Fertilisers & Petrochemicals Ltd. (500645.BY), a mid-sized listed Indian firm, plans to set up a plant to manufacture isopropyl alcohol to reduce its dependance on the fertilizer business.

"Our growth pattern aims at more and more revenue from the non-regulated areas," said S.C. Mehta, Managing Director at Deepak Fertilisers, referring to the government's control of fertilizer prices. "There's a lot of uncertainty in the fertilizers business where prices haven't been revised for nearly a decade."

The company is setting up a 70,000 metric-tons-a-year isopropyl alcohol plant at a cost of 2 billion rupees ($1=INR45.56). The project is being funded partly through debt, including overseas bonds, although Mehta didn't provide details on borrowing.

The isopropyl alcohol unit, which is expected to go on stream in December 2005, is likely to help revenue from chemicals to rise to 75% of the company's total revenue from the current 60%, said Mehta.

"Now, the country's total requirement of 65,000 metric tons of isopropyl is imported, so once this plant goes on stream, we will be the only producer in the country since no similar project is coming up," he said.

Deepak's deal with Equistar-Lyondell of the U.S., the supplier of technology for the isopropyl plant, ensures that the U.S. company won't supply that technology for 7 years to any other manufacturer in India.

Isopropyl alcohol, a solvent, is used in making cosmetics, agrochemicals and drugs.

Currently, other than fertilizers, Deepak also manufactures chemicals such as ammonium nitrate and methanol. [ 31-05-04 0853GMT ]

The company, whose revenue fell 9.3% in fiscal 2003-2004 ended last March, is expecting to post a 15% revenue growth in fiscal 2004-2005.

In fiscal 2003-2004, the company reported a revenue of INR5.20 billion and a 7.8% rise in net profit at INR697.2 million. Mehta refused to provide net profit estimates for fiscal 2004-2005.

"This year, we expect a better natural gas supply, and the likely commissioning of the company's own power unit should help us improve the capacity utilization," said Deepak's Mehta.

In fiscal 2003-2004 its capacity utilization was 85% since natural gas supply, the fuel for its manufacturing units, was less than promised by suppliers.

"Gas shortage is going to be an issue of the past," said Mehta, referring to the soon to be operational gas pipeline between Dahej-Mumbai in Western India which is expected to provide adequate gas supply to consumers.

Moreover, the company's acquisition of a 35,000 metric tons-a-year ammonium nitrate unit in the southern state of Andhra Pradesh last fiscal will add to revenue growth, said Mehta.

"The new unit could add about 500 million (rupees) to the revenue," he said.

-By M.C. Govardhana Rangan, Dow Jones Newswires; 91 22 22884212, govardhana.rangan@dowjones.com

-Edited by David Bottomley [ 31-05-04 0907GMT ]

Back