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Wednesday, May 22, 2002

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A costly miss for Indian Oil?

Vinod Mathew

AHMEDABAD, May 21

THE biggest casualty in the long drawn-out IPCL disinvestment story, which was finally concluded last weekend, is undoubtedly Indian Oil Corporation (IOC).

The public sector company, which arguably had as much at stake as Reliance Industries Ltd (RIL) in taking strategic control over IPCL, made a pitch at Rs 826 crore for 26 per cent stake in the company. This was against the Rs 350 crore it had offered the Cabinet Committee on Disinvestment (CCD) for the entire stake in IPCL's Vadodara complex in August last.

By falling short of the Rs 1,490.84 crore offered by RIL, it appears IOC has been somewhat mild in its bid. This is quite unlike its aggressive and successful bid for IBP at Rs 1,153.68 crore, which was way ahead of its competitors, Royal Dutch Shell and RIL.

It is not as if IOC had nothing at stake other than synergies of production by acquiring IPCL. IOC's Gujarat refinery had sold IPCL various feedstock items such as naphtha, kerosene, LPG, LSHS, HSD and LDO worth Rs 942 crore in the last fiscal. Of this, naphtha alone accounted for Rs 753 crore, marginally up from Rs 746 crore in the previous year. This is all set to change, as much of it would now be sourced from the Jamnagar unit of RIL.

Faced with the prospect of finding alternative avenues for selling products worth Rs 1,000 crore per annum, one would be inclined to think IOC may be rueing its decision of not having bid aggressively enough for IPCL. Talking to Business Line, Mr P.S. Rao, Executive Director, Business Development, IOC, said the Gujarat refinery was increasingly looking at other customers to offload its naphtha.

"The Gujarat refinery is not as much dependent on the IPCL for the sale of naphtha as it is made out to be. We have built up a customer base that includes Zuari Agro, Chambal Fertilizers, GSFC and IFFCO. As against our monthly naphtha output of 1,00,000 tonnes, IPCL accounts for only 10,000 tonnes. At a landed cost of $ 240 per tonne, this is not much considering the refinery's turnover of around Rs 13,000 crore per annum," Mr Rao said.

But it is a fact that IOC is now forced to export naphtha to offset the slump in domestic demand. That IOC had to depend on the Kandla port to handle the cargo speaks volumes of the advantage it has lost by not annexing Gujarat Chemical Port Terminal Company Ltd (GCPTCL), in which IPCL is the largest equity holder.

Significantly, the January issue of the Petrochemicals Data Service, in its refinery capacity projection for the next five years, had indicated that IOC is looking at the doubling of capacity at Gujarat Refinery from 12.5 million tpa at present to 25 million tpa by 2006-07. The company has also been making noises about setting up LAB and paraxylene-PTA complexes in its bid to integrate backwards into petrochemicals as is the case the world over by refinery companies.

To Reliance and back

There may be quite a few aspirants for the post of Chairman & Managing Director in Indian Petrochemicals Corporation Ltd (IPCL) given that the new management will take over in a matter of days. Most of them would be from the Reliance group. And one thing they are likely to have in common is that they have at one time or the other worked at senior management positions in IPCL before joining the Reliance group.

Leading the pack, undoubtedly, would be Mr K.G. Ramanathan, former CMD of IPCL, who is now Director, Reliance Power. Having spent close to eight years as the CMD of IPCL (1992-2000), Mr Ramanathan joined Reliance about two years back. Another hot candidate would be Mr Sarup Chaudhary, President, Reliance Infocom. Earlier, Mr Chaudhary had worked as Director, Marketing, at IPCL.

The other potential candidates include Mr Manmohan Singh, President, Reliance Hazira complex and Mr Kamal Nanavati, President, Marketing, Reliance Industries.

However, one potential candidate, Mr N. Chander, former Director, Finance at IPCL resigned as President, Reliance Petroleum, recently to join Dodsal after putting in only a few months at Reliance. Mr Chander was once tipped to succeed Mr Ramanathan as the CMD of IPCL.

While there are at least a couple of old IPCL hands at the President level in Reliance, the scene is fairly choc-a-bloc with Vice-Presidents who have put in many years at IPCL.

One such top management cadre hand among the younger lot is Mr K.V. Subramaniam, who was the Executive Assistant to a couple of CMDs at IPCL before joining Reliance, where he now heads the Life Sciences division.

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