IG Petro to tie up with US foam company

IG Petrochemicals Limited (IGPL), one of the top three global producers of the industrial chemical phthalic anhydride (PA), will soon form a joint venture company with US-based specialty and intermediate chemicals maker Stepan Chemicals to manufacture polyol (a kind of foam used in beds and other applications) from PA.

IGPL also plans to expand its capacity by 40,000 tonnes to become the second largest PA manufacturer in the world after BASF, and diversify into allied downstream business, as part of its vision to reach Rs 2,000 crore turnover in three years.

PA, processed from phthalic acid produced by oil refineries as a bye-product, is used to manufacture plasticizers, flexible PVCs, varnish, paint, textile dyes and polyester resins.

"We are in advanced stages of negotiations with Stepan Chemicals. A team of the US-based company is coming to Mumbai next week to discuss the joint venture. If the talks materialise, the JV company can take off in six months," said Nikunj Dhanuka, managing director.

He said the JV would initially set up a 25,000 tonnes a year capacity polyol plant at IG Petrochem's plant at Taloja with an investment of over Rs 100 crore. The $ 1.2-billion Stepan Chemicals is the only company in the world with the technology to make Polyol from PA. The company recently started a joint venture in China to manufacture Polyol, which currently has a market worth over Rs 500 crore in India.

The Rs 700-crore IG Petrochem is planning to expand its PA manufacturing capacity at its Taloja plant from the current 120,000 tonnes a year to 1,60,000 tonnes with an investment of about Rs 140 crore. This will make IGPL the second largest manufacturer of PA after the global chemical major BASF, which produces 400,000 tonnes a year at 10 different locations all over the world. Formosa Plastics of Taiwan, which manufactures 155,000 tonnes a year, currently occupies the second spot. The product has a $6 billion global market with demand for 3.8 million tonnes.

In India, IGPL, Tirumalai Chemicals, Asian Paints (for captive consumption), Aditya Chemicals and IGPL's group company Mysore Petrochem are the leading manufacturers of PA. These companies together produce 220,000 tonnes annually. The industry is growing at an annual rate of 8-9 per cent in the country mainly due to the boom in the real estate and oil & gas industries.

IGPL, currently a supplier of PA to plasticizer manufacturers, is also planning to foray into manufacturing of plasticizers such as diethyl phthalate and dioctyl phthalate.

"The company is talking to some of the European manufacturers to acquire the technology and to sell the product in the global markets," said Nikunj Dhanuka.