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Haldia Petro picks viability over investments
Jul '11
After receiving the Government's notification waiving import duty on naphtha imported by Haldia Petrochemicals Ltd (HPL), the company has announced that it will not make future investments until the plant's viability is restored.

“The company has some immediate plans lined up, but investments will need to wait as restoration of the viability is our priority at the moment”, said Mr. Partha Bhattacharya, Managing Director of HPL.

Speaking about future investment plans of HPL, Mr. Bhattacharya said that the company plans to invest Rs. 2 billion for producing better-margin items having an IRR (internal rate of return) of 35 percent, and a payback period of two years.

HPL also intends to manufacture 12 to 13 grades of new polymer products at a total investment of Rs. 40 billion, he added.

He said while naphtha prices have gone up by 39 percent, the prices of final products have increased only 18 percent during the same period, thus creating a difference of 21 percent. This has affected the company's margins leading to substantial losses, he explained.

He further disclosed that the company made a loss of Rs. 2.47 billion in the April-June quarter of current fiscal year and the total loss in fiscal 2011-12 may cross the Rs. 10 billion mark. He, however, expected a better performance this month as prices of final products are increasing.

HPL may not be able to get funds from banks, if viability is not restored, he said and said that the viability has been severely affected due to the implementation of Supermax project to increase the plant's capacity, as both cost an time factors were overrun.

Initially, the project was estimated to cost Rs. 6.75 billion, but by the time it got completed, its cost turned out to be Rs. 12.30 billion, nearly double than what was thought at the beginning, he added.

Fibre2fashion News Desk - India

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