Dhanuka: Looking ahead

Calcutta, Dec. 26: Calcutta-based South Asia Petrochem Ltd (SAPL) will set up a PET resin plant in Egypt.

The company — the second largest player in the country with a unit at Haldia — has signed a memorandum of understanding (MoU) with Egyptian Petrochemicals Holding Company (Echem) for the project.

The cost of the 315,000-tonne unit is estimated at $95 million or Rs 425 crore. SAPL will hold a 70 per cent stake in the venture and Echem will own the remaining 30 per cent.

“We plan to start work in August. It will take about 20 months to complete the project. It is likely to be located on either Alexandria or Damietta port,” C.K. Dhanuka, vice-chairman of SAPL, told The Telegraph.

SAPL’s investment in the project will be around Rs 100 crore. Dhanuka said the company board would meet in January-end to discuss the funding option.

The new plant would mainly cater to the European and the US markets. “Logistics and cheap power are two main drivers for building the plant in Egypt,” Dhanuka said.

The Haldia plant of SAPL was developed as an export-oriented unit.

The company had exported 64 per cent of its production in 2005-06.

The plant in Egypt is coming up following an increase in global scope after the withdrawal of the anti-dumping duty on imported PET resin in the US. PET resin is used to manufacture aseptic plastic containers.

To tap this opportunity, SAPL has already set up a subsidiary in Atlanta in 2005-06.

SAPL has tied up with Mitsubishi PTA of Haldia to supply feedstock to the Egypt plant.

At present, SAPL also procures from Mitsubishi, which has decided to set up a second unit at Haldia.

SAPL plans to buy 250,000 of PTA, the raw material for PET resin, for the unit in Egypt.

Back home, the company is also expanding capacity through a de-bottlenecking exercise.

Its Haldia capacity will go up from 180,000 tonnes to 200,000 tonnes by October next year, entailing an investment of Rs 40 crore.

SAPL, which has a small equity participation from the Bengal government, started production at Haldia in 2003 with 140,000 capacity. The project cost was Rs 450 crore.

SAPL, part of the Dhunseri Group with interests in tea, recorded a 16 per cent increase in net sales last fiscal to Rs 923 crore.

In the same period, net profit grew by 10.42 per cent from Rs 18.32 crore to Rs 20.23 crore.