Mumbai, Sept. 27: Almost four months after it took over IPCL, the Reliance group has started hiking capacity, tapping synergies, integrating operations, raising capital and cutting costs as part of a larger plan to turn the petrochemicals company into a global giant.
Addressing shareholders at its annual general meeting (AGM) in Baroda today, Reliance chairman Mukesh Ambani, who became the IPCL chief earlier this year, said the benefits of initiatives launched over the past few months would start paying off this financial year. “By March next year, IPCL will rebound and be recognised as the most successful example of the government’s disinvestment drive,” Ambani said.
IPCL, meanwhile, is graduating to world-class manufacturing facilities, procuring key raw materials in a better way, using information technology to speed up processes, apart from nurturing human and intellectual capital.
As part of efforts to dovetail integration, production teams from Reliance and IPCL have studied plant operations and suggested ways to raise production with efficiency; output targets have gone up as well.
Ambani said feedstock integration between IPCL and Reliance, particularly in naphtha, has been achieved, helping the corporation save on costs. In other areas, alternative fuels have been identified to improve value addition, particularly at the Vadodara complex.
IPCL’s management information system is being recast to enhance efficiency. In house-keeping, a team is helping reduce costs on working capital and long-term debt.
“IPCL and Reliance, working in a synergistic manner, have the opportunity to integrate the best characteristics of the two largest petrochemical companies in India and face global competition,” he pointed out.
Ambani said both companies expect to be market leaders, a feat he felt could be achieved with economies of scale, operational integration, productivity gains and cost reduction. IPCL can also leverage Reliance’s core competencies in building world-class businesses in a globally competitive mould.
IPCL and Reliance’s combined annual polymer capacity at 26 lakh tonne would still be a third of what Dow, the world’s largest maker of the stuff, can produce, but Ambani felt both firms have the “fortune of a strong presence in one of the largest markets” on earth.
He listed geographical expansion, market consolidation, product extension, acquisitions and green field investments as IPCL’s options for growth in future.
Earlier this year, Reliance Petroinvestments (RPiL), a Reliance group firm, acquired the government’s 26 per cent equity in IPCL at Rs 231 per share. The deal reduced the government’s holding to 33.95 per cent of the company’s voting capital. The shareholders’ agreement gave Reliance management control and the strength to revamp the IPCL board, which now has 12 directors — six representing the Ambanis, two from the government and four independent ones.