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Home > Outlook Arena > Views On News > Jul 21, 2003 - IPCL: Cyclical upturn to benefit
Reliance's petrochemicals division is only about 20% of its net sales, that for IPCL is about 38%. Therefore, we expect that there is a lot of scope for improvement in overhead costs for IPCL. At Rs 113, IPCL is trading at a P/E of 13.7x its FY03 multiples. The prices of petrochemicals have increased in the first three months of the current financial year. With Reliance taking control of IPCL in FY03, the combined entity account for 65%-70% of petrochemicals capacity in India. Therefore, the recovery in prices will benefit the company in a large way. This coupled with the increased synergies with Reliance are long-term positives for the company. Though the expected deregulation in natural gas prices may impact profitability, the cyclical upturn may rub off this negative effect.