Second Half Could Turn Out To Be Better
The second half of 1996-97 should see a dramatic improvement in the company's volumes. New capacities are getting commissioned and by the end of March 1997, the company should have completed a major portion of its Hazira expansion, including the Rs 1,900 crore cracker complex.
Only the caustic-chlorine plants and the third PTA plant will be left to be completed in fiscal 1997. Company sources confirm that the second half will see higher volume growth.
"Our strategy is volume driven. We aim capture market share by pushing in large volumes at low prices," explain sources.
Within the next one month, Reliance will commission another 80,000 tonnes of staple fibre, its second PTA plant of 3.5 lakh tonnes, and the cracker complex. The cracker will produce 7.5 lakh tonnes of ethylene, 3.6 lakh tonnes of propylene.
A new two lakh tonne plant of polyethylene and an 80,000 tonne PET chips will also be commissioned by end-1996.
The benefits to Reliance are several. Cracker commissioning will help Reliance save nearly Rs 1,000 crore in ethylene imports. It will lead to higher value addition as the integration chain would be complete.
In PTA, the benefits will not be much as most of the production will be used in-house for polyester. Very little will be sold outside. The polyethylene plant will help Reliance consolidate its position in the market where it already has 51 per cent market share.
Prices will be a problem, but analysts do not expect another drastic fall in prices. They went down sharply earlier this year, but now they have recovered slightly, and are expected to remain steady.
"Prices will not rise to 1995-96 levels, but will also not fall drastically," says a petrochemical analyst.
The results and the impending new capacities will lead to a reworking of projections for the full year. From current levels of between Rs 950-1,100 crore, they are likely to be upped to over last year's figure of Rs 1,305 crore.
Says a Reliance spokesman: "This is just a trailer of what is going to happen. The full benefits of volume expansion will be felt in 1997-98."