Indo Rama Set To Ink Pact With Mitsubishi For Pta Project

Indo Rama Synthetics is expected link up with Mitsubishi Gas to set up its proposed US $330 million purified terephthalic acid (PTA) project.

A formal decision in this regard is expected to be taken by the board of directors of Indo Rama during a meeting scheduled to be held on Tuesday. The firming up of the joint venture agreement for the proposed PTA plant comes after prolonged talks.

Though several permutations in the equity division between the two companies are being considered, it has been revealed that Indo Rama Synthetics would retain majority equity in the proposed joint venture project. On option which is being deliberated is that Indo Rama would control 60 percent of the equity while the remaining would be held by Mitsubishi Gas.

 

When contacted by Business Standard, a senior executive with Indo Rama Synthetics said, I am not saying anything right now in this issue.

The plant, which is to be located at Vizag in Andhra Pradesh, would have an installed capacity of manufacturing 3.5 lakh tonnes of PTA annually. The plant would not have a backward integration into paraxylene production as proposed initially.

Mitsubishi Gas is a secondary PTA technology supplier which sources its technology from Amoco, the US-based petrochem giant.

The other global petrochem firms who have been shortlisted for a joint venture partnership in the project include Mitsui of Korea and Interquissa of Spain.

Sources within the Indian company have confirmed that, Mitsubishi Gas, Mitsui and Interquissa are the main contenders for the joint venture partnership in the project.

Mitsui, which had initially demanded a majority equity in the project, has scaled down its earlier stance and agreed to hold a 45 percent equity in the proposed project. However, sources say that a critical evaluation of the proposals forwarded by the global majors puts Mitsubishi Gas much ahead in the race.

Though the Spanish firm is a secondary PTA technology supplier after having borrowed it from US-based Amoco, the contract between the two would expire in 1997. This would enable Interquissa to lend out its technology to Indo Rama.

Speaking to Business Standard, a senior executive within the company said, It is true that we have renewed our negotiations with Mitsui after the Japanese company relaxed its earlier demand for a controlling equity stake in the PTA project. We are now talking of a 45:55 equity division, with the majority remaining with us.

The O P Lohia controlled-Indo Rama has already negotiated with International Finance Corporation (IFC, Washington), the investment arm of World Bank, for an equity participation in the proposed PTA project. The project would be financed through a combination of debt and equity, the ratio between the two being 1:2. However, the company has no immediate plans of entering the capital markets to raise funds.

The executive also reiterated that a new joint venture company would be floated under the name of Indo Rama Petrochemicals after a partner has been identified.

Indo Rama Synthetics is part of the US $ 800 million Indo Rama Group which has operations in Indonesia, Thailand, Nepal and Sri Lanka. The company has an installed capacity of 122,880 spindles for blended yarn and 2,50,000 tonnes per annum of polyester staple fibre and polyester oriented yarn.