Aug 30, 1999|
Domestic majors to bid for IPCL stake
According to newspaper reports, the Union Cabinet has waived aside the condition of preventing market dominance by a single player in the sale of government equity in Indian Petrochemicals Corporation Ltd. (IPCL).
IPCL (FY99 Net Sales: Rs 31.1 bn) is India's second largest integrated manufacturer of polymers, fibre and fibre intermediaries and chemical products. It has two integrated petrochemical complexes and is in the process of setting up a third one.
The Disinvestment Commission, while putting forward its recommendation on IPCL, had cautioned that the strategic sale should not lead to a market dominance by a single player. However, the government now seems to have brushed aside this advice.
Although the Disinvestment Commission was justified in its view, it must be noted that domestic prices are now largely influenced by the international demand supply scenario. This is mainly because of the reduction in import duties. The price differential can be expected to reduce further, as duties come down as per the WTO guidelines. Therefore, even though there might be a single dominant player in the domestic market, prices would still be determined by global demand and supply.
The waiver of this stipulation will help the government invite more competition for the bidding, which may result in the government getting a better price for its stake. This will be achieved without creating a scenario in which a monopolist can exploit its customers.
Analysts have rated the stock as a 'BUY' on account of the turnaround in the petrochemicals cycle. Also the proposed handover of the management to a private concern has supported the 'BUY' rating.
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