According to newspaper reports, Indian Oil Corporation has tied up with the Chatterjee Group, a George Soros affiliate, to bid for a 25% stake in Indian Petrochemicals Corporation Limited (IPCL). Indian Oil Corporation (IOC) had earlier missed the deadline for submitting a bid for the stake.
Indian Oil Corporation (IOC) is India's largest company in terms of sales. The company has a refining capacity of 31.4 m tonnes per annum. The company also operates seven pipelines out of the 10 that India has.
IOC's decision to bid for the stake in IPCL is motivated by its desire to dominate India's petrochemicals and energy sector. Furthermore, IPCL could serve as captive consumer for IOC's product. This would increase the proportion of value added products in IOC's portfolio, thus pushing up margins. With competition from the Reliance Group heating up, it is essential for IOC to step up capacity and integration. Picking up the stake in IPCL could largely solve this.
The importance of picking up a stake in IPCL is largely evident from IOC's alliance with the Chatterjee Group.
The company that manages to get the 25% stake in the IPCL will immediately get a significant presence in the domestic market. If it is Reliance, then it will lead to a near monopoly in the sector. On the other hand, if IOC were to get the stake, competition in the sector would only get fiercer.
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