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Reliance faces EC dumping probe - Views on News from Equitymaster
 
 
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  • Nov 11, 1999

    Reliance faces EC dumping probe

    According to newspaper reports, Reliance Industries Limited (RIL), along with other companies, is facing two anti-subsidy and anti-dumping cases in Europe relating to certain PET (polyethylene terepthalate) products. This is the first time that the company is facing an anti-dumping action in Europe. The other companies in the ambit include Century Enka, Indian Organics, Pearl Polymers, Futura and Elquaie.

    Reliance Industries (FY99 Sales Rs 14.5 bn) is India's largest private sector company. Its activities encompass polyester, fiber intermediaries, polymers, chemicals and branded textiles. The new ventures are in the core sectors of oil and gas, power and telecom. Reliance Industries is also the promoter of Reliance Petroleum Limited, which has a refining capacity of 27 m tonnes per annum.

    Reliance, since September, has constantly been revising its product prices to reflect the improved demand supply situation. The slow build of international capacity and a recovery in demand from Southeast Asian countries have been the main reason behind the firming up of prices.

    In the anti-subsidy charge it is alleged that the Indian government is giving subsidies in the from of schemes like the export processing zones, export oriented units, duty entitlement pass book schemes, export promotion capital goods schemes, advance licenses and income tax exemptions. According to the complaint, the level of subsidies is the highest among the other countries that have also been charged South Korea, Malaysia, Taiwan, Indonesia and Thailand.

    A move to impose anti-dumping duties or other restrictions on Indian exports of petrochemical products would adversely affect the recent recovery in the sector. Moreover, once the European nations are successful in proving their case, similar attempts may be made in other markets. This could precipitate the crisis.

    Market View:
    Analysts have rated the stock as a 'BUY'. The reasons in favor of the 'BUY' recommendation are firstly, the upturn in the petrochemicals cycle, following the recovery in S E Asia, and secondly, the fact that the company, having completed its capex plans, is likely to generate free cash flows this year.

     

     

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