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India's Reliance planning to buy Pakistan PTA

RECORDER REPORT

KARACHI (May 09 2006): India's Reliance Industries Ltd (RIL) is all set to cross the border. India's largest private sector company is in talks for picking up equity in 'Pakistan PTA', the country's only major producer of 'Purified Terephthalic Acid (PTA).

A delegation of senior executives from RIL is already in Pakistan for negotiations on valuation. The company's PTA business is headed by Subodh Sapra, president. If the deal goes through, it will be the biggest investment by an Indian company in Pakistan, according to a report published in an Indian newspaper.

Company executives declined to comment on the issue, but sources close to the development said that talks were at a preliminary stage.

The PTA plant is in close proximity to Port Qasim, about 50 km from Karachi. "This makes things logistically easier for Reliance. The Indian company's Jamnagar port in Gujarat is just about 10 hours from Port Qasim."

A senior analyst, tracking the industry, said that the Pakistan venture would add muscle to Reliance's polyester business. It would also assure RIL another steady source of raw material after expansion of its polyester facilities, the Indian paper report said.

RIL's polyester capacity of 2 million tons per annum is the sixth largest in the world. The company is the largest producer of polyester fibre and yarn in the world. The company is moving towards high-end applications like industrial usage of PTA from mere textiles.

Purified terephthalic acid is the integral raw material in polyester. RIL is the world's fourth largest producer of PTA and the largest manufacturer of polyester fibre and yarn.

With a turnover of nearly Rs 22 billion last year, Pakistan PTA produces 72,000 tons PTA and sells 4,78,000 tons. RIL's present PTA capacity is 9,75,000 tons a year, which is slated to increase to 1.9 million tons after the current expansion.

Pakistan PTA was formed after the PTA business was de-merged from ICI Pakistan in 2001. It remains a member of the world-wide ICI group. Incidentally, RIL had acquired ICI's polyester fibre business in India in the early 1990s.

The UK-based multinational (ICI) was instrumental in producing polyester fibre, for the first time in India, by setting up a plant at Thane in Maharashtra.

The Pakistan company (PPTA) is listed on Karachi, Lahore and Islamabad stock exchanges. On December 31, 2005, 75 percent of its shares were held by ICI Omicron BV (on behalf of ICI plc, UK).


Copyright Business Recorder, 2006

Just a question; Is this a good or a bad move for Pakistan

We shouldnt sell them anything and mind you this is chemical plant.

This sale should NOT be allowed!! And I can think of several reasons off the top of my head why it shouldnt, but knowing how our government seems to be bent over backwards to improve relations with India, it probably will be allowed

Isn't this a private (Pakistani) company? If so, to what level can the government interfere in its decisions?

The Strategic approval of Government can come in, the sale of share is subject to approval by GoP, remember how the US congress intervened in the case of Dubai Port World or prior oil company sale to China was foiled on the basis of security reasons. Well personally I think the big business tycoon groups like Engro should venture into this segment of industry and move from Fertilizer to high end Chemical business. As some other textile and stock market oriented companies are moving in Fertilizer business ( e.g. Fatima Fertilizer plant laying by Arif Habib and Azgard-9 taking over PAFL for 16.6 billion Rs) and also Fauji Fertilizer is into this business and i dont foresee them moving into high technology chemical business(owing to their Fauji-Bureucratic style of business).