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India’s petrochemicals sector on the upswing: Adani, SBI among players taking interest

In a stark contrast to the power sector which is facing a shortage of coal stocks, the Indian petrochemicals industry is on the march. The industry which is vital to the country’s growth has received crucial investment with new players coming in. Following the announcement of a petrochemicals subsidiary by Adani, SBI has gone ahead and approved a loan for Naraya Energy for its petrochemical expansion plans.

Naraya Energy had disclosed its plans for an expansion at the Vibrant Gujarat Summit, 2019. The company signed a financial agreement for a project term loan of Rs. 4,016 crores with a consortium of banks led by the State Bank of India. According to the company’s official statement, the acquired funds would be used to set up a 4,50,000 tonne per annum (KTPA) polypropylene plant at its Vadinar refinery in Gujarat.

A growing interest in India’s petrochemical industry cannot be denied, with a case in point being Adani’s foray into the petrochemical business. In July this year, Adani incorporated a wholly-owned subsidiary to look after its petrochemical interests, with plans to set up and operate refineries, specialty chemical units and hydrogen plants. Adani already has a sprawling base of operations from seaports to airports to power generation and renewables, and its foray into petrochemicals was just a matter of time. The entry of Adani and SBI green-lighting a term loan for a petrochemical expansion plan is just the tip of the iceberg.

India’s petrochemical sector is vital to the nation’s growth and is one of the largest and diversified globally. Its proximity to the Middle East is a big advantage which has been instrumental in driving petrochemicals exports up at a CAGR of 7.2 per cent between FY16 and FY20. According to the President of India’s Chemicals and Petrochemicals Manufacturers’ Association, Kamal Nanavaty, petrochemical demands are expected to skyrocket by 2050 and production would have to increase ten-fold to meet them.

The petrochemicals market is also projected to reach $300 billion by 2025 with the demand expected to grow at approximately 9 per cent between 2020-25. Looking at the numbers, one can expect the sector to perform strongly in the coming years. The entry of new players like Adani, SBI and other financial institutes approving loans for expansion projects and foreign investors looking to infuse capital in the sector bodes well for the future. Given its vital status to the country’s economy, the petrochemical industry can expect multiple greenfield projects in the coming years.

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