IG Petrochemicals Ltd (IGPL) is a market leader in the manufacture of Phthalic Anhydride (PAN), which is a chemical intermediate used for the manufacture of consumer care, personal care and home care products. The company commenced production in 1992 and is today the largest producer of PAN in the country. IGPL is promoted by the Dhanuka Group, in technical collaboration with Lurgi GmbH of Germany. The plant is located at Raigad district in Maharashtra, which is 50 km from the Jawaharlal Nehru Port, thus enabling it to provide unsurpassed customer service. PAN is used for manufacturing PVC products, shoe soles, cables, pipes, leather cloth, packaging and other products. It is also being used for the manufacture of resins for paints, building materials, plastic products, textile industries and printing inks. India has become the fastest growing G20 economy in the world and the Indian economy is expected to maintain its growth rate above 7%. It should be largely driven by the positive measures taken by Indian government to promote infrastructure, encourage domestic manufacturing and drive the industrial productivity to create job opportunities and build a positive investment environment. The fortunes of the petrochemical industry are closely linked to the movement of oil prices as it drives the prices of key materials. Petrochemical markets get impacted during sharp price fluctuations, creating a cloud of uncertainty in upstream and downstream projects. The IG Petrochemical stock is currently quoting at two-year forward PE of nearly ten times, but going forward most analysts believe that the company should fetch premium valuations on the back of improving macro scenario, higher revenue visibility, stability in prices, strengthening of the balance sheet and excellent return ratios. The stock price of IG Petrochemicals Ltd is currently quoting at Rs 705 on the Indian bourses and can be bought by portfolio investors for a one-year investment horizon for a 40% appreciation upside.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.