IPA accounted for nearly 8% of the compnay’s revenue in the first nine months of FY20.
ET Intelligence Group: Deepak Fertilisers, the only Indian manufacturer of specialty chemical IPA (isopropyl alcohol), a key ingredient for sanitisers may benefit from rising demand for cleansers amid the Covid-19 outbreak. India’s total annual demand for IPA is two lakh MTPA from consumer and pharma sectors, which is expected to have shot up in the past few weeks. Deepak Fertilisers has a capacity of 70,000 tonnes per annum (MTPA) and most of the remaining demand is met through imports.
Though international IPA prices rose to nearly Rs 300 per kg from Rs 65 per kg in a month, it may not fully reflect in the form of higher realisations for Deepak. The government has restricted prices of alcohols including IPA that are used to manufacture sanitisers to those existing on March 5, 2020. In case of IPA, it is Rs 69 per kg.
However, the company is free to sell at existing market prices to nonsanitiser manufacturers including antiseptic, aftershave, and cosmetic products. This may support realisations. “It is a short-term impact on the IPA prices which will settle down going forward in the range of Rs 95-100 per kg,” said Rohit Sinha, analyst with Emkay Global Services who has been closely tracking the industry.
IPA prices halved in September 2019 from Rs 100 per kg at the end of 2018 due to Chinese dumping, which also reduced Deepak’s production volumes by 17% in FY19. With the Covid-19 pandemic, the demandsupply situation has turned favourable. IPA accounted for nearly 8% of the compnay’s revenue in the first nine months of FY20.
The company’s stock has fallen sharply to Rs 71 at the end of Thursday’s trading session from a high of Rs 470 following higher capital expenditure amid weakening product prices. It had a debt of Rs 2,900 crore at the end of September 2019.
