So just trying summarize the the current developments.
IG happens to the largest player in the industry (275l Mt pa) close to 50% of total domestic capacity. One of their key customers has actually backward integrated into PAN production for DEP. Meanwhile imports have sharply fallen by more than 50%. It is simply not possible to compete with cost of production of IG and all (economies of scale and cheapest producer). A substantial quantum of PAN is consumed by the paints sector which should sustain, but there is nothing which can change exponentially either on demand/supply side (as far as I understand) however, Indian players are benefitted by imposition of ADDs, some of which shall expire by CY26 I think, unless this factor opens up something.
Asset Turns are around 1-1.2x overall, erratic PAT/OPM keep the RoE/RoCE readings very volatile as well as PAN-Ox spread is the key to track which is directly related to crude and global demand function. So factors which are within control of IG happens to be lesser.
Maybe why in FY18 when RoCE was 35%+ P/BV was 3.5, but currently oscillating between 1-1.25x. Uncertainty maybe is the reason.
Probably why they’re now diversifying into downstream plasticizers (PVC led consumption) which is more stable margins and much higher Asset turns of 5x (mgmt guidance). Full scale productions to happen by FY26 end and should be interesting.
LT Borrowings have gone up, interest cost jumped up as well, which shall add another volatile reading to track: Int coverage ratio.
All said, may not be very comfortable for many right now, but key to watch how the industry dynamics change post the ADDs expire, and if the plasticizers make the business more stable. Both factors shall play out around the same time between CY26-27.
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