Over 16 months after suspending operation, Adani Group’s flagship company Adani Enterprises Ltd (AEL), is planning to revive its petrochemical foray and enter the undersupplied polyvinyl chloride (PVC) manufacturing market. The company’s first phase of the proposed 2 million tonnes per annum (MTPA) PVC manufacturing plant is scheduled to commence commercial production by December 2026, marking the Group’s entry into the petrochemical business.
Being set up in Mundra, Gujarat, with a proposed investment of US$4 billion (Rs 37,900 crore), AEL incorporated a wholly-owned subsidiary, Mundra Petrochem Ltd, in 2021 to establish a 2 MTPA greenfield coal-to-PVC plant on land currently under owned by its group company Adani Ports and Special Economic Zone (APSEZ) in Kutch district of Gujarat. Reports indicate that AEL is setting up a petrochemical cluster in Mundra, which will also accommodate 2 MTPA of PVC manufacturing plants. This plant is proposed to be completed in phases, with Phase-I of this PVC manufacturing facility slated for commissioning by December 2026.
| India’s PVC demand-supply (million tonnes) |
| Financial year | Domestic demand | Total capacity | Operating rate (%) |
| 2029-30 (f) | 6.0 | 4.0 | 81 |
| 2028-29 (f) | 5.6 | 3.5 | 83 |
| 2027-28 (f) | 5.2 | 3.5 | 75 |
| 2026-27 (f) | 4.9 | 3.0 | 77 |
| 2025-26 (f) | 4.6 | 2.0 | 88 |
| 2024-25 (f) | 4.3 | 1.7 | 90 |
| 2023-24 (p) | 4.0 | 1.6 | 89 |
| 2022-23 (p) | 3.7 | 1.6 | 90 |
| 2021-22 (a) | 2.8 | 1.6 | 89 |
Source: Polymerupdate Research; a = Actual, p = Projection, f = Forecast
Project suspensionAiming to consolidate operations and address investor concerns after the United States-based short-seller Hindenburg reported irregularities, Adani Group in March 2023 decided to suspend work on its Rs 34,900 crore petrochemical project in Gujarat. This casts a shadow on the raw material sourcing business also. The Group had earlier cited plans to venture into the business to supply raw materials to meet its PVC plant. Although the coal-to- PVC plant was initially thought to become a costly proposition, it could have been helpful in stepping ahead in India’s self-reliance in PVC supply.
Hindenburg, a research firm that has been popular for its short-selling tactics in the financial investment markets, came out with a damning report on January 24, 2023 this year alleging stock manipulation and accounting fraud, among other governance lapses across several verticals of Adani Group. After the publication of this report, Adani Group is reported to have lost market value to the tune of around US$140 billion across its various companies. In the rupee terms, the company is assessed to have lost around Rs 12 lakh crore.
With this valuation collapse amid losing investors’ confidence, Gautam Adani, the chairperson of Adani Group, slipped to the 30th position by March 2023 in the list of the world’s richest persons from the third rank before the report. Owing to the weak sentiment about the present and future businesses, Adani Group has been suspending work on its budding greenfield and brownfield projects.
Interestingly, Adani Group not only clarified to have done anything wrong but also committed to its comeback strategy by claiming that ‘the report is baseless’. The strategy, however, is based on addressing investor concerns around debt by consolidating operations, fighting off allegations, and repaying some loans in phases, enabling the group to gain confidence. The Group has repaid some debts and pre-paid a number of finances raised by pledging promoter stakes in various verticals.
The Group started re-evaluating projects based on financial availability and cash flow. While some of the debts were repaid, projects in the initial stage of development were suspended. According to reports, the Group decided not to go ahead with its coal-to-PVC plant as initially thought to be set up in Mundra, Gujarat. Under re-evaluation strategy, the company already cancelled a Rs 7,000 crore coal plant purchase and shelved proposals to bid for a stake in power trading company PTC to conserve expenses.
Original planThree years ago, Adani Group proposed to set up a 2 million tonnes per annum (MTPA) coal-to-PVC plant at an investment of US$4 billion. The project was expected to produce PVC grades such as suspension PVC resin, chlorinated PVC (CPVC), and emulsion PVC (past). Feedstock coal of about 3.1 MTPA for this project was proposed to be sourced from Australia, Russia, and other countries. The Group expected to commence commercial production on this coal-to-PVC project within four years after receiving statutory approvals.
Months later, the Group wrote emails to its vendors and equipment suppliers to suspend work on at least 1 MTPA of the greenfield PVC project due to circumstances beyond control. The mail further asks vendors and suppliers to ‘suspend all activities of the scope of work and performance of all obligations till further notice due to unforeseen scenarios,’ for Mundra Petrochemical Ltd’s Green PVC project.
The email further stated that the Group was re-evaluating various project/s under implementation at the Group level in different business verticals. Some of the ongoing business verticals are being re-evaluated for their continuation and revision in timeline based on future cash flow and finance. According to reports, the work under the primary industry vertical will come for further re-evaluation during the next few months.
Current statusAdani Group already obtained environment clearance and consent to establish the project and now intends to implement Acetylene and Carbide-based PVC production processes for the Mundra project. Adani Group’s petrochemical plant at Mundra got a fresh lease of life as State Bank of India prepared to lend the project about Rs 17,000 crore, amounting to approximately 50 percent of its capital expenditure requirement.
The loan, from a consortium led by India's largest lender SBI, will be part of a financial closure programme for Adani Petrochemicals Ltd coal-to-polyvinyl chloride plant, which would be India's largest PVC manufacturing facility once completed.
Growing PVC consumptionIndia’s PVC demand has been rising sustainably in recent years due to increased government’s spending on infrastructure. However, domestic production has not risen in a similar proportion. The industry estimates India’s total PVC production at 4 million tonnes, with overall domestic production capacity having just 1.6 million tonnes. Approximately, 60 percent of India’s PVC demand is met through imports. Hence, the industry enjoys a plethora of opportunities for producers to set up new manufacturing units to make India ‘Aatmanirbhar’ (self-reliant) in PVC supply in sync with growing demand. India’s overall PVC demand is estimated to rise by 50 percent cumulatively to 6 MTPA by financial year 2029-30.
India’s construction and agriculture sectors are seen driving the PVC demand in India. The increasing government spending on housing, sanitation and irrigation through programmes like PMKSY, AMRUT and ‘Housing for All” are driving the demand for pipes and tubes, sources said adding PVC demand is expected to grow at a Compounded Annual Growth Rate (CAGR) of 8-10 percent by FY 2022-26 as a result of increased infrastructure spending and various government initiatives.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
