Deepak Fertilisers to raise IPA production on 10 times jump in demand for hand sanitisers

By: |
March 31, 2020 2:10 AM

DFPC's IPA production was under pressure from Chinese dumping and production had declined in FY19 by 17.39%, according to Emkay Research.

The report puts domestic demand of IPA at 2 lakh mtpa which is served equally by domestic makers as well as imports. (Representative image/ AP Photo)The report puts domestic demand of IPA at 2 lakh mtpa which is served equally by domestic makers as well as imports. (Representative image/ AP Photo)

There has been a 10 times jump in demand for hand sanitisers in the country. Consequently, Iso Propyl Acohol (IPA), a key ingredient in hand sanitisers, has seen a surge in demand. As a result, Deepak Fertilisers and Petrochemicals (DFPCL) has seen increase in demand from segments such as pharma, hand sanitiser, inks and derivatives. DFPCL is the largest and sole manufacturer of IPA in the country.

While logistics and supply chain services have been disrupted due to the lockdown but the company has managed to run the plant at full capacity as IPA is a key ingredient in hand sanitiser manufacturing and sanitisers are now essential to fight against coronavirus.

“Being the only producer and major supplier of IPA in India, we would like to contribute to the nation with all our capacity diligently, during this crisis situation. We would like to increase our supply through both domestic manufacturing as well as imports to serve the demand growth,” a company spokesperson said, adding that the firm has seen demand rise from 15,000 MT to around 20,000 MT across all segments.

DFPLC manufactures IPA at its plant in Taloja and its current installed IPA capacity is 70,200 MT. The company is in the process of setting up another 100,000 MT IPA plant in near future. DFPCL also trades IPA and imports it mainly from NE Asian countries. Though IPA imports have reduced due to disruption in shipping lines, the company anticipates the overall situation to improve going forward.

For DFPCL, IPA revenues had declined in Q3FY20 and this trend would be reversed considering the demand growth in India and the company anticipates better results in IPA segment. Though the government has capped prices, the price of IPA used in the manufacturing of hand sanitisers shall not exceed those prevailing on March 5, 2020, as per a government notification.

According to Emkay Global Financial Services Research, there is severe shortage of IPA, leading to a sharp surge in prices in the import market from Rs 67/kg in February to Rs 300/kg by mid March. However, this is a short-term impact on the IPA prices due to the sharp surge in demand for hand sanitisers and prices will settle down going forward at around Rs 95-100/kg, Emkay Research said.

The report puts domestic demand of IPA at 2 lakh mtpa which is served equally by domestic makers as well as imports. Currently, Deepak Fertilizers is the only manufacturer of IPA in India catering to around 40% of domestic demand.

India also imports 50,000 mtpa of IPA and sells in the domestic market.

DFPC’s IPA production was under pressure from Chinese dumping and production had declined in FY19 by 17.39%, according to Emkay Research.

The company has sought quantitative restrictions to protect the domestic industry alleging increase in IPA imports and undercutting the prices of the domestic industry. As a result, the production quantity, sales quantity, capacity utilisation and market share of the domestic industry have fallen considerably, the company said. The Directorate General of Trade Remedies, had in November 2019, initiated investigations to determine increase in imports and whether it caused serious injury to the domestic industry.

Meanwhile, IPA has got competition as Ethanol is being pushed as an alternative with sugar mills and distilleries being permitted to make sanitisers. However, IPA has certain advantages over ethanol for hand sanitiser use and is globally a preferred ingredient for hand sanitiser as it has proven microbial, anti-bacterial, anti-infectant properties and it does not dehydrate and is therefore soft on the skin.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Amazon updates Echo Dot, Echo Dot with Clock and Echo smart speakers with new spherical design; India price starts at Rs 4,499
2Amazon updates Fire TV Stick with Dolby Atmos and HDR support; will ship October 15 at a price of Rs 3,999
3Amazon announces Luna game streaming service, its answer to Google Stadia and Microsoft xCloud