Indo Rama confident to register profits next quarter

Indo Rama Synthetics Limited (IRSL), known as India’s largest polyester manufacturer, which has a plant at Butibori industrial estate, the first investment in that area and employs a workforce of 3,000 at the Butibori plant has been in the red for last three years, posted losses in the quarter ending September too.

The company has reported a net loss of Rs43.90 crore as against Rs16.02 crore in the same period the previous year. The revenue was down toRs 632.21 as compared to Rs730.86 crore in the corresponding period due to falling prices of crude apart from sluggish demand for its products and dumping by China.

Currently, the company’s plants, including that in Butibori, are being operated at 60% capacity. Efforts will be taken to jack up utilization to 80% of the installed capacity in the next quarter, said chairman OP Lohia. The company could successfully manage to operate without job cuts so far. But no new jobs could be created due to the slump.

Chairman OP Lohia said that the company is finally confident of turning around in the next quarter. Though the industry needs some support from the government, the company hopes to register profits on its own.

When it was pointed out that falling crude prices should benefit a polyester-maker, since it is raw material for the industry, Lohia said that volatile rates have led to inventory losses. The rates have gone much lower than the level at which Indo Rama had sourced its supplies, affecting its pricing calculations.

However, with crude rates stabilizing, at $40 a barrel, it is expected that the inventory losses will be reigned in. The company has stepped up its production, which can be seen in the terms of volumes going up. Though turnover in money terms is down, the physical production has been at 80,693 tonnes as against 73,492 tonnes in the same period last year. The capacity for draw texturized yarn (DTY), a high value added product, has also been expanded during the quarter, said Lohia.

The increased domestic availability of PTA, a raw material, will also help change the tide. However, dumping can be a major concern for smaller units, though on the brighter side there have been reports of Chinese units also facing losses due to low international demand.

As there is no export incentive, which can otherwise make Indian industries competitive. The government needs to support the industry by reducing the excise duty to zero for polyester fibre in lines with natural fibre. The government should also impose an import duty to counter Chinese dumping.