Gautam Adani-led Adani Group on Monday announced its foray into the rapidly growing petrochemical sector that will take competition head-on with country’s largest corporate Reliance Industries in its home turf in Gujarat.
The company has signed an agreement with German chemical giant BASF to invest Rs 16,000 in setting up a chemical factory in Gujarat where petrochemical landscape is dominated by the Mukesh Ambani-run company.
As per terms of the agreement, Adani Group and BASF will set up the chemical factory at Gujarat's Mundra district, besides putting up wind and solar power plant at the site to meet the electricity requirement of the unit, the two companies said in a statement.
BASF will hold a majority controlling stake in the new venture. It will, however, hold a minority interest in the power venture.
Reliance is the market leader in the Indian petrochemical sector and this will be the first time that the two billionaires hailing from Gujarat will be in direct competition in any business.
The oil-to-telecom conglomerate Reliance in January 2018 completed a massive USD 16 billion expansion of its petrochemical production capacity to enter the league of the top five producers globally.
While Adani’s petrochemical operations will be relatively small, the joint venture plans to scale it in future to reach global size. Initially, the Adani-BASF combine will manufacture chemicals that will find application in construction, automotive and coatings businesses. This will be lot smaller from RIL’s that produces a wide variety of products for a range of applications — packaging, agriculture, automotive, housing, and healthcare among others.
The two sides signed the MoU for the joint venture operations on the eve of the Vibrant Gujarat Global Summit 2019 "to evaluate a major joint investment in the acrylics value chain", the joint state ment by the two firms said.
This would be BASF's largest investment in India to date, it said without giving details. Work on setting up the chemical factory will start soon after a feasibility study is completed by the end of 2019.
The joint operations will largely cater to the domestic market and serve a wide range of local industries, including construction, automotive and coatings, whose growing demand is currently supplied via imports.
Headquartered in Ahmedabad, Adani Group is one of India's largest integrated infrastructure conglomerates with interests in resources (coal mining and trading), logistics (ports, logistics, shipping and rail), energy (renewable and thermal power generation, transmission and distribution), agro (commodities, edible oil, food products, cold storage and grain silos), real estate, public transport infrastructure, consumer finance and defence sectors.
Reliance owns and operates mega petrochemical complexes at Jamnagar, Hazira, Dahej and Vodara in Gujarat as well as at Nagothane in Maharashtra.
Gautam Adani, chairman of the Adani Group, said, "India continues to be a very large importer of petrochemicals given the rapid expansion of the middle class, and this leads to a significant outflow of precious foreign exchange. Our partnership with BASF is a big step forward in enabling our country's 'Make in India' program, as this partnership will allow us to produce in Mundra several of the chemicals along the C3 chemical value chain that we are currently importing."
Mundra's infrastructure is ideally suited to enable chemicals production, and Adani Group's ability to deliver renewable power makes this a unique partnership on several fronts, he said.
"BASF's intention to invest in a major new site for the acrylics value chain in India clearly demonstrates our strong and long-term commitment to our Indian customers.
"Together with the Adani Group, we would have the opportunity to provide our customers with high-quality chemicals and support them in growing their business. With our production powered by renewable energy, we would be able to minimize our impact on the environment," said Martin Brudermüller, chairman of the Board of Executive Directors, BASF SE.
In line with BASF's carbon neutral growth strategy, the chemical site in Mundra would be the company's first CO2-neutral production site.
The companies have developed an overall plan including new technologies and the supply of the site with 100 per cent renewable energy. "Therefore, in addition to the investment outlined in this MoU, BASF plans to co-invest as a minority partner in wind and solar park," it said.