IGPL undertook a expansion way back in 1996 to increase its PAN capacity from 55,000 tpa to 1,20,000 tpa. But with PAN prices on a one-way downslide from their peak of $1,500 in December, the sector lost out in popularity. Due to this, the company was unable to tap the capital markets and was forced to fund the expansion through debt.

The heavy interest burden, combined with falling business returns saw it slip into the red. The year 1997-98 saw the company make a net loss of Rs 68 crore, which wiped out more than half the net worth. It was declared a potentially sick company as per the SICA.

However, the revival in the South East Asian economies and the rise in crude oil prices have seen PAN prices moving up from $310 per tonne in March 1999 to $550 per tonne currently.

Petrochemical analystsare of the view that PAN prices will maintain the current level because crude oil prices are strong at $20 per barrel.

Prices are not the only bullish factor. Improved demand for PAN, due to better offtake from plasticizer segment (which constitutes 80 per cent of the total demand) and closure of world capacites to the tune of 2,60,000 tpa has helped IGPL tap leading corporates. It has entered into long-term agreements with Sabic of Saudi Arabia and Lucky Goldstar of South Korea to supply PAN at a minimum price of $550 per tonne with a option to share any further increase in price of PAN. As per company sources, these two agreements will tie up 35 per cent of its capacity.

Internally too, the company has restructured. Renowned consultants Ernst & Young are advising it on financial restructuring. Some of their recommendations have started bearing fruit. Like in the area of interest payout, where IGPL plans reduction by securitising the committed export proceeds from these long term agreements. It is intalks with E. Bank of Europe and another Asian bank for the same.

Banks, on their part, have agreed to reduce interest rates for the earlier loan. Says Nikunj Dhanuka, Director IGPL, "The rates have been revised from 18 per cent to 12 per cent". This, too, will lead to savings of Rs 23 crore in annual interest cost. All this will show up in the current year's workings.

"The above measures will help the company to reduce losses from Rs 68 crore for the year ended September 1998 to Rs 37 crore in the current year", says Dhanuka. He adds optimistically, "If the prices prevail at the current levels, we can declare a dividend next year."

The market has started taking note. The last three months have seen the stock price move up from Rs 9 to Rs 22 and back to its current level of Rs 16. Not a bad price for a SICA applicant.