The Hindu Business Line : IOC mulls selling IBP's explosives business

Kolkata May 15 IndianOil may exit from the loss-making explosives business, which has come into its fold following the merger of IBP with itself effective May 2. The company, however, is confident on the potential of cryogenic vessels manufacturing business and will continue with it.

Apart from petroleum retailing, IBP was present in explosives business and manufacturing of cryogenic containers. The latter was used in transportation of liquid nitrogen and oxygen.

The Rs 141-crore explosives business slipped into the red in 2006-07 and incurred a loss of over Rs 9.5 crore in the first three quarters.

The Rs 27-crore cryogenics business on the other hand is maintaining a steady growth and is on the profit path since 2005-06. The division generated a profit of Rs 39 lakh in first three quarters of 2006-07.

Stiff competition

"The explosives business is facing stiff competition from numerous smaller players who have tremendous cost advantage over us.

Also the business is dependent on the coal sector, especially on a single client Coal India Ltd. This adds pressure on the revenue side making the whole proposition unviable for us. Also this business has little relation with IOC's core competence of refining and marketing of petroleum products," an IOC official said.

According to sources, the company is seriously considering withdrawal from the business by the end of this fiscal. The employees will, however, be retained. Together, the two businesses have 350-400 employees.

When contacted Mr V.C. Agarwal, Director (IBP division) of IndianOil said, "Explosives business is currently incurring losses. We are hopeful of its recovery and will take a call on the business at an appropriate time," he said.

On cryogenic, he said that the business had recorded 25 per cent growth during 2006-07 and was maintaining a healthy order book position during the first two months of this fiscal. "We will continue with this business," Mr Agarwal said.

To merge petro biz

Post-merger, the petroleum business of IBP will be completely merged with IOC. Only the IBP brand will be retained. Accordingly, the IBP division of IOC will manage only the explosive and cryogenic businesses.

"We have already initiated the process of amalgamation of the petroleum business with IOC," Mr Agarwal said.

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