M Ramesh

Chennai, Jan. 5

THE Thirumalai Chemicals Ltd (TCL) stock could benefit from the problems faced by its rival, IG Petrochemicals Ltd.

Both companies make phthalic anhydride. The Appellate Committee Cell of Ministry of Commerce & Industry has banned IG Petrochemicals from selling any quantity in the Indian market. Since IG Petro has been selling between 2,500 tonnes to 3,000 tonnes of the chemical in India, the space it vacates will mainly benefit TCL. This could mean an additional turnover of Rs 40 crore in the fourth quarter.

The TCL stock today closed at Rs 147.65 on the BSE. Close to 4,000 shares were traded.

In November, the Development Commissioner of SEEPZ-SEZ imposed a penalty of Rs 236 crore on IG Petro, a EOU, for excise evasion. The order said IG Petro had "submitted wrong information of DTA sales amounts." The company "failed to furnish information even when repeatedly asked for," it said.

The DC estimated that the excessive sale already affected "in violation of the provisions of the Foreign Trade policy" in the Indian market was worth Rs 78.35 crore. Further, it said IG Petro "evaded duty of Rs 31.64 crore" and imposed a penalty of five times that amount, or Rs 158.20 crore. The value of the excessive sales and the penalty add upto Rs 236 crore.

For the quarter ended June, IG Petro achieved a turnover of Rs 86 crore and made a net loss of Rs 21 crore. In the following quarter, its turnover was Rs 74 crore on which the net profit was Rs 2 crore.

The company's shares closed at Rs 15 on the BSE today and 20,320 shares exchanged hands.

The company challenged the order. Dismissing the motion, the Bombay High Court asked the matter to be decided by the Appellate Cell of the Ministry of Commerce.

The Cell recently passed an interim order staying the penalty levied by the DC until final disposal of the appeal, but "no clearance to the domestic tariff area whatsoever shall be allowed."

IG Petro, however, could continue exports.

(This article was published in the Business Line print edition dated January 6, 2006)
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