A building with the Adani Group logo.
Credit: Reuters File Photo
New Delhi: The Adani Group will commission the first phase of a $4 billion PVC project by December 2026, making its foray into the petrochemicals sector that is marked by a mismatch between domestic demand and supply, sources said.
Polyvinyl chloride (PVC) - the third-most common synthetic plastic polymer made worldwide - is used to make products such as raincoats, shower curtains, window frames, pipes for indoor plumbing, medical equipment, wire & cable insulation, bottles, credit cards, and flooring.
India's annual PVC demand is roughly 4 million tonne but domestic production capacity is only about 1.5 million tonne, resulting in a supply-demand mismatch. With this disparity between domestic output and consumption expected to widen with an increase in consumption, Adani Group is looking to tap into the sector.
Adani Enterprises, the group's flagship firm, is setting up a petrochemical cluster in Mundra in Gujarat. Within this cluster, it aims to set up a PVC plant with a capacity of 2 million tonne per annum, to be executed in phases, two sources with direct knowledge of the matter said.
The initial phase, with a capacity of 1 million tonne per annum, is slated for commissioning by December 2026, they said.
The group had in March last year halted the project saying it had decided to hold major equipment procurement and site construction activities pending financial closure. This followed US short seller Hindenburg Research in a report alleging financial and accounting fraud at Adani Group companies.
Though Adani group vehemently denied all allegations, the report sent Adani stock down and brought into focus its governance practices. The group refocused its resources on core competencies and scripted a comeback strategy that involved raising over $5 billion in equity and double of that in debt, repaying some debt and fully repaying share-backed financing.
And as markets regained confidence in the ports-to-energy conglomerate, Adani Group resumed work on the petrochemical plant.
Sources said State Bank of India (SBI)-led consortium of lenders will be financing the project.
Adani Group intends to implement Acetylene and Carbide based PVC production processes for the Mundra project. The environment clearance and consent to establish the project have already been received.
After polyethylene and polypropylene, PVC is the third most produced synthetic plastic polymer worldwide. By 2027, India is predicted to be the nation adding the most polyvinyl chloride capacity, followed by China and the US. The construction and agriculture sectors are seen driving the PVC demand in India.
The increasing government spending on housing, sanitation and irrigation through programmes like PMKSY, AMRUT and Housing for All are driving the demand for pipes and tubes, sources said adding PVC demand is expected to grow at a CAGR of 8-10 per cent between fiscal years 2023 and 2026 as a result of increased infrastructure spending and various government initiatives.