ICI Pakistan to form JV with TGL for float-glass manufacturing facility

January 27, 2022 (MLN): The Board of Directors of ICI Pakistan have authorized the execution of a Term Sheet with Tariq Glass Industries Limited (TGL) to explore the possibility of a joint venture (JV) with TGIL to set up a greenfield state-of-the-art float-glass manufacturing facility, company’s filing on bourse showed today.

This manufacturing facility will have a production capacity of up to 1,000 metric tons per day,  which will take the total capacity of TGL to 2,050 tpd and total in Pakistan to 3,050 tpd (at present Ghani Glass has 1,000 tpd capacity).

In this regard, the manufacturing facility is intended to be set up via the formation of a joint venture company to be incorporated by ICI Pakistan and TGIL, the notice said.

The implementation of the Proposed Joint Venture is subject to, including, finalization and execution of definitive agreements and receipt of necessary corporate and regulatory approval, it added.

According to the report by Intermarket Securities,  the JV will take a minimum of two years to come online as it is a Greenfield project and based on past execution timelines of TGL.

The report further stated that TGL will finance the project with a combination of the rights issue and debt. TGL has recently deleveraged significantly (D/A fell from 61% in FY20 to 44% in FY21), and thus it has a greater ability to raise additional debt for the project. However, the project will also increase the leverage of TGL and make it more susceptible to future monetary tightening.

The JV will set up the new plant in the North region majorly due to easy access to suppliers (Silica sand mines). TGL also has the majority of its customers based in the North region, which makes it a prudent choice for plant location, the report added.

ICI is the largest supplier of Soda Ash in Pakistan, with around 70% domestic market share. Soda Ash constitutes around 10% of the COGS of TGL; thus this project can prove to be a strategic investment for both companies.

The report further noted that ICI is presently expanding its Soda Ash capacity by 135,000 tons pa (present capacity 425,000 tons pa), which will be commissioned by Dec’22. The new capacity (light soda ash) can partly be converted into dense soda ash (used in glass production) to cater to the JV if ICI decides to go ahead with the project.

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