Prospects Brighten for Indian Process Oils

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The election of Narendra Modi to the post of prime minister was generally viewed as good for Indias economy, and that is considered good news for the countrys transformer oil market.

The reforms and development oriented policies of the Modi government seems to have brought a smile to the face of the industrial community. Given the new governments determination to accelerate reforms, it is not only the corporate heavyweights that are hoping for more prosperity, but also suppliers of transformer oils.

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Apar Industries Ltd., Indias largest supplier of transformer oils and the fifth-largest lubricant supplier – after Indian Oil Corp., Hindustan Petroleum, Bharat Petroleum and Castrol – expects increased demand for transformer oils given the Modi governments emphasis on electrical infrastructure development. Apar derived 71 percent of its revenue from the power sector during the past two years.

Indias electrical grid has historically been unreliable due to inadequate supply, inefficient transmission and theft, and the country has suffered severe power outages as a result. Recent years had seen strides in expansion of the infrastructure, but progress bogged down the past couple years due to the central governments inability to push projects along. Vowing to reverse that failure was a central part of Modis campaign platform.

Apar expressed confidence that government focus on kick-starting the power sector will boost demand for transformer oils.

In a letter to shareholders that was included in the companys May 30 annual report for 2013-2014, Apar Chairman N.D. Desai said, The growth in the domestic power sector in FY 2014 [2013-2014] was constrained given the uncertainties around fuel supply, the financial condition of discoms [electricity distribution companies], challenges of land acquisition [for power infrastructure], water linkages and environmental clearances.

However, given the impetus from the new government with regards to acceleration of reforms, we see a brighter phase on the horizon. We are happy to report that your company has, during the year, taken strong strategic initiatives to strengthen our position further so that we can be well prepared as the sector turns.

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