Budget 2022: Import Duty Cut Lifts Select Chemical Stocks
Stocks of chemicals makers rose as the Union Budget announced custom duty cuts on chemicals like methanol, acetic acid.
Shares of several chemical manufacturers reacted to the Union Budget 2022's proposed reduction in custom duty on critical chemicals. Stocks of companies that use the critical chemicals as raw materials surged, while companies that produce the chemicals witnessed a decline.
In her fourth budget presentation, Finance Minister Nirmala Sitharaman said that the change in custom duties would enhance domestic value addition.
The chemicals that will see a duty reduction include methanol, acetic acid and heavy feed stocks for petroleum refining. The stocks of companies that use the chemicals as a raw material and hence, are likely to benefit from the duty cut gained, while producers of the chemicals fell.
Gujarat Narmada Valley Fertilisers and Chemicals Ltd. fell over 3%, the steepest intraday decline in over a week, and closed with 1.17% losses. The reduction of custom duty on acetic acid led to the decline of its shares as it is the only producer of acetic acid in India.
On the other hand, shares of Alkyl Amines Chemicals Ltd. and Balaji Amines Ltd. rose after the budget announcement. Both companies use acetic acid as a raw material for the synthesis of acetonitrile and methylamine compounds.
Similarly, Atul Ltd. uses acetic acid for monochloroacetic acid production and hence, this move would be a positive for the company.
Grasim Industries Ltd., SRF Ltd., Gujarat Alkalies and Chemicals Ltd., Meghmani Organics Ltd. also rose as they use methanol as a raw material for the manufacture of chloromethanes, and are likely to benefit from the custom duty cut.
Thirumalai Chemicals Ltd. and IG Petrochemicals Ltd. are also in focus, as they stand to benefit from customs duty cut from 10% to 0% for orthoxylene, which is a hydrocarbon used in the manufacture of coatings and plastics.
Supreme Petrochem Ltd. and Ineos Styrolution India Ltd. rose after the custom duty reduction from 10% to 2% in styrene, while Finolex Industries Ltd. gained because of the import duty cut on ethylene dichloride and import duty reduction on vinyl chloride monomer. Both these chemicals are raw materials used in the manufacture of PVC resin.
Besides these, the government has also raised duty on sodium cyanide for which adequate domestic capacity exists.