MUMBAI, July 17: The Aditya Vikram Birla group has decided to strengthen its holding in associate company Tanfac India, a leading aluminium fluoride producer, through a preferential allotment to group blue-chips Hindalco and Grasim.

With this, its stake will increase from 25 per cent to 41.33 per cent. Co-promoter Tamil Nadu Industrial Development Corporation (Tidco) will also subscribe to a small chunk of the preferential shares to prevent dilution of its stake from the current 26 per cent.

The allotment will also part-fund the company's planned diversification into anti-biotic bulk drugs. The Tidco board has recently approved the allotment of preferential shares to the two AV Birla companies, following which it will be reduced to the status of a minority partner.

The price at which the Rs 10-crore preferential allotment will be made has been fixed at Rs 20 a share, according to senior AV Birla group sources. The Tanfac scrip has hovered around the Rs 12-22 range over the last six months.A total of 50 lakh fresh equity shares will be issued. Grasim and Hindalco will pick up 18.5 lakh shares each, translating into a total investment of Rs 7.4 crore for the group. Tidco will pick up the remaining 13 lakh shares with an investment of Rs 2.6 crore. A major portion of Tanfac's production of aluminium fluoride is lifted by Hindalco. The chemical is a critical input for the aluminium industry, and most domestic white metal companies have to resort to imports to meet its requirement. The public sector National Aluminium, the country's largest producer of the base metal, has been considering setting up an aluminium fluoride plant to bring down its production cost per tonne in an increasingly competitive environment.

The Rs 10-crore preferential allotment will also part-finance the company's Rs 30-crore diversification into organo-fluorine chemicals. Tanfac, it is learnt, will produce anti-biotic bulk drugs named Enrosloxacin. While banks and institutions will provide term loans of Rs 16 crore for the project, the rest Rs 4 crore will come through internal accruals, sources said.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.