MUMBAI, Mar 9: Alcan Aluminium on Monday threatened to sever Indian Aluminium's technology lifeline if Sterlite Industries emerged as a new "industrial partner" in its local associate.The Canadian major finally came out in defence of its 34.6 per cent single-largest stake in Indal at a press meet in Mumbai on Monday. Sterlite Industries, a domestic copper major, has bid for 20 per cent stake in Indal.
Alcan's chief financial officer Suresh Thadani and executive vice president in charge of Asia Pacific operations Brian Sturgell outlined how Indal's technology and competitiveness were built around the global capabilities of Alcan, a huge $7.9-billion Canada-based transnational, and said the links would simply be severed in case a new industrial partner was thrust upon it.
On the other hand, given a 51 per cent-plus stake in Indal through the ongoing counter-offer or otherwise, the technology support would evolve into more integrated operations with the sprawling global Alcan operations, the twoclarified.
Sturgell said the technology input from Alcan to Indal was on the basis of renewable agreements, and hinted that these would not be renewed in the interest of protecting Alcan's proprietary technologies (the company spends an annual $80 million on research and development) in an adverse scenario.
Thadani has made the Canadian company's stand on Indal and the open offer for 20 per cent of its equity by Sterlite Industries unequivocally clear. "If any company emerges with a substantial stake in Indal, we will have to review our relationship," he said.
"It is not that Alcan does not enter into partnerships with other companies. But we do so only with companies who can contribute something to the venture," Thadani said. "We feel that Sterlite cannot, in any way, bring anything to the party. Indal is going through a crucial phase and it needs Alcan and not Sterlite," he added. "Alcan, till now, has chosen to remain a passive shareholder. Now with the open offer, and possibly a stake in excess of50 per cent, it plans to have direct say in the management," Thadani said.
Meanwhile, financial institutions have ridiculed Alcan's veiled threat to snap technology transfer to Indal if Sterlite is allowed a stake in it. "The Alcan threat does not make sense to any institutional investor," FI sources said. "We are living in a democratic set up where everybody has a right to take his/her own decision," the sources said. Institutions cannot be forced to take a decision in favour of Alcan, they added. The institutions, they said, would not hesitate to offload their Indal stake in favour of Sterlite, provided a higher offer is made. The press conference, an integral part of Alcan's bid-defence policy, aimed at three objectives: one, a show of Alcan's global muscle, complete with slide shows of internationally dispersed operations with market leading positions, two, to show Sterlite, by implication, as a domestic player unable to compete in the rapidly changing global scenario, which included a complete paradigmshift in production costs in southeast Asia owing to currency devaluations, and three, a renewed and loud commitment to the management of Indal.
Indal managing director Tapan Mitra was a mute but interested spectator to the proceedings, sometimes whispering urgent explanations to Thadani or Sturgell.
Thadani explained that in the early 90s Alcan chose not to add to its stake in Indal during a global depository receipts issue by its local associate due to financial constraints, which had since been overcome. As a result, the Canadian major's stake came down to 34.6 per cent from 39 per cent.
"We were exploring possibilities of how to increase our presence in the country when the Sterlite open offer came along," Thadani said. "We were also keen on increasing our stake through a preferential allotment but such a plan did not work out," he added.
Alcan officials reaffirmed their commitment towards Utkal Alumina, a greenfield alumina project promoted by Indal, Norsk Hydro and the Tatas, in which Alcan hasagreed to contribute 20 per cent to its equity.
a little late in the day
Alcan has stated that it could not raise its stake in Indal through a preferential issue despite having serious intentions to do so. The reason being that it would have required a special resolution and Alcan did not have the requisite shareholding to ensure the successful voting of such a resolution. But a number of MNCs, HLL, Castrol, Colgate, to name a few, hiked their stakes through preferential allotment despite their holdings being similar to Alcan's in Indal.
The Canadian multinational has also said that lack of funds prevented it from subscribing to the GDR issue in February 1994. Even if it had picked up the entire issue it would have just cost $60 million. Alcan, however, had three consecutive years of losses since 1991 to 1993. In retrospect, if Indal is important to Alcan as made out, it would seem that Alcan made a mistake in not trying to hike its stake earlier.
