Indian Rayon, which earlier backed out of the deal following a disagreement over the price, has returned to the negotiating table following a fresh asset valuation exercise done by AF Ferguson. Ferguson, which recently submitted the report to ICICI, Baroda Rayon's lead institution, has pegged the price at around Rs 75 crore. The new valuation is believed to have brought the two parties closer to agreement, institutional sources said. The VFY plant has a capacity of 4,500 tonnes per annum.

Negotiations gained momentum after AF Ferguson submitted its valuation report. Both parties are meeting next week to finalise the deal, institutional sources said.

``Negotiations have reached an advanced stage and there will soon be a consensus on pricingand other factors. The proceeds of the sale can be utilised to pay off the institutional liabilities,'' said a top official of Baroda Rayon.

ICICI's decision to approach the Mumbai high court for recovering its dues from Baroda Rayon has been cited as one reason why the sale plan is being speeded up. ICICI went to court recently because it alleged that Baroda Rayon was not willing to make proportionate payments to its creditors. The company, it appears, wanted to sell one complete floor at Hoechst House in Mumbai's commercial hub of Nariman Point and offer the bulk of the proceeds to IL&FS -- another creditor. But, ICICI objected to it on the grounds that it would have to be done on a proportionate basis to all creditors. The court is yet to give its verdict in the matter.

Both ICICI and Baroda Rayon are, however, now said to be keen on an out-of-court settlement. The settlement can be worked out only if the VFY plant sale comes through, sources said.

Indian Rayon, which is the market leader in the VFYindustry, will benefit from the buyout as it will get a monopoly position in the industry. The division recorded an all-time high production of 14,273 tonnes during the last fiscal despite an increase in water charges and power tariffs.

The company is providing greater thrust to the division as is evidenced from the fact that it is in the process of inducting state-of-the-art technology by adding eight continuous spinning machines on parallel yarns at an estimated cost of Rs 40 crore.

INSIGHT
The largest player will emerge

The acquisition of Baroda Rayon's plant by Indian Rayon will make the latter the largest player in the industry. Though prices of all man-made fibres have declined, VFY along with NFY has shown positive trends. This was mainly because of a good export market for VFY. Production of the sector in 1997-98 has been maintained at around 52,500 tonnes. Also, prices of rayon grade wood pulp are likely to remain low as Grasim will be procuring a substantial portion of the rawmaterial from its newly acquired Canadian plant. This will further add to Indian Rayons profitability.

The acquisition looks cheap considering the company is paying at the rate of Rs 1.67 crore per tonne for a readymade plant, which would have been considerably higher for a greenfield project.