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Our Corporate Bureau
Mumbai, Dec 3: Mafatlal Industries has sold 42 per cent stake in the rubber-chemical division of associate company Nocil to the Onkar S Kanwar group for Rs 55 crore. An agreement to this effect was signed on Thursday.
The division will be transfered to a new company, Polyolefins Rubber Chemicals (PRCL), in conformity with Nocil's three-way demerger scheme, but only after approval from the Mumbai high court, said a joint press release.
Mafatlal, reeling under a loss of Rs 87 crore for 1997-98, is set to receive its second vital funds infusion. It recently hived off its petrochemicals division into a joint venture with multinational Shell.
The rubber-chemicals business is being given the opportunity to chart its own course for the future, the release stated.
The deal, apart from bringing in extra money to Maftalal Industries' kitty, presages the diversification of Omkar S Kanwar group to speciality chemicals, which it considers as a focus area.
With this, the Mafatlals are moving ahead with acomprehensive restructuring programme, which ran into several obstacles, aimed at pumping in extra funds into the cash-strapped flagship. A core team comprising six key officials are close to finalising a detailed investment plan.
Mafatlal Industries' cash psoition will be clear only after the completion of the demerger.
After an internal study, the Mafatlals have realised that astronomical power costs in Gujarat are eating into their profitability. Hence, a plan for the construction of captive power plants with a probable investment of Rs 35 crore is being firmed up.
Also, domestic activity will take a back seat in the new scheme of things with the company's plants being altered to suit export requirements. A major part of fresh funds will be deployed here.
The group also plans to invest Rs 150 crore in the processed-fabrics divsion in addition to beefing up the garments' business.
The money will flow into Mafatlal Industries from three sources: money generated from the recent real-estate sales,cash from Nocil petrochemicals division sale to Shell, and from the sale of the rubber-chemicals division. JM Financial and Enam Financial were advsiors to the deal.
Insight
-- opportunity for shareholders
The Mafatlals have finally managed to sell their rubber-chemicals division. As the domestic rubber industry was in the doldrums, the division was a drain on the company's profits. And it is unlikely that the division will do well in the hands of the new promoters in the near future. Thus, the existing shareholders have an excellent oppurtunity to sell their stake to the Onkar Kanwar group as the transfer of stakes will trigger the takeover code.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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