Reliance Industries, after a recent survey of Orissa Synthetics' polyester staple fibre (PSF) plant at Dhenkanal, Orissa, has turned down the offer as it feels that the asking price was higher for the plant in its present condition, institutional sources said. Singhanias are understood to have demanded a price of Rs 260 crore for Reliance's role as a co-promoter.

Senior JK Corp officials confirmed that the Reliance team had visited the plant on November 25, 1998, and said that it was too early to say the deal was actually not taking place.

JK Corp officials consider deteriorating polyester market conditions as the major factor responsible for Reliance's change of heart and not the price. The deal can only happen if the going is good for the polyester industry, and views of institutions andbankers on the price also matter a lot in the present context, officials added.

Orissa Synthetics was a joint venture between JK Corp and Orissa Industrial Development Corporation. It was merged into JK Corp's fold in 1990 following a BIFR revival package. But this also failed to revive the fortunes of the company and it continued to post huge losses.

Takeover of Orissa Synthetics, industry sources say, should be viewed against the backdrop of the happenings in the global polyester industry. Worldover, smaller players are being dwarfed by bigger sharks which implies that there will only be two or three players per country, they added. This trend is catching up in India, too. Takeover or conversion arrangements is the best way of increasing the market share, with Reliance improving its PSF market share recently by teaming up with India Polyfibres Ltd, industry sources said.

However, industry appears to be falling in line with the global perception that consolidation by way of takeovers and mergers willtake place during the downturn. The real action will take place only by the middle of next year because by then the future price trends can be arrived at. PSF prices, which came tumbling down in December 1996, is yet to go back to higher levels.

Prices, which were at Rs 56 a kg in December 1996 came down to as low as Rs 41 a kg in December, 1998. Prices were ruling at Rs 41 a kg throughout 1998. Global shrinkage in the prices for fibre intermediates will hold back the prices in the next year. Analysts expects intermediate prices to rise only by 2000 and that too if there are no fresh capacities.

Though the total PSF capacity in the country is 5.4 lakh tonnes per annum, only 4.56 lakh tpa are used owing to closure of some players. Orissa Synthetics, which has a capacity of 28,000 tpa has utlised only 12,000 tpa in 199697. Its capacity utilisation is expected at 14,000 tpa during 1998-99.