Further, the legal provision is being amended so that the eligibility for tax concessions is only contingent upon a minimum of 75 per cent of the fixed assets of the amalgamating company being absorbed in the amalgamated firm and subject to the condition that the amalgamated company will continue the business of the amalgamating company for a minimum of five years. He has also stated that an enabling provision will be provided through the amendment of the Income-tax Act for the detailed guidelines to be issued subsequently under the powers available from the statutory provisions.

The company, which has a capacity to produce 30,000 tonnes of flat products at Monda in the Nagpur district of Maharashtra, has beenreferred to the BIFR. There are two suitors for the company -- Hindalco and Sterlite, both of which have a long-term interest in aluminium. Their interest in acquiring the ailing company stems not only from the benefits of taking over a sick company, but also because the company's plant set up in collaboration with Pechiney Aluminium Engineering of France is known to be technologically superior. The company has two fundamental weaknesses that would have to be taken care of by the acquirer to make the acquisition a viable proposition.As Pennar Aluminium is engaged in manufacturing semi-fabs, it is vulnerable at both ends of the value chain. Neither does it have control over raw material supply nor does it have a stronghold over the market. The acquirer would therefore have to be either one that manufactures aluminium ingots or one that has a large market for its finished products and is in need of a captive source of semi-fabricated products.

Both Hindalco and Sterlite would therefore fit the bill. As doingaway with the provision of routing the acquisition deal through the BIFR would mean that the process would be expedited, Pennar Aluminium shareholders would not have to wait long before they are able to realise good gains on their holdings. The fact that there are two contenders for their company will only help them derive a better bargain.