The company said it may also have to close down its sea-water magnesia unit as all attempts to dispose it off so far has not been successful. Explaining the reason for the buy-back, the company said the buyback would provide shareholders who desire an exit from the stock an opportunity without substantially impacting either the price at which they exit or adversely affect the interests of ongoing shareholders. With no major investments envisaged in these in the future, share buy-back would enhance shareholder value, it said.

The company has cash surplus of Rs 200 crore and returning upto around Rs 150 crore (through buy-back) would still leave it in a comfortable position for its operations and futureplans. Following the buy-back, the promoters holding in the company would increase to 28.7 per cent from the present 21.5 per cent.

It said the buy-back would only serve as a means of ensuring returns to its shareholders but this did not mean an end to further investments and expansions in the company. The company had recently transferred its cement unit to Grasim Industries, another group company.

Both the proposals would be put up for approval at the company's annual general meeting on September 17.

``Indian Rayon's sea water business has been unviable. This has been largely due to a fall in the product prices, substantial reduction in offtake due to a slump in the domestic steel industry coupled with dumping fused magnesia from China, leading to a huge inventory build-up,'' it said. The company, which had suspended operations of the sea water magnesia unit in December 1998 today appointed P C Gandhi and associates to valuate the assets of the project and would take a decision for eventual closure ifall other alternatives fail.

The company was willing to write off the losses from the sale or closure of the unit to the tune of Rs 300 crore (against which it holds assets of Rs 353 crore). The losses would be written off in the second half of the current fiscal. Over the past one year, the international prices of sea-water magenesia had fallen from $ 475 per mt to $ 325, while Chinese imports of the product were available at $ 265 to $ 280 per mt.

The company had explored to possibility of converting the plant for alternative uses such as manufacture of cement.