The company''s industrial chemical business consists of the nitro-cellulose business including a trading division. These entities will be demerged into a separate company. Under the agreement, CDC will pay an upfront amount of Rs 62.3 crore while a further Rs 12.7 crore will be paid in three instalments.

While the deal is in line with ICI India''s oft-stated policy of concentrating on its core businesses of speciality chemicals and paints this marks the exit of yet another business from the company''s once impressive portfolio of businesses.

ICI India acquired the Gujarat-based Asha Nitrochem for a reported Rs 16 crore in 1998. The acquisition helped the company achieve near monopolistic status in the nitro-cellulose market with a share of above 70 per cent.

Sources in the company say though ICI India invested some amount in upgrading the Gujarat-based plant it was minuscule against the profits that accrued to it because of the monopolistic nature of the business. The nitro-cellulose business registered a growth of 10 per cent in the last financial year and accounts for 15 per cent of the total turnover of ICI India.

The sources say sales of the division were around Rs 90 crore in the last financial year and its average operating profit over a three period was in the region of Rs 15 crore.

Earlier speculation was rife about CDC acquiring ICI India''s twin regional businesses of rubber chemicals and nitro-cellulose in a package deal. However, with nitro-cellulose being sold off, ICI India remains saddled with its loss making rubber chemicals division. Margins from its rubber chemicals business have been under pressure due to a decline in global prices and appreciation of the rupee against the dollar. Increased competition from imports has also pulled down sales.

ICI also has a starch and chemicals business that will continue to be part of its core business. Its core business comprises of adhesives, starch and polymer business. The company is now focusing on reducing costs and focusing on exports of key specialities to improve margins.

The ICI scrip was down 0.42 per cent to Rs 165.24 on the Bombay Stock Exchange on Monday. ICI has been selling its non-core businesses as part of its global strategy. A few months ago, it entered into an agreement with Orica Investment Pty of Australia to divest its 51-per cent stake in their joint venture in the industrial explosives segment.

The sources say the future driver of revenue for ICI India will be paints, which constituted around 36 per cent of its total turnover last fiscal. The company is the fourth largest paints company in India, behind Asian Paints, Goodlass Nerolac, Berger and Shalimar paints.

ICI India recorded a turnover of Rs 1,011 crore during the year ended 31 March 2003. Recently, Asian Paints acquired the government''s 9-per cent stake in ICI India and is now seeking a berth on the board of the company.

ICI India''s transaction with CDC is in the form of a management buyout, in which the latter will back the existing management team and around 130 employees will be transferred to the new company. The deal is subject to regulatory approvals from the Foreign Investment Promotion Board and approvals from shareholders through a postal ballot.

"For CDC it marks an entry into the chemicals business in India, while for ICI it marks an exit from a non-core business," say sources at Mumbai-based investment bank Ambit, which advised ICI.

The deal will be a second major investment by CDC in an Indian company. CDC earlier acquired a 23.49-per cent stake held by the Punjab State Industrial Development Corporation in Punjab Tractors for Rs 218.4 crore in July 2003. It later made an open offer to acquire another 20 per cent in the company. CDC is talking to a number of other Indian companies for equity participation. Some of these deals are expected to be concluded in a short time.