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.
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
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.
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.
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.
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
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.
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.
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.
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.
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.
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
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.