Financial Daily from THE HINDU group of publications
Thursday, Oct 03, 2002
Financial Daily from THE HINDU group of publications Thursday, Oct 03, 2002 |
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Corporate
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Restructuring Indian Rayon to spin off insulator business — Joint venture with NGK, Japan C.R. Sukumar
HYDERABAD, Oct. 2 INDIAN Rayon and Industries Ltd (IRIL), an Aditya Birla group enterprise, has decided to hive off its insulators business under Jaya Shree Insulator Division, in favour of a new company - Vikram Insulators Private Ltd (VIPL). In a communiqué to the shareholders, the company said the net assets of Rs 92.98 crore of the insulators division would be transferred in favour of VIPL and a 50:50 joint venture with the Japanese insulators giant - NGK Insulators Ltd - would be forged. NGK, a $2.6-billion company, currently enjoys over 60 per cent share in the global insulators market. Following the joint venture, VIPL would get the requisite technology and know-how from NGK, apart from total marketing support worldwide. The insulators division of IRIL, which has been into the manufacture of insulators since 1968, has an installed production capacity of 34,000 tonnes per annum. "In order to upgrade the quality of the existing insulators, in order to meet the new requirements and to develop new and more technically advanced insulators, it is proposed to have a joint venture with NGK Insulators Ltd, Japan," the company informed the shareholders, while seeking their consent for the proposed scheme of arrangement at a court convened general meeting scheduled for October 28. According to the IRIL management, while the present generating capacity of electricity in the country was around one-lakh MW, it was expected to double to two-lakh MW by the end of the current decade. With increased and complex demands of the power transmission system, the quality and technical requirements of insulators have become more stringent and rigid. The existing manufacturers of insulators in the country, including IRIL, did not have the technical capability of manufacturing insulators of such high quality and specification, the management said, while explaining the reasons that necessitated the proposed scheme of arrangement. In consideration of transfer of the insulators business, VIPL would allot to IRIL 1.25-crore equity shares of Rs 10 each at par and debentures of an amount being the rupee equivalent of $25 million. On completion of demerger, NGK would subscribe to 1.25 crore equity shares of Rs 10 each of VIPL for cash at a premium. This would result in equal shareholding for both IRIL and NGK and equal board representation in VIPL. The joint venture would be renamed as Birla NGK at a later stage, subject to necessary approvals, the shareholders were told.
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