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Adhesives unit sell-off for strategic reasons: Coates MD

Our Bureau

CALCUTTA, Oct. 27

AFTER considering the long-term viability factor, the board of Coates of India Ltd has cleared the management's proposal to sell off (by way of a slump sale) the company's adhesives business to Totalfina of France, which till recently was the parent of t he Indian outfit.

The printing inks major launched the adhesives business in collaboration with Bostik Ltd (a subsidiary of Totalfina), and was licensed to manufacture and market the products under the `Bostik' brand name.

Talking to Business Line on Friday, Dr P.K.Dutt, Managing Director, Coates, said the sale was for strategic business reasons, and would be on the basis of an independent valuation of the business by experts, subject to the necessary approvals.

According to the MD, the sale decision was prompted largely because of the non-availability of the brand name after the expiry of the current agreement in June 2001.

He said the sale would be executed through a direct transfer agreement procedure instead of the complicated court-driven scheme of arrangement, and the shareholders' approval would be sought at an EGM in December. The sale consideration, said to be under Rs 10 crore, would be utilised for the company's future expansion plans.

Totalfina, as part of a restructuring exercise, sold its interest in the ink business on a worldwide basis to Sun Chemicals Group B.V. (SCGBV), a wholly-owned subsidiary of Dainippon Ink and Chemicals Inc. (DIC) of Japan. SCGBV, a $8-billion global playe r, now holds 59.42-per cent stake in Coates. The group is a world leader in graphic arts products such as printing inks, liquid and news ink, and chemical coatings.

Sounding upbeat on the company's future prospects, Dr Dutt said several new products from the DIC stable were likely to be launched in India soon. Pointing out that DIC held 40 per cent of the world inks market and more than 50 per cent of the publicatio ns market in Europe, Coates would now reap the advantage of both technology and products on a sustained basis.

Besides inks, the other businesses of DIC include areas such as polymers and related products and specialty plastics and compounds.

On the problem of Valspar Corporation of US not yet bringing in its equity portion (in two-stages) for the joint venture, Coates Coatings India Ltd (CCIL), Dr Dutt said a final decision on whether or not to terminate the agreement with Valspar would be t aken before the company's next AGM, sometime in April 2001.

Valspar was permitted by the Industry Ministry to acquire in stages the entire equity shares in CCIL (initially 49 per cent).

Encouraged by the third quarter results (accounting period of calendar year), Dr Dutt expected the company to maintain a 15 per cent volume growth, while conceding that margins were likely to be under some kind of pressure (10 per cent growth expected) o wing to general business conditions.