RIL spins polyester web with Hualon
Indian promoters love acquiring troubled businesses, using their home-grown techniques to turn units around and succeeding where others failed.
By TNN |
Indian promoters love acquiring troubled businesses, using their home-grown techniques to turn units around and succeeding where others failed. Reliance Industries’ acquisition of the polyester assets of Malaysian textile company Hualon is one such experiment.
After acquiring Trevira — the European polyester fibre company — this is its second acquisition. Hualon has a polyester capacity of 5,00,000 tonnes compared to the European company’s 1.3 million tonnes. In addition, Hualon has further processing capacity to make 30,000 tonnes of nylon, 1,50,000 tonnes of PET bottle grade chips and about 400-500 million yards of fabric a year.
Hualon had a turnover of $800 million or Rs 3,280 crore, which Reliance believes can be taken up to $1 billion. Trevira’s sales in 2006 was about 330 million euros or Rs 1,815 crore. The acquisition will grow RIL’s polyester capacity by 25%, and more importantly gives it a bigger share in value-added products.
The acquisition price has not been disclosed, but being a clean acquisition of only the assets, excluding Hualon’s liabilities, the consideration will be in cash and reflect the value of the assets. RIL’s ability to supply feedstock to Hualon is one aspect of the deal, but getting more value-added revenue sources is the main attraction.
Moreover, Hualon is an export-focused company, which gives RIL a better hold in markets it operates in. Though incremental revenues of Rs 4,000 crore are small when compared to RIL’s Rs 1 lakh crore-plus turnover, it is not insignificant either.
The polyester market in FY07 went through a bad phase but recovered towards the end of the year. Higher demand growth, a slowdown in Chinese capacities, and rising cotton prices augur well for polyester makers. RIL’s plans for polyester focus on improving its domestic market share, more captive processing and entering new segments like home textiles.
It also wishes to increase share in non-apparel segments like non-woven, industrial and automotive yarns. Hualon will help it achieve some of these objectives. RIL also desires consolidation in the polyester market; after all it is the largest polyester maker in the world, but has just a 7% share after this acquisition. While it has done its bit for promoting consolidation, it would now expect others to take the cue.
Essar takes the delisting route
The chances of this open offer succeeding are much higher than the earlier offer for Essar Shipping as the promoters need only 3% to be able to delist the share and they already have almost 87% of the stock. The promoters declared their intentions to look for growth elsewhere in March 2007, when they received the shareholder’s approval for the delisting exercise.
Essar Steel has been doing well recently. In the June quarter, the company reported 50% growth in net sales to Rs 2,563 crore. Future looks equally bright as steel prices have once again began to climb up.
The move is part of the expansion plans for Essar Steel Holdings, the promoter company that looks after the steel business for the Essar group.
With Essar Steel being delisted from the bourses, it would be easier for the promoters to restructure the company and bring it in closer synergy with its other steel operations around the globe. It already has 4 lakh tonnes rolling capacity in Indonesia, and is in the process of setting up a 3 mtpa steel plant in Trinidad and Tobago.
The company has also signed an MoU with the government of Vietnam to set up a 2 mtpa steel plant. The company plans to take its global steel capacity to 23.5 mtpa from the current 8.6 mtpa.
After acquiring Trevira — the European polyester fibre company — this is its second acquisition. Hualon has a polyester capacity of 5,00,000 tonnes compared to the European company’s 1.3 million tonnes. In addition, Hualon has further processing capacity to make 30,000 tonnes of nylon, 1,50,000 tonnes of PET bottle grade chips and about 400-500 million yards of fabric a year.
Hualon had a turnover of $800 million or Rs 3,280 crore, which Reliance believes can be taken up to $1 billion. Trevira’s sales in 2006 was about 330 million euros or Rs 1,815 crore. The acquisition will grow RIL’s polyester capacity by 25%, and more importantly gives it a bigger share in value-added products.
The acquisition price has not been disclosed, but being a clean acquisition of only the assets, excluding Hualon’s liabilities, the consideration will be in cash and reflect the value of the assets. RIL’s ability to supply feedstock to Hualon is one aspect of the deal, but getting more value-added revenue sources is the main attraction.
Moreover, Hualon is an export-focused company, which gives RIL a better hold in markets it operates in. Though incremental revenues of Rs 4,000 crore are small when compared to RIL’s Rs 1 lakh crore-plus turnover, it is not insignificant either.
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The polyester market in FY07 went through a bad phase but recovered towards the end of the year. Higher demand growth, a slowdown in Chinese capacities, and rising cotton prices augur well for polyester makers. RIL’s plans for polyester focus on improving its domestic market share, more captive processing and entering new segments like home textiles.
It also wishes to increase share in non-apparel segments like non-woven, industrial and automotive yarns. Hualon will help it achieve some of these objectives. RIL also desires consolidation in the polyester market; after all it is the largest polyester maker in the world, but has just a 7% share after this acquisition. While it has done its bit for promoting consolidation, it would now expect others to take the cue.
Essar takes the delisting route
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The open offer from the Ruias for Essar Steel is the second attempt from the promoters to delist one of their group companies. The first attempt was made for Essar Shipping, but it failed because of the indifferent pricing. Floor price for the Essar Steel offer has been computed at Rs 38. But given the recent performance of the company and the prevailing fundamentals in the steel sector, experts are of the opinion that the final price could be in the Rs 45-50 range. The chances of this open offer succeeding are much higher than the earlier offer for Essar Shipping as the promoters need only 3% to be able to delist the share and they already have almost 87% of the stock. The promoters declared their intentions to look for growth elsewhere in March 2007, when they received the shareholder’s approval for the delisting exercise.
ADVERTISEMENT
Essar Steel has been doing well recently. In the June quarter, the company reported 50% growth in net sales to Rs 2,563 crore. Future looks equally bright as steel prices have once again began to climb up.
The move is part of the expansion plans for Essar Steel Holdings, the promoter company that looks after the steel business for the Essar group.
With Essar Steel being delisted from the bourses, it would be easier for the promoters to restructure the company and bring it in closer synergy with its other steel operations around the globe. It already has 4 lakh tonnes rolling capacity in Indonesia, and is in the process of setting up a 3 mtpa steel plant in Trinidad and Tobago.
The company has also signed an MoU with the government of Vietnam to set up a 2 mtpa steel plant. The company plans to take its global steel capacity to 23.5 mtpa from the current 8.6 mtpa.
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