Mahindra & Mahindra (M&M) has got the government approval to pick up 26 per cent equity stake in Owens Corning India, the Indian subsidiary of the US-based multinational, which had earlier received clearance to set up a 100 per cent subsidiary in the country.
M&M decided to pick up the share after being approached by the multinational for its glass fibre project slated to come up at Taloja in Navi Mumbai.
Owens Corning had offered M&M 49 per cent of the shareholding but the Indian company decided to limit its exposure, treating it as a strategic portfolio investment with long-term synergies with its other operations.
Owens Corning will now hold a majority 51 per cent shareholding in the Indian subsidiary, while the balance 23 per cent will be privately placed with individual investors.
The initial equity capital of the company will be $40 million or about Rs 144 crore with $60 million being raised as debt for the Taloja project.
The company has already given the mandate for the private placement to Peregrine Capital, said R K Pitambar (ex-managing director of M&M), who is the non-executive chairman of Owens Corning India and the M&M nominee on its board.
However, the multinational has retained the right to pick up the additional 23 per cent stake if the private placement offer fails to attract good bids.
The company received the government clearance through the FIPB approval given to it last Saturday, which had sought amendment to the earlier 100-per cent subsidiary plan for bringing in $36 million as equity capital.
The company had said that the US parent may pick up 75 per cent in the company by pumping in Rs 135 crore of the total Rs 180-crore paid-up capital which has been allowed by the government.
The Taloja facility, expected to go on stream from April 1998, will produce glass fibre for construction activities and auto-components industries with an initial installed capacity of 30,000 tonnes per annum. The installed annual capacity will go up to 50,000 tonnes with the expansion in the equity base.
The project envisages at least 75 per cent of its production for exports to Owen Corning's international markets, especially in Asia, for five years.
Internationally, about 65 per cent of Owens Corning's sales comprises to construction activities, while 30 per cent goes to the automobile industry.
Owens Corning India will have to pay 5 per cent as royalty payments to the US parent and additional 8 per cent of the export turnover, with $20 lakh as one-time payment as technical know-how fees.