Degussa To Buy Out Vam Organics Stake In Insilco
Degussa AG, the global chemicals giant, is to buy out the entire 34 per cent stake of Vam Organics in Insilco Ltd, thereby wresting majority control in the local silica manufacturing company.
Insilco is a ten-year-old joint venture between Degussa AG of Germany and Vam Organics of the Bhartias, with each partner holding 34 per cent equity stake each in the chemicals company. The remaining stake is with the public.
Highly placed sources said that a delegation from Degussa AG will be in Delhi next week to finalise the deal. "The Bhartias have decided to sell their stake in Insilco. The deal will be finalised next week after the visit of the Degussa officials," a source said. Sources said the Bhartias are exiting from Insilco because the company is a losing proposition and has been accumulating losses since inception.
Further, the Vam Organic stake in Insilco is itself divided among Bhartia family members following the division of assets within the family.
A fax to the Ajay Bhartia, chairman, Insilco, on the issue was answered by his representative S Ravi. The reply said: "Ajay Bhartia is not available for comment. I, on his behalf, request you to have his comments in the forthcoming week." But Ravi when contacted on the phone refused to comment on the matter. Ajay Bhartia could not be reached on the phone despite repeated attempts yesterday.
Sources, however, confirmed that the deal will be struck in the coming week. "The sale price of the share is likely to be between Rs 20 and Rs 30. Degussa
is expected to file an application before the Foreign Investment Promotion
Board (FIPB) for the deal to be cleared once the sale price is finalised," sources said.
The Insilco scrip closed at Rs 17.70 on the Bombay Stock Exchange (BSE) on Thursday. The sale of shares to Degussa in the range of Rs 20-Rs 30 would make the deal worth about Rs 40 crore. During the past three weeks, the share price of the scrip on the BSE increased from Rs 11 to over Rs 17.
Sources said the company is expecting approval from banks and financial institutions for the buyout by the German company. They said one of reasons for the Bhartias to quit from Insilco is because the company has been making losses since inception. "However, the company made an operating profit during the last financial year. And with the takeover by the German company, it is expected to do well in future," sources said.
As at March 31, 1996, the share capital of the company stood at Rs 50.7 crore, while accumulated losses were to the tune of Rs 5.2 crore.