Goenka Alters Plan On Herdillia Merger

The Rs 2500-crore Duncan Goenka group of G P Goenka has decided not to effect the proposed merger of its Herdillia chain of companies owing to a slump in the petrochem sector.

The group is considering individual restructuring of the companies in the chain, and has already initiated talks on such options with the Industrial Credit and Investment Corporation of India (ICICI), the lead financial institution.

This is in sharp contrast to the stand which the group had taken earlier of merging the three Herdillia companies, namely Herdillia Chemicals, Herdillia Oxides and Electronics and Herdillia Polymers.

"We have decided to change our stand on the merger proposal due to a sea-change in the petrochemicals industry. Since an immediate revival in the situation is not seen, we don't see the merger as a possibility. Other alternatives, therefore, will have to be worked out," G P Goenka told Business Standard yesterday.

While another possibility before Goenka is to sell off companies in the Herdillia chain which no longer remain viable for the group, the option is proving difficult for the group due to lack of prospective buyers in the industry. With virtually no takers for picking up the companies, Goenka is keen on recasting the companies individually.

The group had put up a merger proposal of three Herdillia companies to financial institutions in August 1996. According to sources, the financial institutions took a detailed look at the proposal, and even at one stage sought to know the viability details of these companies and their projects.

But even as the detailed exercise was on between the institutions and the Goenka group, the market conditions changed once again, making the merger route unattractive.

The institutions were also believed to be taking their time in clearing the proposed merger, since public attention, at that time, was focussed on the role of financial institutions in such mergers, sources said. Consequently, they were extremely careful, wanting to know the exact ramifications of the decision before signing on the dotted line.

Herdillia Chemicals is engaged in the manufacture of diphenyl oxide, phenol and acetone plants.

Herdillia Oxides & Electronics (HOEL), engaged in the manufacture of magnetic iron oxide or gamma ferric oxide and import substitute for the magnetic coating of audio, video and computer tape, debottlenecked its plant in the financial year 1995-96.

Another associate, Herdillia Polymers (HPL), however, is still faced with overcapacity in the local market.

Herdillia Chemicals has extended financial support to HOEL, HPL and Herdillia Unimers Ltd (HUL). As on March 31, 1996, the outstanding interest bearing intercorporate deposits are Rs 81 lakh to HOEL, Rs 4.70 crore to HPL, and Rs 10.81 crore to HUL.

However, considering the long-term relation with the associate firms, the company considers the diminution in the value of its long-term investments to be in the nature of temporary decline.