Iocl Kicks Off Restructuring Operations

Indian Organic Chemicals (IOCL) has embarked on a restructuring process to streamline the company's operations.

At a board meeting held last week, the directors have decided to either merge Futura Polymers (FPL) and Trnsmere, two of IOCL's subsidiaries with itself, or sell FPL along with the surplus assets and machinery of IOCL to a third party.

In June this year, IOCL had concluded an agreement with PepsiCo, New York, whereby PepsiCo sold all its interest and rights in Futura Polymers, an unlisted company in Chennai in favour of IOCL, the only other shareholder and joint venture partner.

This was carried out by transferring the shares of Transmere Inc, Mauritius, the subsidiary of PepsiCo which in turn held 71 per cent in FPL.

Accordingly, both Futura Polymers and Transmere became subsidiaries of IOCL. Under the first option of merger, IOCL will be benefited by the accumulated networth of Futura Polymers of about Rs 85 crore as well by the addition of the future sales turnover and net profit earned by Futura Polymers.

If the second option of sale of Futura Polymers materialises at an acceptable price, the sales proceeds will enable IOCL to settle its debts and reduce the interest burden substantially improving it's profitability. Both the options however, as and when they materialise, are subject to the approvals under law of the financial institutions, banks and other agencies as may be required.

By virtue of the above mentioned agreement between IOCL and PepsiCo, PepsiCo has paid IOCL $2 million as one time as compensation for termination of the join venture and $10 million to Futura Polymers for investment in energy saving equipment.

Further, PepsiCo will give export price support of $230 per ton for export for PET resins manufactured and exported by Futura Polymers for 38,000 tonne.

PepsiCo would also place orders for certain quantities of preforms with assured returns. The profitability of IOCL has already begun to improve as evident from its corporate performance.

The company has posted a profit of Rs 1.33 crore for the first quarter of financial year 1998-99 as compared to a loss of Rs 9.74 crore during the corresponding period of the previous fiscal. Sales improved to Rs 48.78 crore during the first quarter from Rs 44.06 crore during the corresponding period of the previous fiscal.