Texmaco To Be A Shell Company

The K K Birla group engineering company Texmaco Ltd has decided to float a 50:50 joint venture with the Dallas-based wagon giant Trinity Industries Inc, to which the business of the Birla company will be shifted.

A top level source in the diversified group said the proposed joint venture will be christened Texmaco Trinity Ltd. The $ 3 billion Trinity, one of North America's largest manufacturers of transportation, construction and industrial products, has already started the due dilligence exercise and PricewaterhouseCoopers (PwC) has been appointed to value the deal.

With the transfer of Texmaco's engineering business to the proposed joint venture company, the Birla firm will effectively become a shell entity. The Birla group, which holds a shade over 66 per cent in Texmaco, will indirectly control 33 per cent in Texmaco Trinity Ltd.

The source said as a part of the "strategic alliance", the US major will pump in funds and bring in technology required for a complete overhaul of the business of Texmaco.

Incorporated in 1939 by the Birlas, Texmaco manufactured an import substitute_cotton spinning machinery. After that, the company began wagon, industrial boilers, road rollers and hydraulic steel structures. The hard times come to the company in 1987-88 when it slipped into the red. However, it returned back to the black in 1994-95 and wrote off a part of its term loans by transferring the cement division to Zuari Agro, a sister concern.

In a similar fashion, the cement division of Zuari Agro is being transferred to a 50:50 joint venture company, to be formed with the French giant Ciments Francais Italia. A final announcement is expected within a couple of days, the source said.

In 1998-99, Texmaco experienced a massive reduction in turnover at Rs 198 crore from the previous year's Rs 272.07 crore. Resultantly, net profit went down to Rs 4.16 crore from Rs 8.62 crore in 1998-99.

Trinity registered a 11.3 per cent increase in its operating profit to $ 284.9 million in the financial year ended 1999 as compared to the previous year's $ 255.9 million. Revenues went up to $ 2.93 billion in 1999 from $ 2.47 billion in 1998. Net income grew 78.7 per cent to $ 185.3 million from to $103.7 million in 1998.

Informed sources said the foreign company is keen to make India the manufacturing base for its wagons and LPG containers foray into the Indian market. Although the primary target would be the Indian market, the company will also look at exporting its industrial products to the far east.