Plastic tank maker Sintex Industries is planning to hive off its textiles division into a separate company.
Christened Bharat Viay Mills, the new company will take over the entire textile operations of the parent company, while the residual Sintex will be left with the plastics business.
Dinesh Patel, managing director, Sintex Industries, said: "Financial institutions have to approve this measure first. We will then consider the demerger."
Financial institutions, however, said that the Sintex board had approved the move at a meeting on June 18, 2001. The textiles division accounts for around 40 per cent of Sintex's turnover.
The demerger has been suggested by consultant Deloitte Haskins & Sells which had been hired by Sintex to suggest a revamp of its operations. It has also valued the Sintex brand at Rs 165 crore which at one point was the generic name for plastic tanks.
The company's main area of business is plastics which accounts for over 55 per cent of the turnover. The logic behind the demerger is that the textiles and plastics are two totally unrelated areas of businesses.
Even at present, despite the two divisions being a part of the same company, they operate independently with separate staff and independent marketing tie-ups.
"Sintex is now scouting for a joint venture partner for the textiles division to bring in new technology. It makes sense to hive off the textiles division into a separate company as this would facilitate the induction of a joint venture partner," financial institutional sources said.
The proposed demerger would come into force with effect from April 1, 2001. Bharat Vijay Mills has already been incorporated with a paid-up capital of Rs 70 lakh.
Under the proposed demerger scheme, the shareholders of Sintex will be issued one share in Bharat Vijay for every one share held. The transfer of assets will take place at Rs 268.59 crore, the book value estimated on March 31, 2001.
The new company will inherit the composite textile mill at Kalol in Gujarat. Post-demerger, the equity capital of the textile company will jump to Rs 14.6 crore.
