Century Enka, the BK Birla group company, plans to merge Rajashree Polyfils with itself to create the countrys second largest synthetic textile major after Reliance Industries and Indo-Rama Synthetics.
The boards of the two companies are meeting on May 9 to consider the merger. Company sources said the meeting will also decide who the valuers will be and swap ratios will be known only later.
Century Enka holds 25 per cent stake in Rajashree, while 18 per cent is held by Swedish major, Akzo Nobel and the rest is with financial institutions and public. The proposed merger will see Centurys polyester POY (partially oriented yarn) capacity increase from around 20,000 tonnes to 86,600 tonnes. Rajashree Polyfils has a capacity of 66,600 tonnes of polyester chips and 27,900 tonnes of POY. Analysts say Century Enka can either use the chips capacity to produce POY or sell it directly as chips. If they decide to convert chips to POY, the capacity will automatically rise to 86,600 tonnes.
Century Enka board will also consider the sub-division of its Rs 100 paid up shares into shares of Rs 10 on May 9. Akzo Nobel will also hold a major stake in the merged company as it already holds 40 per cent in Century Enka. Rajashree Polyfils started operations in November last year at its plant in Bharuch, Gujarat. It has therefore not yet completed one full year of operations. Sources said the rationale for such a move was to create a bigger company in the polyester industry.
The company will also get some tax and sales tax benefits as a lot of chips produced at Rajshree will be used captively.
Century Enka posted total sales of Rs 534.56 crore for 1996-97, a 11 per cent fall from last years figure of Rs 603.93 crore. Net profit increased by 26 per cent, to Rs 31.06 crore, in 1996-97 from Rs 24.7 crore. The surge in net profit was due to the fall in depreciation charges and reduced tax liability.
