Reliance Floats Baroda Rayon Bailout Plan

Reliance Industries is exploring the possibility of sealing a contract manufacturing agreement with the loss-making Baroda Rayon Corporation, under which RIL will buy the latters polyster filament yarn produce and market it under its own name.

The Industrial Credit and Investment Corporation of India (ICICI), the lead institution for Baroda Rayon, is currently examining the Reliance proposal, said company sources.

Under the proposal, Reliance will pay Baroda Rayon a fixed cost covering conversion charges, which the latter will use to sustain operations and also to clear its dues with employees.

The arrangement will suit Reliance as well as it gives the company extra capacity to play around with, said the sources. Baroda Rayon produces 15,000 tonnes of polyester filament yarn annually which Reliance could sell easily in a market that is growing between 15 to 20 per cent. Reliance itself produces 2.2 lakh tonnes of polyester filament yarn out of its total polyester production of 5.6 lakh tonnes.

 

Baroda Rayon, which also produces nylon tyre cord and viscose filament yarn (VFY) at its factories in Gujarat, is negotiating with Indian Rayon & Industries, the Aditya Birla group company, to sell the VFY business which is doing fairly well with a turnover of more than Rs 100 crore.

However, Baroda Rayon has been unable to make money in the nylon and polyester business and top corporate sources said the company was unlikely to find buyers for these businesses. Reliance had been initially approached for an outright buy-out, but the move did not work out.

Baroda Rayons case is reflective of the sickness that has gripped the polyester industry. Several other majors, including Raymond Synthetics and JK Synthetics, are also looking to get out of the business. Raymond has already approached Reliance but talks in this direction have been bogged down.