Reliance Industries, the Rs 8,730 crore textiles-to-petrochemicals major, has decided to become a co-promoter in India Polyfibres, the sick polyester company controlled by the RPG group. The deal is likely to eventually lead to the RPG groups exit from India Polyfibres.
Reliance is expected to infuse fresh funds into India Polyfibres to recapitalise the company. The RPG groups holding, now at 53 per cent, is expected to be considerably diluted after the infusion. A formal announcement on the new equity holding structure is expected after the Board for Industrial and Financial Reconstruction and other operating agencies clear the proposal.
A Reliance press statement issued yesterday said: The Reliance group plans to bring in synergy to IPLs operations in terms of technology, raw materials and other resources besides upgrading manufacturing facilities. Reliance will also market all IPL production under its own brand name from April 1.
An RPG spokesperson said the group has not yet sold any stake in the company to Reliance.
The deal was announced yesterday after the India Polyfibres board approved the proposal at its meeting in New Delhi. Reliance Petroproducts struck the deal on behalf of the group. The proposal will now be sent to the BIFR for its approval. It will also have to be approved by the banks, financial institutions and other operating agencies.
The RPG group has been scouting for buyers for India Polyfibres ever since the company became sick. Reliance had earlier proposed a contract manufacturing arrangement, under which it would pay the conversion charges, supply the raw material and sells the finished product under its name. However, RPG did not favour this as it wanted to get rid off the company.
The deal makes sense for RPG, as it is keen to focus on its core areas and exit non-core areas like polyester and office automation. The group recently sold its entire stake in RPG-Ricoh to Ricoh, its Japanese partner in the venture.
RPG also diluted its stake in chemicals major RPG-BTP from 50 per cent to 33 per cent, and is holding talks with French major Saint Gobain to dispose of its stake in glass major FGP.
India Polyfibres makes 20,000 tonnes of polyester staple fibre at Barabanki, in east UP. It had accumulated losses of Rs 35.17 crore and borrowings of Rs 148.11 crore by the end of 1996-97 . Industry sources said Reliance would now work out a package with BIFR to revive the company.
Reliance is expected to retain the company separately for some time and increase capacity to over 60,000 tonnes. The deal will give RIL a foothold in the northern market.
