Sumitomo Corp In Parleys With Swc To Source Acephate

Sumitomo Corporation, the Japanese conglomerate, has initiated talks with the Manu Chhabria-controlled Shaw Wallace & Co (SWC) for sourcing acephate, a chemical manufactured by the liquor majors agrochemicals division.

Sumitomo representatives, who recently visited the Shaw Wallace plant, have now initiated talks with the officials of the Chhabria-flagship.

Sumitomo Corp will be sourcing the chemical mainly to meet its global requirements, said Shaw Wallace sources.

Though the SWC company officials declined to comment on the total value of the deal on the grounds that the formalities are yet to be completed.

It was learnt that the Japanese firm will be sourcing a sizable quantity of acephate from Shaw Wallace for its south Asia and Europe operations.

 

The supply tie-up, once in place, will boost the operations of the agrochemicals division of Shaw Wallace.

The tie-up will also result in a considerable inflow of foreign exchange for the cash-strapped company.

In fact, the non-executive chairman of Shaw Wallace, Manu Chhabria, at the companys latest annual general meeting had said the company will be sticking only to core competence areas, which are namely liquor, beer and electronics.

He has already washed his hands of the shipping division while the consumer products division has been put on the auction block.

However, the agrochemicals division, particularly the acephate wing, has shown improved performance in recent years.

This is mainly because of freer imports of DMPAT, an intermediary required for acephate production, mainly from China.

The agrochemicals divisions sales turnover increased from Rs 132 crore in 1993-94 (12 months period) to Rs 205 crore (15 months) in 1994-95, registering an annualised growth of 24.2 per cent.

However, the availability of cheaper, imported acephate, coupled with the high cost of borrowing, had affected the overall financial performance of the companys division.

Besides, due to increasing global competition, the company will have to manufacture DMPAT from potassium chloride through backward integration.

This calls for a substantial investment at the Haldia plant of the company, which SWC could not afford now due to financial constraints.