Tisco, Rallis Pact To Buy Out Sanderson

The Rs 6,400-crore steel major Tisco is buying out a chemical plant of a small Jamshedpur company for Rs 11 crore in a deal which also involves the Tata groups agrochemical major, the Rs 900 crore Rallis India.

While Tisco will take over the operation and management of the plant, Rallis will be in charge of marketing the product, ammonium sulphate. Rallis managing director, Vijay Rai, confirmed the development, but said Rallis will not be investing in the buy-out. It will only market the product.

Tisco officials could not be reached for comment.

The proposal is seen as a bail-out of Sanderson Industries, which makes various chemicals like sulphuric acid, sulphur dioxide, alum and oleum, apart from ammonium sulphate. Located in Jamshedpur, the company buys coke oven waste from Tisco.

 

The Tatas were planning a joint venture to buy out the plant with both Tisco and Rallis holding stake in the new company. This proposal was even cleared at a Rallis board meeting on December 18, 1997.

Rallis was to bring in Rs two crore as its share of the equity. The balance Rs 9 crore was to be brought in by Tisco as its share comprising, both, equity and debt.

The valuation was arrived at on the basis of a technical feasibility study conducted by Gamma Associates. Ammonium sulphate is a fertiliser and is used as a raw material for fertilisers as well.

Rallis is a major player in the fertiliser industry.

It makes sense for Rallis to market the product as it is the largest domestic agrochemical company, with a formidable field force.

Rallis has several co-marketing agreements and companies like Wockhardt have routed their products through it.

Sanderson Industries has a plant at Jamshedpur which manufactures alum, oleum, sulphuric acid and sulphur dioxide. It went into the red in the very first year of its operations. It posted a loss of Rs 1.41 crore in the first six months of 1996-97.

Beris, the company promoters, had requested Tisco to work out a bail-out plan, after the company incurred losses in the first year of its commissioning.