COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES

Hindalco to acquire majority stake in India Foils

In a major acquisition in recent times, Aditya Birla group's Hindalco Industries Limited and its subsidiaries have decided to acquire majority state in Williamsom Magor group's Calcutta-based India Foils Limited to attain a leadership position in downstream value-added products in aluminium industry.

Chairman of the AB group Kumarmangalam Birla told reporters that Hindalco's subsidiaries have entered into an understanding to purchase 1.7 million shares of IFL from the WM group at a mutually agreed price. IFL will make a preferential offer of shares and warrants to the wholly-owned subsidiaries of HIL. These companies will also acquire shares from the WM group, prior to the preferential offer. In due course, HIL's and its subsidiaries' stake in IFL will be 51 per cent.

Birla said after due diligence and obtaining statutory approvals, IFL will allot nine million shares and 5.5 million warrants to the subsidiaries of HIL. The price of each share will be Rs 45 and each warrant will convert into an equity share, at a price of Rs 55 within 18 months, as per the Secutities and Exchanges Board of India guidelines.

Interestingly, the WM group, which currently owns 51 per cent of IFL, will continue to be a significant shareholder of the company with 22.4 per cent stake. The WM group has for some time expressed its intent to focus on core businesses and were looking out for a strategic partner with proven track-record who could steer IFLs to greater heights.

Birla stated that the move stems from the group's strategy of focussing on sectors where it can maintain its dominant position. It fits perfectly with HIL's strategy to attain leadership position in the downstream value-added products in aluminium industry, such as foils, alloy wheels and rolled products.

The induction of HIL into the IFL management is a very progressive step by the WM group, analysts said. The combination of HIL and IFL makes imminent strategic and financial sense and will result in the creation of tremendous shareholder value for both the companies. The AB group will reconstitute the board and HIL will have more members, Birla stated.

Incidentally, this is the fourth major acquisition announced by Birla in recent times, the first being Altholville Pulp Mill in Canada, Dharani Cements in Tamil Nadu, Shree Digvijay Cements in Gujarat and now the West Bengal-based IFL, which has four factories in the state.

IFL is a leading player in the aluminium foils industry with more than 44 per cent market share. Of its turnover of Rs 3.26 billion in 1997-98, exports account for over ten per cent. IFL's West Bengal plants have technological collaboration with Pechiney, France.

All its plants are ISO 9002 certified and are in the process of ISO 14001 certification.

Its total capacity has been recently raised from 13,000 tonnes per annum to 19,000 tonnes per annum at a cost of $ 40 million. This included setting up an ultra-modern foil mill company from Germany. The project was mainly financed by debt, that led to an overleveraged financial structure, straining company's profitability and cash flows and thereby optimum capacity utilisation.

UNI