It is understood that Hindalco will merge India Foils with itself. On May 22 this year, the Khaitans had merged group company Light Metal Industries with India Foils.
India Foils has convened an extra-ordinary general meeting on October 9 to seek the permission of its shareholders for issuing 1.45 crore shares and warrants to Hindalco. Of this, 55 lakh warrants will be preferential and convertible.
Sources said Hindalco will bring its own team right down to the level of vice-president. They said that BM Khaitan, whose companies are now focused on tea and batteries, had little option but to offload his stake in IFL. Among the factors they cited are:
India Foils has a huge interest cost on its debt burden;The company has a massive loancomponent -- Rs 220 crore secured and Rs 285 crore unsecured. On the other hand, it has not been able to make a public issue because of the poor condition of the stock markets.
A team from Hindalco had visited India Foils' Kamarhati factory in April this year, after which due diligence was initiated. Then, the India Foils management had played down the visit by saying that it was a routine one. The company buys aluminium foilstock from Hindalco, as well as from the government-owned National Aluminium Co and Indian Aluminium Co.
India Foils increased its installed capacity to 19,000 tonnes in 1996-97 from 13,000 tonnes in the previous year. The new foils plant at Kamarhati, commissioned in March last year, was part of a Rs 130-crore modernisation and expansion programme.
The company will be able to operate at its full capacity by 1999-2000. The production of aluminium foil including polycoated cable wrap remained flat at around 11,500 tonnes during the last three years -- 1995-96, 1996-97 and1997-98.
The Khaitans tapped Hindalco because the Birla company is going for value addition to tackle the stagnation in aluminium prices caused by poor offtake. Prices have either remained steady or declined since last year.
In April this year, Hindalco commissioned a foil manufacturing plant at Silvassa in Dadra & Nagar Haveli.
India Foils' interest and financing expenses jumped by 64 per cent to Rs 47.13 crore during 1997-98 from Rs 28.76 crore in 1996-97. The interest component on term loans increased by over 300 per cent to Rs 21.04 crore in 1997-98 against Rs 5.23 crore in the previous year.
Secured loans increased by around 21 per cent to Rs 220.14 crore in 1997-98 against Rs 181.94 crore in the previous year. Similarly, unsecured loans increased by around 16 per cent to Rs 285 crore in 1997-98 against Rs 245 crore in the previous year.
The company banked on high cost debt like fixed deposits which increased by 180 per cent to Rs 20.46 crore in 1997-98 against Rs 7.30 crore in the previousyear.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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