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M. Ramesh

Chennai , June 2

Consequent to the (proposed) merger of Tuticorin Alkali Chemicals and Fertilisers (TAC) with its parent company, Southern Petrochemical Industries Corporation (SPIC), the holding of SPIC's co-promoter, Tamilnadu Industrial Development Corporation (TIDCO) will fall to 7.5 per cent from 10.04 per cent now.

Calculations show that because of the merger, the Muthiah family will get 41.75 lakh shares in SPIC for their 66.80 lakh shares in TAC. Their stake in SPIC will go up to 34.75 per cent from 38.62 per cent now (and not from 43 per cent to 46.81 per cent as mentioned in an earlier report which had ignored that TIDCO was counted as a promoter in SPIC).

SPIC holding

Consequently, the holding of the co-promoter of SPIC, TIDCO will come down from 10.04 per cent to 7.5 per cent.

TAC, part of the Chennai-based SPIC group, mainly produces ammonium chloride (a nitrogenous fertiliser) and soda ash. The company was pushed into the red by a quirk of government policy that withdrew subsidy on ammonium chloride while retaining it on another nitrogenous fertiliser, urea.

In the third quarter of last year, the company had projected a turnover of Rs 170 crore for the year, but ended up with Rs 130 crore. In January-March 2005, the company made a net loss.

The proposal to merge TAC with either SPIC or Tamilnadu Petroproducts Ltd (another company of the group) was mooted several years ago. TPL was keen on taking over TAC because of synergies between the businesses of the companies — TPL mainly produces LAB, a product used in the manufacture of detergents, just as soda ash, which TAC makes.

So why now? Honouring an agreement under the `corporate debt restructure' with banks, the Muthiah family had brought in Rs 20 crore last year to shore up their investments in the company. A few analysts that Business Line spoke to are of the view that the SPIC-TAC merger provides the Muthiah family with an opportunity to divest a part of their holding in SPIC, perhaps to the pre-merger level of 34.75 per cent, without ceding control over TAC.

More Stories on : Mergers & Acquisitions | Fertilisers | Foreign Institutional Investors

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