Aditya Birla Chemicals (ABCIL), a subsidiary of Hindalco Industries, has acquired the Chloro Chemical Division of Kanoria Chemicals and Industries for Rs 830 crore.

The chemical division comprises manufacturing facility for chlor-alkalis, chlorine derivatives and water treatment at Renukoot in Uttar Pradesh and Salt Works in Gujarat.

ABCIL proposes to finance 60 per cent of the deal through debt and remaining from equity and internal accruals.

The deal, which is expected to be completed by May-end, will more than double the caustic soda capacity of ABCIL to 220,000 tonnes a year (tpa) from 105,000 tpa. ABCIL produces chlor-alkali at its Rehla plant in Jharkhand.

Driven by latest manufacturing technology, the chloro chemical division of Kanoria is highly cost competitive with captive power plants, coal linkage and forward integration into value added chlorine derivatives. It recorded a revenue of Rs 303 crore and profit before interest and tax of Rs 47 crore in the 2009-2010 financial year.

ABCIL clocked a revenue of Rs 222 crore (Rs 204 crore) and net profit of Rs 61 crore (Rs 46 crore) in the 2009-10 fiscal. In the December quarter of 2010-11 fiscal, its revenues were up 20 per cent at Rs 55 crore (Rs 46 crore) and net profit more than doubled to Rs 9 crore (Rs 4 crore).

Mr Kumar Mangalam Birla, Chairman, Aditya Birla Group, said the acquisition is a compelling strategic fit and solidifies the group's position as the country's largest producer of chlor-alkali, a critical input for the aluminium sector.

“Given the large expansion plans in our aluminium business, the deal serves as an excellent sourcing point. The business has potential for both growth in revenues and earnings,” he said.

Mr R.V. Kanoria, Chairman and Managing Director, Kanoria Chemicals, said that the funds realised from the transaction would be used for expanding other existing businesses and to consider opportunities in new and related business. “The land and infrastructure available at our manufacturing facility at Visakhapatnam provides an immediate opportunity to expand and diversify our business,” he said.

Caustic soda is one of the essential inputs for the manufacture of alumina and is also used widely in various other industries. Several new alumina manufacturing facilities are being set up in the eastern region, offering growth opportunities. Besides, the demand for other chlorine derivatives is also looking up.

Mr Lalit Naik, Business Head for Chemicals, Aditya Birla Group, said the acquisition offers significant potential and infrastructure to expand the business which will serve the increasing need for caustic soda. “In addition, we also expect significant operational synergies on account of logistics and other cost savings,” he said.

Aditya Birla Chemicals plans to invest Rs 1,000 crore in two years for setting up greenfield projects for producing caustic soda of 150,000 tonnes per annum at Vilayat and another 75,000-90,000 tpa at Patalganaga in Gujarat, said Mr Naik.

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