Reliance to buy Nocil Petro

No money to be paid, but debt to be taken over

After protracted negotiations over the last few years, the Reliance group yesterday finally announced that it was taking over the petrochemicals and plastics business of the Arvind Mafatlal group's ailing flagship Nocil, thereby virtually wiping out competition in the petrochemicals business.

Reliance will not be paying a single rupee for the buyout but will be taking over Nocil's entire outstanding debt. Reliance sources said Nocil had an outstanding debt of Rs 300-350 crore. Nocil has reserves of around Rs 100 crore. The deal is expected to be completed in a "few months," they said.

Reliance will have to make an open offer to Nocil shareholders, but the sources declined to spell out when the open offer would be made. Mafatlal executives were not available for comment.

Sunbright Cement Agencies, a business associate of Reliance, today signed a memorandum of understanding (MoU) with Nocil to take over its petrochemicals and plastic products division. The petrochemicals business of Nocil has been shut since 2001.

To facilitate the takeover, Nocil will restructure its businesses. Its board today approved the transfer of the assets of the petrochemicals and the plastic products division along with debt to Nocil Petrochemicals, a wholly owned subsidiary of Nocil, which in turn will be sold to Sunbright. Consequently, Nocil will be left with just the rubber division.

Nocil has 300,000 tonnes of petrochemicals capacity, 80,000 tonnes of polymer capacity and 10,000 tonnes of processed polymer products capacity.

Reliance said in a media release "the proposed takeover of Nocil's petrochemicals and plastic products division will provide significant synergies with the existing petrochemicals businesses of Reliance Industries and Indian Petrochemicals Corporation."

Nocil's performance begun to slip in the mid-1990s following a petrochemicals downcycle.

In 1998, the company had proposed a three-way split of its businesses as a bailout exercise, which included a tie-up with Royal/Dutch Shell group company Montell, to grow the petrochemicals business with fresh investments of Rs 4,000 crore. It also proposed to sell the rubber business to Apollo Tyres. But both the deals eventually fell through.

In the April-June quarter in 2003, Nocil posted a net loss of Rs 7.97 crore. In the financial year 2002-2003--the last full year for which its financials are available--Nocil posted a net loss of Rs 91 crore.

Subsequently, it changed its accounting year to April 2002-September 2003. In first four quarters of the 18-month period, its net loss was almost Rs 86 crore.