Pennar Aluminium Co (Palco),the largest producer of aluminium products in the secondary sector, is hiving off its conductor and wires division to the American major, South Wires.
A memorandum of understanding is understood to have been signed when the Pennar Group chairman Nrupender Rao visited the United States earlier this month.
The Pennar board had last week agreed in principle to split the company and transfer control of the conductors division to the American company.
Also Read
A new company for the conductors division will soon be formed after the consent of the financial institutions which have funded Palco is obtained.
The two divisions are located at Mouda near Nagpur and are part of the Rs 300-crore Pennar Group based in Hyderabad.
The conductors division has a capacity of 6,000 tonnes per annum and its clients include most electricity boards in the country. It has also exported products to Bangladesh.
The conductors division has been tentatively valued at around Rs 21 crore of which Palco will retain about Rs 2 crore as its share and South Wires will pay Palco the remaining cost, which will be utilised to pay off the loans from financial institutions and thus reduce Palcos interest burden.
Palco has since extended its financial year to September 1997. However, financial results for the 12-month period ending March 1997 show an operating profit of Rs 3 crore on a turnover of Rs 162 crore for the two units.
The interest burden for the period has been shown as Rs 38.22 crore.
The Group is known to be scouting for a similar overseas partner to take control of the residual Palco as well.
Sources in the group said certain parties in the United States have already visited the works in Nagpur and shown interest in the takeover.
A final decision may be taken by the year-end.
Palco, with ISO 9000 certification, has state-of-the-art technologies provided by Pechiney of France.
It also has a joint venture company, along with MG NE Produkthandel GmbH of Germany, based on Hong Kong to handle its exports.