3 firms keen to pick up stake in Asahi Songwon

World's big players in chemical industry are likely to pick up a stake in Ahmedabad-based Asahi Songwon Colors Ltd (ASCL), a major pigment manufacture.

A source close to the development told Business Standard that one of the three companies - Clariant, DIC and Ciba - is in talks with ASCL to pick up a stake in it.

Clariant already holds a 9.39 percent stake in Asahi. The main reason for keenness to pick up a stake in ASCL is to have a cost-effective reliable supplier.

ASCL will be raising Rs 44 crore from its initial public offering to fund the expansion project at its Vadodara plant at a cost of Rs 52 crore. The company has already received a term loan of Rs 8 crore from the State Bank of India.

Paru Jaykrishna, ASCL chairperson, said, "We will be expanding our production capacity at our Vadodara plant and also go for forward integration." The company's Vadodara facility that was commissioned in March 2005 produces 3,600 tonne of copper phthalocyanine (CPC) blue crude per annum. The production capacity of CPC would be increased to 10,800 tonne per annum.

The CPC blue crude is the major raw material used in manufacturing pigments. The company will also undertake forward integration by producing finished blue pigments (beta blue) with an initial production capacity of 1,200 tonne per annum.

It has a 20-acre land at its existing facility in Vadodara and an additional facility will come up at the same location. The company is also setting up two mega watt power projects for its captive power consumption.

According to industry estimate, the market size of CPC blue crude is 40,000 tonne per annum in India. However, the company basically caters to the export market due to high margin gains. In the domestic market, the volume is high but the margin is low. ASCL's turnover for FY05-06 was Rs 24.5 crore and net profit at Rs 2.6 crore. Unaudited results for the six months of FY 06-07 show a turnover of Rs 31 crore and the net profit at Rs 4.6 crore.