US petrochemicals giant Dow Chemicals may participate in the restructuring of Diamines and Chemicals Ltd, a loss-making local speciality chemical firm, by picking up an equity stake in it.
Baroda-based Diamines posted a loss of Rs 4.75 crore in 1997-98. It has accumulated losses of Rs 5.18 crore that have nearly wiped out its networth of Rs 7 crore. The company plans to approach the Board for Industrial and Financial Reconstruction.
Officials said Dow Chemicals may pick up equity through a preferential issue, to be launched soon. On September 29, Diamines shareholders cleared an allotment of Rs 6 crore by the company. Dow is likely to soon close a deal to provide technology for producing piperazine, a basic raw material for making bulk drugs.
"The two companies are in the final stages of negotiations," officials said.
Investors seem to have got a whiff of the impending deal as trading interest in the Diamines scrip has picked up strongly. It touched a new 52-week high of Rs 7.95 on October 13 from a low of Rs 1.55 in September and is currently being quoted at Rs 4.40. Trading volumes too have picked up sharply, with around 1,000 shares being traded daily for the past month against 100-200 shares normally.
Dow Chemicals India chief executive Vipul S Shah denied the US company's interest in Diamines. "We have not signed any contract with Diamines. We only supply raw materials to the company."
Diamines chairman P S Chhabra, could not be contacted. Chief manager sales Y R Upadhyaya said Diamines planned to expand production of piperazine, an important input for pharma companies. He said the company had not signed any deal with Dow Chemicals.
However, in its annual report for 1997-98, Sintex Industries, one of the shareholders with a three per cent stake said talks are on with Dow for working out a restructuring package.
"Diamines worked out a restructuring plan for a turnaround with the support of Dow Chemicals. If the proposal is put through with relief and concession of institutions, it would be possible for the company to regain its basic viability," Sintex directors told their shareholders.
Dow's interest in Diamines comes at a time when the global petrochemical industry is in a downturn and Indian companies have also been hit badly. Most companies including public sector major Indian Petrochemicals Corporation Ltd, are making losses.
Diamines produces ethyleneamines, polyamines and piperazine. Its raw materials are supplied by Dow chemicals. In the past two years, Diamines incurred huge losses due to a sharp escalation in the raw material prices and low prices of imported products.
