The deal, expected to be struck in a fortnight, will mark the first takeover of a domestic company by a foreign stressed asset firm. In the last few years, a few stressed asset funds have taken equity exposure in Indian manufacturing firms without assuming management control.
Although the exact deal size has been kept under wraps, the Asset Reconstruction Company of India has put a price tag of Rs 170-180 crore (Rs 1.7 1.8 billion) for OCM India.
The company, carved out of the Birla group's Birla VXL some time ago to facilitate the sale, has a plant in Amritsar with capacity to produce 8.6 million metres of fabric and the OCM brand.
Beginning in the mid-1970s, Ross built his reputation as the foremost bankruptcy adviser in the US. He is a specialist in leveraged buyouts in industries such as steel, coal, telecommunications and textiles.
Two independent sources close to the development confirmed that talks between Arcil and WL Ross had reached the final stage. Another source close to the company said Arcil had finalised the broad contours of the deal with WL Ross at a recent meeting in New York.
Arcil had bought over the financial institutions' outstanding dues to Birla VXL, which spun off its OCM unit in Amritsar into a separate entity called OCM India.
The asset reconstruction company received response from three domestic and three foreign companies. The domestic companies were established textiles makers while all the foreign bidders were funds. The list of domestic companies included Arvind, S Kumars and Raymond.
Arcil had sold Saurashtra Chemicals, another company of the Kolkata-based SK Birla group, to the Nirma group in June last year.
Birla VXL Ltd, the textile outfit of the SK Birla group, is planning to extend its fabrics brand Digjam to men's apparel in order to give a big push to its readymade garment business.
Once a premier textile outfit, Birla VXL, fell sick in the mid 1990s after its capacity expansion plans ran into rough weather following an industry downturn.
Birla VXL, through its two brands, OCM and Digjam, had one-fifth share of the fabric market. OCM has had brand ambassadors like Sunil Gavaskar and Allan Border in the past. Now, group chairman Sudarshan Kumar Birla, who recently sold cement firm Mysore Cements to German major Heildelberg, is trying to put Birla VXL on the rails once again.