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SRF mulls DuPont payment options

BS Corporate Bureau

The Arun Bharat Ram-promoted SRF Ltd is looking at options of either paying DuPont of the US Rs 230-250 million or giving it a two per cent stake in the company for buying it out of DuPont Fabrics Ltd last financial year. According to sources, SRF has time till December 2001 to make up its mind. "The company is studying both the options right now," the sources added.

After being taken over by SRF, DuPont Fabrics Ltd was rechristened Tyrecord Fabrics Ltd. It is currently a wholly owned subsidiary of SRF. The plant is located at Gummidipoondi in Tamil Nadu and manufactures Nylon 6,6.

In case the company decides to offer DuPont a two per cent stake, it will be through the preferential route, a source said. The current market capitalisation of SRF Ltd is around Rs 1.03 billion. The value of a two per cent stake would work out to a little more than Rs 20 million. "In that case, besides the shares, there will be an additional payment also," the source added. The source also said if SRF pays Rs 230-250 million for the acquisition, the payment will be much below the book value of the company.

At the moment, SRF Ltd is doubling the capacity of its Nylon 6,6 plant from the current 13,000 tonne per annum involving an investment of Rs 250-300 million.

SRF has also kicked off the process to merge the subsidiary with itself, which is slated for 2001 itself. According to sources, the plan is to make Tyrecord Fabrics, a division of SRF, and extinguish its shares. The acquisition has made SRF the world's seventh largest tyrecord company in the world. It is the leading producer of tyrecord fabric in the country.

Meanwhile, the company is all set to reap a bonanza this year. Under the Montreal protocol to phase out the use of CFCs, SRF is to be paid $34.48 million. Out of this, Rs 400 million has been paid this year. However, instead of treating the amount as income, the SRF brass has decided to add it directly to the reserves.

The company's market share had dipped from 35 per cent last year to 27 per cent during the first quarter of the current fiscal mainly on account of the government reducing import duty on tyrecord fabric.

However, the company has been able to regain its marketshare since then and it now stands at 33 per cent. In view of the sluggish growth in the tyre market, the company expects the domestic sale of tyrecord fabric during the current financial year to be lower than the previous year.

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