RIL's German unit goes bankrupt

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New Delhi: The global economic downturn has hit India's most valued company Reliance Industries, forcing it to declare as insolvent its German unit Trevira, a speciality polyester manufacturer.

Reliance Industries had acquired Trevira five years ago for Rs 440 crore and group Chairman Mukesh Ambani had announced the deal at the Annual General Meeting that year.

This acquisition in 2004 had propelled Reliance to the position of the world's largest polyester fibre and yarn producer. The German unit had 1,800 employees as of March 2009 and a turnover of Euro 323 million last year.

"Trevira filed an application with the Augsburg Court in State of Bavaria, Germany, for the commencement of insolvency proceedings with a restructuring plan," RIL said in a press statement in New Delhi.

Reliance is the latest in the list of Indian conglomerates that have been hit by the financial Tsunami on their global acquisitions.

Trevira is among the few prized acquisitions that the second generation of Ambanis executed after taking charge from their father late Dhirubhai Ambani, before the siblings Mukesh and Anil parted ways. The Trevira deal followed acquisition of Flag Telecom in early 2004 for USD 311 million.

Trevira faced severe demand contraction in its principal market segments due to the global financial crisis. Trevira, which was part of German industrial conglomerate Hoechst AG before being acquired by Reliance, manufactures high-value branded polyester fibres and filament yarns for the automotive industries, home textiles as well as for technical applications.

The filing for insolvency follows attempts by the company to overcome the impact of industrial slowdown in Europe, particularly of the automotive and textile sectors to which it is an important supplier.

"European textile manufacturers are currently facing a considerable drop in demand for their products, while the cost of production and employment is increasing and competition from Asian and Eastern European industries is stronger than ever," RIL said.