The Arvind Mafatlal group on Wednesday signed a memorandum of understanding with Montell, which allows the Shell subsidiary to pick up a 49 per cent stake in Nocil Petrochemicals.

Nocil is being de-merged into three separate companies: Nocil Petrochemicals, a rubber chemicals company and residual businesses that will include other subsidiaries and plastics business, chairman Arvind Mafatlal said at the company's 37th annual general meeting in Mumbai.

The announcement marks the culmination of three years of hectic deliberations, a bid to improve Nocil's finances, which, according to Mafatlal, would have otherwise `gone into liquidation'.

"Old friend Shell is coming as a shareholder with a 49 per cent stake. I can assure you that it is going in safe hands, and the shareholder value will only go up. Your company has a bright future," Mafatlaltold shareholders.

Nocil shareholders will receive shares in each of the three companies. This will be in a proportion of roughly 70 per cent in the petrochemicals venture, 16 per cent in rubber chemicals and 14 per cent in the residual company. A valuation of the businesses is now on. Mafatlal said the company was working towards putting in place a scheme for shareholders, a move that will take care of odd lots following the demerger.

An extraordinary general meeting of the shareholders has been called on October 31 to approve the resolution of issuing shares on a preferential basis to Montell to enable it to pick up a 49 per cent stake. Since Nocil Petrochemicals exists as a company on paper, shares will be issued in Nocil Petrochemicals. The minimum price at which the shares will be issued on a preferential basis is Rs 29 per share.

Nocil Petrochemicals will set up a new international cracker complex with a 4.5-lakh tonne per annum capacity. This will be further enhanced to 5.56 lakh tpa at theexisting Thane-Belapur site near Mumbai at the cost of Rs 4,500 crore.

"I'm quite confident that you will be rewarded," Mafatlal told shareholders.Explaining the rationale behind the demerger deal and the fact that management control would be in the hands of a foreign company in the petrochemicals company, Mafatlal said: "The pertinent question was that of finance, not that we do not have the capabilities, but because the plant expansion was a must. Otherwise we would have run into losses and become a sick company. Thus there arose the need for a suitable partner who takes full responsibility of the management."

Nocil's performance has been affected and so has been the subsequent dividend declared during 1997-98, due to the worst kind of downturn which hit the industry.

Nocil has posted sales of Rs 442 crore in the first five months of the current fiscal, against Rs 406 crore in the corresponding period last year. Exports during the period have been higher at Rs 24 crore, compared with Rs 19 crore inthe same period last year.