Institutions insisted on the new valuation of the assets of Orissa Synthetics to ensure that there should not be any major mismatch between the offer price and the value of the assets.

It is believed that RIL has made an offer in the range of Rs 125 crore to Rs 150 crore for Orissa Synthetics.

"JK Corp has agreed on a price between Rs 125 crore to Rs 150 crore for the sale of Orissa Synthetics to Reliance Industries. Institutions have also agreed in-principle for the sale. However, JK Corp has been asked to do a fresh valuation of Orissa Synthetics' assets two weeks ago just to make sure that that the offer price matches the assets to be sold off," said top institutional sources. IDBI is the lead institution of the consortium. ICICI, too, hasexposure.

RIL did not comment on the issue. A senior official of Orissa Synthetics also refused to comment. Institutional sources, however, said that the new valuation has been asked for two weeks back, and hence must be at an advanced stage.

It is believed that there are various options being considered for the sale and the polyester division will be hived off into a separate company. The arrangement could be similar to the one that Reliance had with India Polyfibres Ltd (IPL). RIL joined IPL as a co-promoter recently by picking up a chunk of equity.

Though institutions only have a marginal Rs 6-crore exposure in Orissa Synthetics, the huge exposure they have in JK Corp forced them to take a tough stand, sources said.

Orissa Synthetics was initially formed as a joint venture between Orissa Industrial Development Corporation (OIDC) and JK Corp. The company's polyester staple fibre plant, with a capacity of 27,000 tonnes per annum, went on stream in 1986. The plant is located at Cuttack inOrissa.

Bad market conditions coupled with the overwhelming presence of players like Reliance Industries acted as major deterrents to its growth. With the company making losses right since its inception, it was referred to Board for Industrial and Financial Reconstruction (BIFR) in 1986.

BIFR suggested a rehabilitation package in 1989 which included a merger of the company with JK Corp and diversification into the polyester yarn business.

The company was merged with JK corp in 1994 and the POY plant started functioning in 1992. The POY plant has a capacity of 3,000 tonnes per annum. Despite these revival measures, Orissa Synthetics continued to make losses which prompted the Singhanias to sell off the division and approach the financial institutions with a proposal to this effect.