Aqua will be Nalco's first acquisition since it began operations in India in 1989 as 40:40 venture between Nalco Chemicals of the US and ICI India. Subsequently, Nalco of the US picked up ICI's stake, and itself became part of $34billion French giant Suez Lyonnaise des Eaux in 1998-99.

ACS, which has an issued capital of Rs 3.55 crore, develops, manufactures and markets speciality chemicals and equipment for dosing of chemicals and water treatment.

Nalco sources said the acquisition would have ``the effect of synergising of the operations of the company, resulting in favourable economies of scale in production and distribution, having due regard to the expertise and reputation enjoyed by ACS.''

In order to fund this acquisition, the company proposes to turn to itsFrench parent or affiliates for external commercial borrowing on ``mutually acceptable and beneficial terms.''

Since the proposed investment in ACS exceeds the limit of 60 per cent of the paid-up capital and free reserves or 100 per cent of the free reserves of the company, the board has to get the consent of members to the proposal by way of a special resolution under section 372A of the Companies Act.

Nalco has been for the past couple of years considering alternative growth strategies including acquisition of efficient units in the industry. Its previous managing director Sean Hayward had gone on record earlier that the company would be able to bring better value to customers by enhancing overall efficiency through economies of scale.

Hayward had then said that Nalco being an on-site service-oriented company, the ideal candidate would need to have the requisite expertise to service customers by ``operating dynamic systems either in industrial water treatment or process treatment.''

Nalco, accordingto company sources, commands a market share of 30 per cent in speciality chemicals and a 35 per cent in water treatment chemicals.