While the performance of the carbon black division has improved, the VFY business has suffered due to cheaper polyester alternatives. It said that offtake of insulators by state electricity boards has also been lower.

Indian Rayon is likely to formally announce closure of the loss-making sea water magnesia unit by the end of the current month as it is yet to find a buyer. The company has held discussions with around 60 companies, but could not strike the ``right'' deal.

The Financial Express had earlier reported that closure of the unit was imminent. Chairman Kumar Mangalam Birla had told the paper that waiting indefinitely for a proposal tomaterialise was against shareholder interest and hence Indian Rayon will opt for closure in the absence of a deal.

PC Gandhi & Associates had been appointed to do a valuation of the assets. Indian Rayon will now provide for a one-time cash loss based on these valuations in the second half of the current financial year.

The company was also exploring alternatives such as manufacturing chemical products for the pharmaceutical industry, converting the unit into a cement plant, or an outright sale of assets. A formal decision will be taken by its board in September-end.

The division was set up at a cost of over Rs 330 crore, following a cost overrun of Rs 70 crore and substantial time overrun as well. Due to increasing losses, the company was forced to close down the division in December last.

The sea water business had become unviable due to a sharp fall in the product prices and a substantial reduction in offtake due to a slump in the domestic steel industry. Worse, there has also been increased dumpingof magnesia from China.

The company has taken various initiatives to arrest the slide in profits arising primarily from the ailing division. Besides suspension of operations, efforts were taken to reduce operating losses through a cut in overheads, apart from reducing wages of employees.

It has also announced premature redemption of Rs 200 crore worth of debentures to reduce interest costs. The book value of investment in fixed assets on account of sea water business was Rs 332 crores as on March 31, 1999.