New Delhi, Oct 25: In the first consolidation of its kind in the Indian corporate world--Flex Industries Ltd and Polyplex Corporation Ltd--two polyester majors have decided to hive-off their polyester film businesses to form a joint venture.The companies had signed a memorandum of understanding (MoU) recently to create the country's largest and the world's fifth largest polyester film manufacturing company, with an installed capacity of 39,000 tonne per annum.
Flex Industries chairman and managing director Ashok Chaturvedi, when contacted, confirmed to the signing of MoU.
Polyplex Corporation will hold a 55 per cent equity stake, while the balance 45 per cent will be held by Flex Industries in the new company, which is proposed to be named United Films Technology Ltd. An application for registration of the new name will be made to department of company affairs soon. Both the companies informed the stock exchanges about their proposed joint venture on Saturday.
The proposed merger of the polyester film business of the two companies is subject to the approval of the financial institutions as it involves transfer of debt from both Flex Industries and Polyplex to the new company.
Ashok Chaturvedi will be chairman of United Films while Polyplex managing director Sanjiv Saraf will be the managing director.
Flex Industries has a capacity to produce 24,000 tonne of polyester film per annum, while Polyplex has an installed capacity of 15,000 TPA. The United Films Technology is expected to have an equity base of around Rs 75 crore to Rs 100 crore.
The proposed joint venture is a major step forward in revival of Flex Industries which made a loss of around Rs 118 crore on a turnover of Rs 600 crore and an equity capital of Rs 25 crore in the 18 month accounting year ended on December 1998. The poor financial performance was attributed to the stagnant polyester film business and heavy debt burden.
Flex Industries' interest burden is expected to come down drastically as the company proposes to transfer between Rs 300 crore to Rs 350 crore debt out of its total serviceable debt of around Rs 550 crore to the new joint venture company.
The hiving-off of the loss making polyester film business, reduction in the interest cost and debt burden and rising margins in the packaging business are expected to boost the bottomline of Flex Industries', once the new joint venture is formed. Flex had a turnover of Rs 104 crore with a net loss of Rs 8.77 crore during the first quarter ended March 1999.
SCRIPTING A NEW FILM
Consolidation to create India's largest and world's fifth largest polyester film manufacturing company with capacity of 39,000 TPA
Polyplex Corporation would hold 55 per cent and Flex 45 per cent in the joint venture proposed to be named United Film Technology; the equity base would be between Rs 75 and Rs 100 crore
Flex debt burden to come down drastically after transfer of Rs 300 to 350 crore debt to United Film
Flex, Polyplex would focus on packaging business after the restructuringCopyright © 1999 Indian Express Newspapers (Bombay) Ltd.