German firm weighs options for Pennar Aluminium stake

Suresh Nair

Mumbai, Aug 21: Dan Metals of Germany is believed to have expressed its interest to bid for the sick Pennar Aluminium company (Palco), the 45,000-tonne per annum Hyderabad-based company.

Dan Metals, essentially a trading company, has strategic investments in assets in different parts of the world. The company has significant holdings in aluminum producing companies in the US and Europe.
Dan Metals is now evaluating the opportunities to have a base in India by taking a controlling stake in Palco.

Industrial Development Bank of India (IDBI), the operating agency for Palco, is examining the credentials of the new entrant in the race. Dan Metals is said to be close to the Palco management as the company has actively been trading with the aluminium major and is well-versed with the working of Palco.

A special executive meeting of the financial institutions will decide whether the bid by Dan Metals should be called after evaluating the companies credentials.

Aditya Birla group’s flagship Hindalco and the promoters of Sterlite Industries in their personal capacity have been short-listed after having submitted their bids.

Hindalco had conducted techno-economic and financial viability studies through Tata Consultancy Services and SB Billimoria.

The Pennar unit at Nagpur, having an annual capacity of 30,000 tonne of rolled products and 15,000 tonne of conductors, is the third largest manufacturer of aluminum sheets in the organised sector after Hindalco and Indal. With a combined capacity of 1.70 lakh tonne, Hindalco and Indal together account for 59 per cent of the aluminum sheets market.

Since the market is fragmented, Palco’s present share stands at 5.8 per cent. The share is down from 7.3 per cent in 1995-96. Five years after it commenced commercial operation in December 1993, Palco was declared sick. The promoters have a 12.8 per cent holding in the Rs 162 crore equity of Palco, while the FIs hold 25.6 per cent.

The company had accumulated losses of over Rs 175 crore and a negative net worth of Rs 83.14 crore. In April 1998, it was declared sick.

IDBI had earlier sought fresh valuations from the two serious players for upward revision of their bids. However, Hindalco has said that it will stick to its earlier bid but if at all bids have to be revised the valuation has to be done afresh, as Palco had incurred further losses over the year.

Palco has accumulated losses of approximately Rs 175 crore and a negative net worth of approximately Rs 100 crore. The company was earlier valued when accumulated losses were around Rs 150 crore and the negative net worth was around Rs 80 crore. For handing over of management of the company, IDBI will have to achieve a general consensus and iron out the differences among creditors whose consent will be sought for any recommendation by it to the Board for Industrial and Financial Reconstruction.