The Aditya Birla group is planning to sell its 25% stake in Tanfac Industries, a fluorine chemical JV with the Tamil Nadu Industrial Development Corporation, TOI states.
The company is in talks with Arvind Mafatlal-owned Navin Flourine International and Inox group-promoted Gujarat Fluorochemicals to sell its stake in the JV.
The JV was incorporated in 1972, is among the largest suppliers of fluorine chemicals with the facility spread over 60 acres in the chemical complex of SIPCOT at Cuddalore, 180km south of Chennai.
Tanfac manufactures aluminium fluoride, anhydrous hydrogen fluoride, Sodium Silico Fluoride, ammonium Bifluoride and other speciality fluorides.
TIDCO owns 26% in Tanfac and has made a equity investment in the company of R260 Lacs. Aditya Birla owns 25% stake in JV through TGS Investment & Trade Pvt Ltd( 19.96%) and Pilani Investment & Industries Corporation Ltd(5%).
Tanfac Industries is facing strong competition from its Chinese players.
The JV has been going through a tough time since a decade now as Chinese companies started offering its main product aluminium fluoride at a substantial discount to domestic prices.
Irrespective of the fact, Tanfac directly sourcing feedstock from China, its process is not adequate enough to take on competition from China.
Another Aditya Birla group company, Hindalco used to source a major part of aluminium fluoride production from Tanfac, has also turned to Chinese companies to save costs and maintain a robust bottom line.
In 2011 due to a cyclone the company was forced to stop production at its Cuddalore plant for nearly 30 days.
Though the company managed to turn around its operations in 2010-11 by changing product mix and saving costs, it could not sustain its performance in successive years.
The company reported a loss of R24 Cr for the year ended March 2012. For the first nine months ended December 2013, Tanfac posted a loss of R5.6 Cr on a turnover of R114.8 Cr.
The $40 Bn Aditya Birla group plans to exit its non-core and unprofitable businesses. Group chairman Kumar Mangalam Birla believes the group companies should be among the top three players in their respective segments or should be very profitable.
In the past 10 years, the group had exited some non-profitable and non-core businesses.
- Its 37.5% stake in Mangalore Refineries and Petrochemicals (MRPL) was sold to upstream oil giant ONGC in 2002.
- The palm oil business, which symbolised the groups operations in Malaysia, was also divested in 2006.
- Vikram Ispat, the profitable sponge iron business, was sold to the Welspun group as it was not part of the core business, which are on par with Chinese players.
Last Month, Aditya Birla Nuvo came up with a plan to sell Aditya Birla Minacs, its BPO arm and sold its carbon black business to group entity, SKI Carbon Black (India) for R1,451 Cr.
In this segment, in December 2012 – IFC exited from Kanoria Chemicals & Industries Limited by selling 61.02 lakh shares or 10.88% stake.
China dominates international trading of fluorine chemicals such as aluminium fluoride and its feedstock fluorspar. Since Chinese companies are offering fluorine chemicals at $40-50 Mn per tonne lesser than the domestic rates, Indian consumers such as fridge makers and aluminium producers buy directly from China.