India's largest private company, Reliance Industries Ltd's proposed joint venture with Nova Chemicals, the Canadian chemical and plastics major, for foraying into construction and building materials will not take off, as the latter's new owner, International Petroleum Investment Company, has decided not to pursue the project.
RIL and Nova Chemicals, long-time technology partner in some of RIL's petrochemical businesses, were planning a 51:49 JV in India to leverage Nova Chemicals' green building and construction technology to design, engineer and build a range of high-efficiency structures for the Indian sub-continent.
RIL had floated a subsidiary, Reliance Innovative Building Solutions, for the purpose. India has a $60-billion construction market growing at about 20 per cent per year, said sources.
IPIC, promoted by the government of the emirate of Abu Dhabi, had acquired debt-ridden Nova Chemicals for $2.3 billion early this year and the acquisition was completed in July. The acquisition agreement said once it was concluded, Nova or its subsidiaries would not pursue the proposed JV with RIL.
"The acquirer will not permit any of its subsidiaries to, directly or indirectly, enter into any contract with respect to ...the Reliance Innovative Building Solutions joint venture as set out in the letter of intent dated April 28, 2008, as amended from time to time, between the Company and Reliance Industries Limited," said the document."
Industry sources said demand had declined during the downturn, prompting the decision to withdraw debt-ridden Nova Chemicals from the bigger plans.
"Reliance Industries continues to believe that India offers strong prospects for application of unique construction methodologies and technologies. Reliance Industries and Nova continue to work together for validation of such technology through demonstration in India," said a Reliance spokesperson.
The partners were planning to make and market unique building and construction systems and component parts, based on expandable polystyrene, including structural and non-structural roof, decking and wall panels. The new venture was expected to be operational by the third quarter of last year, following finalisation of formal agreements. The first activity of the planned JV was to construct buildings for RIL's retail venture, Reliance Retail.
Nova Chemicals already has a long-term relationship with RIL, as technology partner for one of RIL's main plastic packaging brands, Relene, a polyethylene product.
