Sterlite Industries, which took over India Foils from Williamson Magor in 2000, has now decided to hand over management control of the company to a strategic partner.
Sterlite has invited expression of interest from interested parties and engaged ICICI Securities to identify the strategic partner.
Following the transfer of control to the partner, Sterlite will offload its entire stake to the new management.
Vendanta Resources holds 39 per cent in IFL through Madras Aluminium, which it took over a few years ago. Sources at Sterlite and Vedanta Resources said the idea was to hive off IFL through a transfer of management and the process would be initiated by inducting a strategic partner, who would later take over the company.
"The Sterlite group intends to concentrate on its core business of manufacturing and mining metals -- aluminium and copper and would not spend time and resources in the business of value addition," the executive explained.
"We have been spending a lot of time and resources for India Foils, but of late we decided that this not being the core area we would hive it off. Further, the market for aluminium foil was facing an over supply, decreasing margins and lack of demand," he said.
At present, the Indian foil market is crowded with a large number of small converters, which buy aluminium from existing players and convert them into foils, due to which quality suffers.
India Foils has been suffering from lack of demand from the pharmaceutical industry, which has also started buying from converters for medicines supplied in the domestic market.
"The industry buys quality foils from larger players for products that are meant for the domestic market -- this has also affected sales of India Foils," he said.
"Aluminium manufacturers had initially supported the converters to cater to the demand in the domestic market with supplies of aluminium. This has, however, acted against the larger aluminium foils manufacturers by flooding the market," said an industry analyst.
India Foils in the recent past has been trying to boost sales through exports but this has also suffered lately.According to the company's shareholding pattern, White Cliff Holdings holds additional 2.77, while Zen Industrial Services hold another 2.65 under the promoter category. Considering these two stakes, promoters' stake in the company stands at 44.22, while Sterlite is looking at giving the proposed ally at least 51 per cent stake.