The Chatterjee Group buys Mitsubishi India unit for $48m

The deal represents a rescue effort for a purified terephthalic acid (PTA) manufacturing subsidiary in the Bengal region that has suffered in recent years due to production overcapacity from competing plants in China. PTA is a raw material of polyester.

Under Chatterjee's ownership, the business, known as MCC PTA, will be removed from the purview of the Board for Industrial & Financial Reconstruction (BIFR) through a program aimed at mitigating debt servicing and depreciation liability. MCC will retain a 9% stake, offering technical and operational support. The West Bengal Industrial Development Corporation, a government-backed local business lobbyist, is expected to retain a 5% interest in the company.

"MCC PTA's main problem is the substantial amount of debt it has incurred, the huge accumulated loss and its continuance as a ‘sick unit' under BIFR," MCC PTA said in a statement. "The only way we could help MCC PTA overcome this critical scenario is perhaps by infusing a large amount of additional capital to take it out of the fold of BIFR and to make it a zero debt company."

Founded in 1997, MCC PTA is considered one of the largest Japanese investments in India, with about INR36 billion ($540 million) in commitments having established a PTA business with installed production capacity of 1.3 million tons per annum and 1,100 employees. The value of the company's net assets, however, eroded from -INR20.8 billion to -INR50.2 billion during the 2016 financial year. Net sales during the year fell 16% to INR47.4 billion.

MCC's divestment of the company represents part of a broader corporate restructuring and portfolio overhaul by its parent company. Mitsubishi intends to merge MCC with its plastics and rayon divisions to reduce its exposure to commodities for which supply is exceeding demand, such as PTA. It has also moved to sell its PTA business in China.

Chatterjee was created in 1989 by Purnendu Chatterjee, a founder of the Indian School of Business who is estimated to be responsible for investments valuing more than $3 billion. The firm is active primarily across chemicals, financial services, pharmaceuticals, life sciences, IT and real estate.

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