Poor results, lack of technology, and the advent of transnationals has compelled the sell-off.

By Dilip Maitra

The glass ceiling proved too high for the Rs 97.90-crore FGP, till now the country's largest fibre-glass producer. Late last month, this affiliate of the Rs 6,000-crore RPG Group signed a Memorandum Of Understanding (MOU) with the $18-billion Saint-Gobain of France to sell its fibre-glass plant in Hyderabad, as well as the machinery from its Thane plant near Mumbai. While FGP did not disclose the value of the deal, BT learns that the sale price is about Rs 70 crore.

Admits K.V. Gopalkrishnan, 51, President, FGP: ''Yes, we have signed an MOU with Saint-Gobain to sell the Hyderabad-based plant. The FGP board felt that it would be in the company's best interests if a leading global player with the necessary technology and access to world markets could take over its fibre-glass business.'' However, Harsh Goenka, 40, Director, FGP, and the Vice-Chairman of the RPG Group, declined to discuss the sale, saying: ''The RPG Group has links with FGP's management, but no stake in the company.''

Why is a company with a 65 per cent share of the Rs 200-crore fibre-glass market exiting its only business? The simple answer: it couldn't keep up. The fibre-glass business is capital-intensive and technology-driven-and FGP has neither the money nor the technology. And its majority shareholder, the UK-based Fibreglass Pilkington, which holds 45 per cent of FGP's Rs 11.90-crore equity, is no longer an active player in the industry.

In fact, despite being in the business since 1962, FGP has remained small. And over the past two years, poor demand from the automobile and construction industries have shattered its fortunes. After peaking at Rs 124.70 crore in 1995-96, its turnover dropped sharply to Rs 97.90 crore in 1996-97. Net profits took a severe beating too, falling from Rs 20.10 crore to Rs 7.30 crore. This trend continued into 1997-98, with sales dipping further to about Rs 70 crore, and the company plunging into the red (estimated loss: Rs 3 crore). The share price, which had touched a high of Rs 107 in 1996-97, now languishes at around Rs 6.

Of course, FGP did try to work out a revival strategy: in 1997, it had planned to raise Rs 15 crore through a rights issue to expand its capacity from 14,000 tonnes per annum (tpa) to 20,000 tpa-only to abandon the idea when it realised that the market would not support the increased production. Worse, it had to close down its Thane plant, spending about Rs 12 crore on a Voluntary Retirement Scheme to retrench the workforce. And the last nail in FGP's coffin was hammered in by the $4.40-billion Owens Corning's plan to manufacture fibre-glass in India. Owens Corning India, its joint venture with the Rs 3,624-crore Mahindra & Mahindra Group, has set up a 30,000-tpa fibre-glass plant at Taloja (Maharashtra) with an investment of Rs 400 crore. This increases domestic capacity by two-and-a-half times, from 20,000 tpa to 50,000 tpa-more than three times the 1996-97 demand of 15,000 tonnes. No wonder FGP saw its future in shards.

Saint-Gobain is certainly serious about building a glass empire in India. Besides acquiring FGP's plants, it is putting up a Rs 300-crore float-glass plant in Tamil Nadu. The transnational has also raised its holdings in the Rs 23.47-crore Maharashtra Glass and in the Rs 32-crore Atul Glass from 26 per cent to 51 per cent, through preferential issues. On its part, FGP, now reduced to a shell company with a lot of cash and a plot of land in Thane, can now capitalise on the sell-off instead of facing a fragile future.

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