Opinion on Reliance deal with Hualon Corporation

By Vipin Agnihotri

In what can be termed as an attempt to strengthen its position as the world’s biggest manufacturer of polyesters, Reliance Industries Limited has recently acquired the assets of the troubled Malaysian polyester manufacturer, Hualon Corporation, from the latter’s receivers and managers for $ 250 million.

It is worth mentioning in this regard that Hualon is a leading producer of polyester in Malaysia with a yearly capacity of 500,000 tonnes of polyester and blended yarns, 30,000 tonnes of nylon, 150,000 tonnes of PET bottle grade chips and 400-500 million yards of fabrics.

In my opinion, the acquisition will assist Reliance Industries to consolidate its position as the world’s biggest polyester manufacturer and result in a 25 per cent increase in its production capacity to 2.5 million tonnes. The pivotal factor here is that it will also add $ 1 billion to its revenues as well.

According to my calculation, following the takeover, Reliance Industries Limited share in the global polyester fibre and yarn business will increase from 5 per cent to 7 per cent. Point to be noted here is that since Reliance Industries Limited makes all the raw materials, the acquisition of Hualon is quite an important step towards its forward integration into blended yarn, textured yarn and fabrics.

If experts are to be believed, the integrated facility at Hualon will assist Reliance Industries Limited to comprehend the complete textile value chain and hasten new product developments in polyester.

Talking about Hualon, it is one of the top five exporters of Malaysia and has extensive collaboration for fabric and yarn supply in the global markets.

All in all, we at The India Street believes that the acquisition will enable Reliance Industries Limited to get simple access to the western markets. By the way, this deal from Reliance is the single largest foreign direct investment inflow into Malaysia after the Asian liquidity crisis.

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