Only if it can build economies of scale in India.

By Rajeev Dubey

March, 1997: Polysindo plans to buy the Rs 1,946.60-crore spic's 51 per cent stake in spic Petrochem
April, 1997: Polysindo buys a 50 per cent stake in the Rs 170-crore Best & Crompton
September, 1997: Polysindo buys the Rs 968-crore JCT's PSF division

Since the beginning of the financial year 1997-98, the Indonesian textile manufacturer, PT Polysindo Eka Perkasa--the flagship of the $1-billion Texmaco Group, which has capacities of 3.40 lakh tonnes per annum (TPA) of Purified Terephthalic Acid (PTA), 3.30 lakh tpa of Poly Ethylene Terephthalate (PET) chips, 1.87 lakh tpa of polyester staple fibre (PSF) and 65,000 tpa of polyester filament yarn (PFY)--has been quietly weaving together its strategy for India. Spurred on by its chairman, Marimutu Sinivasan, 60--the scion of a third-generation Tamilian business family which migrated to Indonesia in 1885--the group's flagship, PT Polysindo Eka Perkasa, has planned an investment of Rs 1,000 crore in India over the next five years. Says PT Polysindo's director, M. Arunachalam, 48: "We see ourselves as a totally integrated textile-manufacturer in India."

But PT Polysindo's investments will be staggered. It's only after the due diligence report--being conducted by the Hong Kong & Shanghai Banking Corporation's Investment Bank--is completed by October, 1997, that pt Polysindo will take a final decision on whether to meet the investment needs of JCT's PSF plant, which run between Rs 150 crore and Rs 200 crore.

The Indonesian major has has so far invested only Rs 50 crore in another acquisition, Best & Crompton. But the biggest investment plan it has drawn up is for SPIC Petrochem. Says Joydeep Mazumder, 43, general manager, PT Polysindo: "We have a structured investment schedule."

Just why is PT Polysindo so bullish about India? Explains Nilesh Shah, 30, investment analyst, WI Carr: "The overall industry prospects are extremely bright." Indeed, the domestic demand for PSF is projected to grow annually by 15 per cent, and for PFY, by 12 per cent, till 2001-02.

But does PT Polysindo have the financial ability to fulfil its plans? The combined asset base of the Texmaco Group's 26 companies in 1996 was $3 billion. In the first quarter of 1997, the group's net profits stood at Rp 53.50 billion (Rs 66 crore), on an income of Rp 468.20 billion (Rs 580 crore). Confirms M.L. Lohia, 72, chairman of the Rs 852-crore Indo Rama Synthetics, Polysindo's arch-rival in Indonesia: "They are a large integrated player. Their companies are very profitable."

However, there could be a few knots in PT Polysindo's India yarn. In its hurry to acquire polyester capacities in India, the group has scattered itself geographically. For instance, while JCT's 60,000-TPA PSF and 20,000-tpa pfy plant is located at Hoshiarpur (Punjab), SPIC's Rs 2,800-crore plant, which will make 50,000 tpa PFY, 15,000 tpa PSF, and 2.50 lakh tpa PTA, is coming up at Manali (Tamil Nadu). And none of these plants can achieve globally-competitive prices due to unrealistically small capacities.

Arunachalam's defence: "Once we consolidate, we will be expanding our capacities." Until then, however, pt Polysindo will have to contend with unviable production costs at both the facilities. Also, if textiles and textile machinery are its avowed interests in India, there's hardly any synergy with the power transmission products-maker, Best & Crompton? Counters Arunachalam: "Best & Crompton has the expertise to help us get into the power transmission lines business in Indonesia." Perhaps. But what PT Polysindo must now prove is that it can consolidate as smartly as it can play the M&A game.