Tata Chemicals Limited (TCL) broadly operates in three sectors living essentials,

industry essentials and farm essentials. It has recorded a 43% drop in net profit in the second
quarter of this years fiscal due to sharp rise in raw material cost even after it recorded higher
income. It saw a 25% y-o-y decline in recurring PAT. The objective of the merger is to post
a stronger financial and operating performance by catering to newer markets/companies,
meeting the unfulfilled demands and producing new products.

Oxiteno, one of the largest Brazilian chemical companies is part of the Ultra Group- a well
reputed age old company with a global reach, broad client range and a strong distribution
channel.
Main Synergies of the deal would be Increased Revenues, Cost Reduction and Technological
Improvements. Oxiteno has a diverse product mix of emulsifiers, solubilizers, dispersing
agents, wetting agents and coupling agents that would enable TCL to operate in a new line of
products. This would help TCL cater to new market segments like paint, consumer care,
detergent and pharmaceutical companies. For this purpose, we propose to acquire three
market segments of Oxiteno, namely- Personal Care, Paints& Varnishes, Household and I&I.
An Information-Driven Value Chain strategy for supply chain management would help
TCL gain a competitive advantage by predicting demand, shaping demand thereby
maximizing revenue and profits. Sound capital investment can manage capital productivity
and reduce overcapacity.
Fig: Market Attractiveness Model for TCL-Oxiteno Merger

Financial Implications: Depending upon future negotiations we assume that Oxiteno would
want to be paid equal cash and equity of TCL. Cash raised by debt and cash reserves of TCL.
We consider here that TCL would acquire only three businesses as mentioned earlier.
Parameter Short Term effect Medium Term Long Term
P/E Slight Decrease Stable Increase
ROA Increase Increase Stable
ROE Decrease Increase Stable
Cash Flow Decrease Stable Increase

The rise in manpower cost TCL would be compensated by the talent quotient. Integration
process will enable develop a common vision between both companies and thereby identify
areas where they can work together to grow the business.
Oxiteno scores high on people management where a 12-month program enables trainees to
develop projects in different departments: Administration, Planning and New Ventures etc. It
offers licensing for facilities involved in producing niche chemicals. Oxiteno has been in the
news for introducing 100% green renewable SLES and has become the member of RSPO.
Oxiteno invests more than 2% of its annual income in product\process research and
development. Approximately 12% of the company's staff is involved in activities at the
laboratories.
Besides its four industrial units in Brazil, the company made its presence felt in the Mexican
market with the acquisition of Canamex in 2003 and shares from Rhodia Veracruz in 2004.
The company has a healthy history of entering into mergers thereby strengthening its reach in
the South American Market.
Both TCL and Oxiteno are committed to meeting the highest standards of corporate
governance and business practices. There activities integrate the principles of corporate
sustainability.