The Aditya Birla Group is likely to put off its plan to buy India Foils, the second biggest aluminum foil manufacturer in the country.
Top sources in the group said Hindalco may review the entire matter as the price demanded by the Sterlite group was too high for the unit.
"It does not make sense to buy a unit at such a high price," said the sources.
Hindalco had bid for India Foils through Indal, its subsidiary, a few months back when Sterlite expressed its desire to sell off India Foils. S M Bhatia, president, foil and wheel business, Indal, said Hindalco was interested in buying India Foils three months back, adding, "Nothing is happening now in this regard."
Bhatia was in Kolkata to attend the 68th annual general meeting of Indal. Bhatia said cheap imports from China were posing to be a real problem for aluminum foil makers.
"It is a downstream activity with consumer interface so Chinese dumping is taking a toll on us," he said.
Indal, which is now the biggest aluminium foil manufacturer in the country, posted a loss of Rs 1.3 crore (Rs 13 million) in 2005-06 and Rs 1.5 crore (Rs 15 million) in 2004-05.The company has a plant in Kollur in Andhra Pradesh.
Other major manufacturers of aluminium foil include India Foils, Emco, PG Foils and Flex Art. Bhatia said Hindalco was expecting the Chinese government to cut down its duty entitlement passbook scheme equivalent there, which is expected to bring relief to the Indian firms.
The basic purpose of DEPB is to neutralise the incidence of various types of duties charged in the input material.
"Now it is 13 per cent. We heard it will come down to five per cent which could help us. But the Chinese manufacturers are lobbying hard against this," he said.
According to him, aluminum foil industry currently has an annualised growth rate of seven per cent. But in 3-4 years, it could well be 15 per cent or more, he said.
"The domestic market for aluminum foils in China is huge. The same thing will happen in India with the phenomenal rise in disposable income. Working couples now prefer to pack their food in aluminum foils," he said.
