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WHEN shareholders of Tata Oil Mills Co (TOMCO) and Unilever subsidiary Hindustan Lever (HLL) meet in Bombay on June 29 and 30, respectively, to vote on a merger, one outsider will be watching with great interest.

   Nirma Chemical Industries chief Karsanbhai Patel has a finger in the pie - he hopes to launch what he refers to as a ''friendly acquisition'' of TOMCO, one of his major competitors.

    But the offer by the Ahmedabad-based Nirma, which has a hefty annual sales turnover of over 6.5 billion rupees (about HK$1.62 billion), hardly seems amicable in light of what Mr Patel has proposed.

   He has offered shareholders in TOMCO a cash payment of 75 rupees per share against the HLL offer to two HLL shares for every 15 TOMCO shares held - which translates into 50 rupees per TOMCO share.

   It does not seem to matter to Mr Patel that Tata and the financial institutions, which between them own 62 per cent of TOMCO, are already committed to the merger with HLL.

  Shareholders may be tempted to grab Mr Patel's offer, but his payment to shareholders would be subject to capital gains tax by the beneficiary, whereas the HLL offer does not involve cash.

   In India, where the highest income-tax bracket touches 54 per cent, capital gains tax becomes an important consideration.

  The hiving off of TOMCO is one move by Tata group chairman Ratan Tata to streamline the operations of his huge empire, the largest business house in India.

  However, recent poor corporate results from his key units, Tata Iron and Steel Co (TISCO) and Tata Engineering and Locomotive Co (TELCO), and an indifferent image of the group as a whole, have damaged the prestige of the Tata name.

   Ratan Tata took over the reins of the business empire in December 1991 when the 86-year-old J.R.D. Tata, considered the doyen of Indian industry, stepped down.

   Since then, Ratan Tata has been facing flak from all sides, with matters coming to a head when Russi Mody, the 75-year-old chairman of TISCO, was sacked after 53 years with the company.

   TISCO's steep drop in profits for the financial year 1992-93 did not help matters.

  TOMCO, a 45-year-old company that sells soaps, hair oil, detergents, shampoos and toothpaste in India, has been losing money for some years, claiming only a seven per cent share of the total Indian market for soaps and detergents.

  The Indian Soaps and Toiletries Manufacturers' Association (ISTMA) estimates that the total market for detergents in the country is close to 1.4 million tonnes a year, in volume and 18 billion rupees in value.

   Nirma has the largest share, estimated at around 520,000 tonnes, while HLL comes second with 330,000 tonnes, between them controlling more than half of the market.

  Some of TOMCO's brands, though, have been household names for years, commanding strong brand loyalty. They would add tremendously to HLL's business.

  It is for this reason that the multi-national made what was effectively an offer to buy the company.

  The offer was accepted by both Ratan Tata and financial institutions, which hold the reins of power in most big business in India.

   The scheme of amalgamation has been filed before the Bombay High Court, which fixed June 29 and 30 as the dates for shareholders of TOMCO and HLL, respectively, to meet the vote on the scheme.

  The Nirma offer can only become effective if the proposed merger is not acceptable to the shareholders of TOMCO or HLL.

   The chances of Nirma succeeding are extremely remote.

  Mr Patel has admitted that his intention to acquire TOMCO can materialise only if either the Tatas, who own 20 per cent, or the institutions, which hold 42 per cent of the equity, support him.

     Whether his bid eventually goes through or not, the fact remains that a man who started work on a monthly salary of 400 rupees, today aspires to be a takeover tycoon, to be talked about in the same breath as the likes of Manu Chhabria, Rama Prasad Goenka and Vijay Mallya.

   And the product that has carried him along the path to riches is a low-priced detergent of reasonable quality which in just 10 years put the skids under the well-established and acclaimed product of a powerful multi-national.

  The story of Nirma detergent powder, which prised out Hindustan Lever's Surf from top spot and now out-sells its rival four to one by volume, has become a classic as a marketing case-study.



Battle looms as Tata's merger plan takes shape