Chennai: The Rs526-crore abrasives major Carborundum Universal Limited (CUMI), has acquired 84 per cent equity stakes in Volzhsky Abrasive Works of Russia for $37 million.

The Indian company made the acquisition through its wholly owned subsidiary CUMI International Limited, Cyprus.

CUMI has plans to increase its holdings to 100 per cent soon. Volzhsky Abrasive Works holds on date 12.67 per cent of its ordinary shares as treasury investment, which represents approximately 10 per cent of the Russian company''s charter capital.

Cancelling Volzhsky Abrasive Works treasury shares will result in Carborundum Universal''s holding going up to 96 per cent of the ordinary shares. An open offer for the balance 4 per cent ordinary shares is being made as per statutory requirements.

The $54 million Russian company is the largest producer of silicon carbide abrasives there with 65,000 tonne per annum (tpa) capacity. However, it produced only 11,500 tonne last year, nearly one third of its actual capacity.

Volzhsky Abrasives also manufacturers bonded abrasives (capacity 35,000 tpa) and specialised refractories (1500 tpa).

It is Volzhsky Abrasives'' export centric silicon carbide business that attracted CUMI. The Russian company''s production capacity is ten times that of CUMI''s in India. Further CUMI with operations in Australia, Canada, China, the Middle East, the US as well could meet the global demand for silicon carbide abrasives from Russia and also get into value added micro abrasives.

In addition, the Russian company has energy security it terms of fuel availability at cheaper rate, unlike similar companies in other countries.

In June 2007, CUMI had signed a binding agreement with a consortium of investors to acquire 84 per cent stakes in the Russian company.

The Indian company will fund the acquisition through a mix of debt and internal accruals. The company may sell some of its non-core assets like the 70 grounds it owns in Pallikaranai, in Chennai.

Carborundum Universal is also planning to raise external commercial borrowing (ECB) for part funding the Russian acquisition.