Chennai: Murugappa Group, which has decided to merge two fertilizer-manufacturing companies under its fold to create India’s second largest phosphatic manufacturer, has finalized the swap ratio for the merger.
The amalgamation of Coromandel Fertilisers Ltd and Godavari Fertilisers and Chemicals Ltd would result in an entity with a combined turnover of around Rs3,900 crore and a production capacity of 2.5 million tonnes (mt) of phosphatic fertilizers.
As per the share swap ratio, the shareholders of Godavari Fertilisers would receive three shares of Coromandel Fertilisers (face value of Rs2 each) for every two shares (face value of Rs10 each) they hold in Godavari.
“It is better to have a single organization”, said P. Nagarajan, chief financial officer of Coromandel Fertilisers. “We hope to generate cost savings out of this merger.”
However, an estimation of cost savings arising out of this merger in terms of distribution, marketing, raw materials and logistics had not yet been made, he added.
In January, Coromandel Fertilisers acquired 25% stake in Godavari Fertilisers for Rs120 crore from Indian Farmers Fertiliser Cooperative Ltd, one of Godavari Fertilisers’ promoters. This, and a subsequent open offer, enabled the Murugappa Group to increase its shareholding in the company to close to 75%.
As a result of the merger, the promoter stake in Coromandel Fertilisers is expected to come down marginally, but the magnitude of reduction hadn’t yet been calculated, said Nagarajan. Bansi Mehta & Co. and Dalal & Shaw, both chartered accountants, valued the companies for the merger.
The merger would be completed by December, by which time both the companies need to secure shareholders approval and also the approval of the Hyderabad high court.
Despite some rationalization in the distribution and marketing networks, Nagarajan said the merger would not involve any retrenchment of employees.
“Since both the companies are growing, we would re-deploy manpower,” he added.
The share price of Coromandel Fertilisers declined marginally by 0.35% to close at Rs84.7 per share, while that of Godavari Fertiliser increased by 2.5% to end at Rs133.45 per share.
Based on Tuesday’s closing price on the Bombay Stock Exchange, the market capitalization of Coromandel Fertilisers (Rs1.076 crore) is 2.51 times that of Godavari Fertilisers (Rs427 crore).
Two overseas raw material suppliers, Foskar Ltd of South Africa and Groupe Chimique Tumisen of Tunisia, hold 5% each in Godavari Fertilisers.