Kolkata: Industrialist Saroj Kumar Poddar, who heads the $3 billion (Rs 13,320 crore today) Adventz group, is restructuring all key companies under his control to make it easier for them to raise resources from the financial markets.
After Texmaco Ltd, he is likely to restructure fertilizer maker Zuari Industries Ltd, the biggest company in the group.
At wagon maker Texmaco, where restructuring ended a few months ago, he separated the firm’s core manufacturing operations from its investments and real estate assets.
This strengthened the balance sheet of Texmaco Rail and Engineering Ltd, the manufacturing company carved out of Texmaco, and led to the creation of a focused real estate company, said Poddar, chairman of both companies.
Texmaco is awaiting court clearances to launch its first large real estate project in Delhi, he added.
Zuari Industries is among India’s biggest fertilizer producers with an installed manufacturing capacity of close to 1 million tonnes a year.
“The aim is the same-to separate manufacturing operations from assets and investments,” said a Zuari executive who did not want to be identified. “It won’t be long before we begin the process.”
Zuari is looking to invest about Rs 5,000 crore to set up a new urea plant, said Poddar, the company’s chairman.
“I am willing to consider any plan that strengthens (the firm’s) balance sheet and acts as a growth enabler,” he said, when asked about a potential restructuring of the fertilizer maker.
The firm’s capacity expansion, however, is subject to the Union government announcing a favourable fertilizer policy, Poddar said.
“Such reorganization of businesses creates focused companies, and the sum of parts valuation is normally greater than the whole,” said Rajesh Agarwal, head of research at Kolkata-based brokerage Eastern Financiers Ltd.
But in the case of Texmaco, shareholders have not benefited yet. Though they received as many shares in the new company as they held in Texmaco, the combined worth of the shares of the two firms is one-third less than that of Texmaco’s shares immediately before restructuring.
Texmaco closed at Rs 161.65 on the Bombay Stock Exchange (BSE) on 29 October-the last trading day before it was carved up-and on Wednesday closed at Rs 33.55. Trading in Texmaco Rail and Engineering’s shares began on 3 March; the stock closed at Rs 75 on Wednesday.
The combined worth of one share each of the two companies is Rs 108.55 at Wednesday’s closing price, which is 32.8% lower than the closing price of Texmaco’s shares on 29 October. During this period, BSE’s benchmark equity index Sensex declined by 2.9%.
“Shares of all wagon makers have been underperforming during this period-Texmaco Rail was no different,” said Agarwal.
Zuari and Paradeep Phosphates Ltd, an erstwhile public sector company that it acquired, are jointly looking to develop a rock phosphate processing unit in a country that has phosphorite deposits such as Morocco and Saudi Arabia.
Adventz group is a key producer of chemicals such as phosphoric acid and sulphuric acid, besides phosphatic fertilisers, which are derived from rock phosphates.
The new processing unit abroad could entail an investment of up to Rs 5,000 crore, said Poddar, adding Adventz group had initiated discussions with a number of countries for the proposed factory.
Chambal Fertilisers and Chemicals Ltd, which absorbed India Steamship Co. Ltd in 2004, has decided to turn the shipping business into a separate company again.
Chambal is jointly controlled by Poddar, the chairman of the firm, and Shobhana Bhartia and Nandini Nopany-successors of industrialist K.K. Birla, former chairman of HT Media Ltd, which publishes Mint. Bhartia is now HT Media’s chairperson. Poddar is married to Birla’s third daughter Jyotsna.
The shipping business has a debt of Rs 1,350 crore, but other divisions are almost debt free. The amount was borrowed largely to buy five new ships. “As Chambal prepares to raise resources to invest Rs 4,500 crore for its third urea plant, we decided to transfer the debt from its books,” Poddar said.
Poddar will either ramp up the production capacity of Gobind Sugar Mills Ltd, the only sugar firm under his control, or sell it if it cannot become competitive.
It was to be merged with Zuari, but after waiting for court approvals for more than a year, Poddar decided to abort the integration plan. It has a crushing capacity of 6,500 tonnes a day, which isn’t “competitive”, according to Poddar. “We need to scale it up to at least 10,000 tonnes.”
In 2001, Poddar sold Zuari’s cement division to Italy’s Italcementi SpA in one of the first deals that allowed a global leader to enter the Indian cement market.
“It’s been my policy not to stay invested in businesses that we cannot scale up to compete with the best,” Poddar said, when asked if he had similar plans for Gobind Sugar. “But I have no plan to sell the sugar company immediately; we will first try to raise its production capacity.”