Chennai: Sical Logistics Ltd, part of the M A Chidambaram group, is planning to sell 15% stake to IDFC Private Equity at around Rs 250 per share, to part fund its expansion plans. This represents a premium of 28% to today’s closing price of Rs 175.3 per share in the National Stock Exchange (NSE).
The stake sale, through preferential allotment, will bring Rs 110 crore to the company and will be used to fund its equity portion in the upcoming infrastructure projects being executed as special purpose vehicle (SPV).
As part of the plan to become a pure-play logistics firm, Sical Logistics plans to sell non-core business units (like Palm oil, refractory and specialty chemicals) and de-merge the rest (mainly trading businesses and coffee plantations).
The de-merger ratio has been fixed at 1:1. Existing shareholders of Sical Logistics will get one share in the new company for every share they hold in Sical. The new company will have a topline of Rs 250 crore, said a company official.
The sale of remaining units will bring between Rs 80 crore and Rs 100 crore and would result in company’s total income declining by 30% in the current financial year, said Karthik Menon, vice president for finance and strategy, Sical Logistics.
For the year ended March 2006, the company posted a turnover of Rs 1,002 crore and around 60% (Rs 618 crore) of it was from logistics business, which is expected to increase by 10% for the year ending March 2007.
“The equity infusion will help us reduce the debt-equity ratio,” said Karthik. “The company aims to bring it to 1:3 ratio in two to three years time”. At present, Sical Logistics has a total debt of Rs 580 crore on an equity portion of Rs 31 crore.
Sical has recently won rights to build Ennore Iron Ore Terminal, second container terminal at Chennai Port in joint venture with Singapore-based PSA, and rail and road terminals in Nagpur. The projected investments in these projects, all executed as special purpose vehicle (SPV), is in excess of Rs 1,200 crore and Sical’s equity contribution is around Rs 220 crore, said Karthik.
Thus, IDFC’s investment of Rs 110 crore would help Sical to meet 50% of the equity requirement in future projects. The debt to the raised for these projects would be independent of the parent company, said Karthik.