Mumbai: The erstwhile pesticides marketing company of the United Phosphorus group, Uniphos Enterprises Ltd plans to use gains from a share transfer last week to start a real estate business, retire its debt or pay dividends, according to two top executives with the group.
Uniphos transferred about 2.85 million shares on 6 November to the group’s privately held firm Nerka Chemicals Pvt. Ltd at Rs110 per share, a premium of Rs50 per share based on an estimated valuation of the firm at Rs60 a share.
The company expects to book a profit of Rs15 crore for the third quarter ending December, after about five years of posting quarterly losses since the agrochemical and pesticide business was restructured under United Phosphorus Ltd, a company executive familiar with the situation said.
This executive, who didn’t want to be named because he is not the group’s official spokesman, said Uniphos intends to use a portion of the gains from the share transfer as initial investment for starting a realty business after market conditions improve.
“Uniphos has some real estate assets in Mumbai and neighbouring locations, and we are awaiting the market conditions to get stabilized for venturing into a diversified business,” he added.
India’s real estate market has been roiled after three years of significant growth that saw real estate prices in some parts of the country double. Slowing demand, and tighter access to credit—both for developers and customers—have since taken a toll on the business.
United Phosphorus’ company secretary M.B. Trivedi confirmed Uniphos’ plans but declined additional details.
If the business plan does not work as expected, the board might declare a dividend for shareholders at the end of fiscal 2009 after adjusting for debt, Trivedi said.
The two executives declined to state the extent of Uniphos’ real estate holdings in and around Mumbai or the amount of debt on its books.
Uniphos had been declaring annual dividends to shareholders regularly until 2004 on profits made the previous year.
United Phosphorus, promoted by the Mumbai-based Shroff family, had informed the Bombay Stock Exchange (BSE) last week that the transaction was part of an internal strategic planning exercise.
“In general, an entry (into real estate) at this market condition may not be very conducive... They will have to wait till it (the market) stabilizes,” said Mumbai-based real estate consultant Pranay Vakil.
Following the share transfer, Nerka Chemicals’ holding in Uniphos has increased to 12.81% from 1.63%. Retail investors hold a 19.7% stake in Uniphos, the promoters own 45.53% and institutional investors the rest.
Uniphos holds a 6.34% stake in United Phosphorus, while Nerka owns 0.95%.
Shares of Uniphos Enterprises went up nearly 5% on BSE to end at Rs16.50 each on Monday, while those of United Phosphorus rose about 6% to Rs106.05 each.
Shares of Uniphos have lost 71.03% since January and those of United Phosphorus, 39.19%.