Chennai: The GMR Group has agreed to sell a majority stake in its agricultural business to EID Parry (India) Ltd, the country’s oldest sugar producer, as part of a plan to divest units that are not central to its core business of infrastructure development and energy.
EID Parry could pay between Rs110 crore and Rs120 crore, depending on the subscription to an open offer that will follow the deal, P. Gopalakrishnan, vice-president of finance for EID, told ‘Bloomberg’.
The purchase of the stake in GMR Industries Ltd, which is listed on the Bombay Stock Exchange and the National Stock Exchange, will give EID Parry, which is a part of the Chennai-based Murugappa Group, three integrated sugar complexes in Andhra Pradesh and Karnataka.
The three plants have a combined crushing capacity of 11,000 tonnes of cane a day, 46MW of co-generative power and 95 kilolitres per day of distillery products, said a joint statement released by the companies on Sunday.
Under a definitive agreement signed by the two parties, GMR Group will divest a majority equity stake such that post a mandatory open offer, EID Parry would hold a minimum 65% equity stake in GMR Industries. After the open offer, the GMR Group would become a minority shareholder in the company.
Under Indian market regulations, if a company acquires a stake of at least 15% in another firm, it is required to make an open offer to buy at least another 20% of the second company’s shares from the market.
“The transaction is in line with GMR Group’s overall strategy to divest its non-core assets and focus on its infrastructure and energy business going forward,” said the joint statement.
The GMR Group, which has interests in airports, energy, highways and urban infrastructure, recently raised $500 million (Rs2,225 crore) to fund its expansion plans in infrastructure and energy.
“We are confident that this development would be rewarding and beneficial for all stakeholders, including the shareholders, farmers and employees of the company,” said G.M. Rao, chairman of the GMR Group, in the statement.
For EID Parry, the transaction consolidates its position as one of the leading sugar manufacturers in cane-rich areas of north Karnataka and marks its entry into Andhra Pradesh. “This acquisition strengthens our position as one of the leading sugar companies in India...,” said A. Vellayan, chairman of EID Parry. “It thus provides EID Parry a platform to tap the sugar markets other than southern India.”
GMR’s shares slumped 8.5% in Mumbai on Friday, the most in seven months. EID Parry shares fell 0.5% to Rs366.5 the same day.
(‘Bloomberg’ contributed to this story)