Mumbai: India’s top sugar maker Bajaj Hindusthan Ltd said on Thursday its board has approved merging unit Bajaj Hindusthan Sugar with itself.
Shareholders in the unit will get one share of the parent for every five held, it said in a statement to the stock exchange.
Post-merger Bajaj Hindusthan will have sugarcane crushing capacity of 136,000 tonnes crushed per day, distillery capacity of 800 kilo litres a day and surplus bagasse based co-generation capacity of 150 megawatt, it said.
The merger “will strengthen Bajaj Hindusthan’s position in India’s sugar sector... resulting in rationalisation of operations, better profitability, enhanced production and a stronger competitive position,” Kushagra Bajaj, joint managing director, said in the statement.
For the sugar year ended September 2009, Bajaj Hindusthan swung to a profit of Rs579.2 million from a loss of nearly Rs200 crore. Sales were nearly flat at Rs2,000 crore.
The unit narrowed losses to Rs89.3 million in 2008-09 compared with 757.4 million a year ago.
Further gains such as reduced operating costs arising from the synergies of a combined operation will benefit the parent company in terms of financial strength and flexibility, it added.
Bajaj Hindusthan’s stake in the unit will be held in a trust as treasury stock, it said.
Analysts said the move was neutral as investors in the unit do not get a premium. Besides, Bajaj Hindusthan is a majority stakeholder in the unit with the same management control.
“The share swap ratio is neutral. This is just an exercise on paper. The whole move is neutral in my opinion,” said Pranshu Mittal, analyst with Centrum Broking.
Shares of Bajaj Hindusthan Sugar extended losses, closing down nearly 2% in a firm Mumbai market while Bajaj Hindusthan ended up 1.9% at Rs116.