Financial Daily from THE HINDU group of publications
Friday, Feb 17, 2006
Agri-Biz & Commodities - Sugar
K.K. Birla Group makes changes in sugar biz restructure model
Kolkata , Feb. 16
THE K.K. Birla Group has made certain changes in the proposed restructuring model of its sugar business, which involves three out of its four sugar companies.
According to Mr C.S. Nopany, grandson of Mr Birla and a director in all the four sugar companies, the management has decided against shifting the sugar unit of New India Sugar Mills Ltd from Bihar to Uttar Pradesh.
However, as decided earlier, the finances (assets and liabilities) of this unit will be transferred from New India Sugar Mills to Upper Ganges Sugar and Industries Ltd, the group's flagship sugar venture.
Bihar's offer: Mr Nopany said the management had changed its decision because the Bihar Government had offered an attractive package for the revival of sick units. The New India Sugar unit is located at Samastipur. The company had said that it was shifting the unit as the region was perennially flood prone.
"However, we are going ahead with the financial demerger as we had planned earlier. In fact, today (Tuesday) we have got the necessary approvals for the respective High Courts," Mr Nopany told Business Line.
Rights issue: The delay in this demerger process, which will subsequently make New India Sugar an investment firm, forced the management to defer the proposed rights issue of Upper Ganges and Industries. It was supposed to hit the market in December 2005.
According to Mr Nopany, the management was waiting for the High Court clearance of the demerger. "Now as we have received the approval, we would file the right issue application to SEBI," he said.
The size of the Upper Ganges rights issue is likely to be Rs 65-70 crore to meet its working capital requirements. Enam Securities has been selected as the merchant banker for the issue.
To dilute stake in Oudh sugar: Meanwhile, in another development, the K.K. Birla Group has decided to dilute a part of its stake in Oudh Sugar Mills Ltd for raising fresh capital. The company's total paid-up capital will be increased by 20 lakh equity shares.
The instrument for raising this fund has not been finalised but it could either be a private placement, a global depository receipt or a foreign currency convertible bond or any security that could be converted into equity.
"At the moment, we have just asked the finance and corporate affairs committee of the board to select the instrument. Subsequently, we will take a final call. Yes, we may dilute some stake but it would be nominal, probably two or three per cent only," said Mr Nopany.
Oudh Sugar has undertaken a capital expenditure programme worth Rs 90 crore. It is increasing its capacity to 10,000 tonnes crushed per day from 7,500 tonnes. The distillery capacity has been increased to 125 kilolitres per day from 65 kilolitres.
Last year, around this time, the company had conducted a rights issue for raising approximately Rs 39 crore of capital.
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