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To transfer 54 pc stake in Gujarat Glass — Nicholas Piramal forms new holding co

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Mr Ajay Piramal, Chairman, Nicholas Piramal India Ltd, with Mr Vijay Shah, COO, at a press conference held in Mumbai on Friday.

MUMBAI, June 13

PHARMACEUTICAL major Nicholas Piramal India Ltd (NPIL) is creating a new holding company, Nicholas Holding Company (NHC), to transfer its 54 per cent stake in Gujarat Glass Pvt Ltd (GGPL), a move NPIL says, will halve its debt burden and improve financials.

As per the transfer scheme, NPIL shareholders will get one share in NHC for every four shares owned. Private equity fund JP Morgan, which currently owns 46 per cent in the joint venture glass-maker, will have a similar stake in NHC.

NPIL shareholders today unanimously approved a resolution to transfer GGPL shares held by NPIL to the new holding company.

NHC's shares will be listed on three stock exchanges: Bombay Stock Exchange, National Stock Exchange and Ahmedabad Stock Exchange.

Speaking to reporters here, Mr Ajay Piramal, Chairman, NPIL, said the rationale behind the move was to reduce the debt which was dragging NPIL's balance sheet.

"We wanted to unlock value and improve consolidated financials. The debt-equity ratio will be reduced considerably from 1.6 to 0.9. In absolute terms, the debt will come down from Rs 760.21 crore to Rs 337.52 crore," he said.

According to him, the GGPL hive-off will improve the return on net worth of NPIL from 25.7 to 30.9 and return on capital employed from 21.7 to 31.2.

The scheme of arrangement is now subject to approval from the High Court of Mumbai and the stock exchanges.

"The process of approval will take at least four to six months," Mr Piramal said. Further, the `non-tax' demerger will necessitate a new board to be formed for GGPL.

Analysts tracking the sector perceive this to be a good move for NPIL as the valuations of the core business of pharmaceuticals will be enhanced.

"The de-linking of GGPL will be very positive for NPIL's shareholders as GGPL was always a drag on its numbers," said an analyst from a domestic brokerage firm.

The Piramal group had acquired GGPL in 1984 and merged the company with NPIL in 1990. Subsequently, it was de-merged in 1998 with the inclusion of private equity fund participation.

During 2002-03, GGPL's gross sales, on a consolidated basis, which includes GGPL, Ceylon Glass Ltd and GG USA Inc, were at Rs 306.49 crore while profit after tax was at Rs 5.01 crore.

"We are keen on expanding the exports business of GGPL. Currently, exports accounts for 17 per cent of sales. This would be increased to 50 per cent of sales by 2006," Mr Piramal said.

Earlier, at the annual general meeting, Mr Piramal told shareholders that NPIL expects an 18 per cent rise in sales for 2003-04.

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