Financial Daily
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Wednesday, August 01, 2001



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UB set to offload stake in Mangalore Chem for Rs 60 cr -- Valuation diluted to `realistic' price

Boby Kurian


THE UB group is gearing up to offload its 30.44 per cent stake in Mangalore Chemicals & Fertilizers (MCF) for about Rs 60 crore. This marks a significant climbdown in MCF's valuation as UB initially looked at a figure close to Rs 100 crore from the sale.

Highly-placed UB sources told Business Line that the company was agreeable to Rs 60 crore as a realistic sell-out price and would expedite the exit process once the Centre announced its new fertiliser policy.

The sources said there were two companies, including a multinational, in the fray to buy out UB's stake. However, they declined to name the companies. It must be mentioned that recent media reports had named one of the AV Birla Group companies among the interested players.

``We are certain about our exit from the company by this year-end. The reason for the delay is our wait for the fertiliser policy, expected to carry some far-reaching changes,'' the sources said.

It is reliably learnt that the dampened industry scenario has forced UB to tone down MCF's valuation. However, UB sources argued that the company enjoyed certain strategic advantages as it was the only fertiliser and chemical plant in Karnataka and was l ocated close to the Mangalore port.

``Moreover, it is a fairly efficient company,'' the sources added. They pointed out that the production of urea and DAP at 3.4 lakh tonne and 1.8 lakh tonne over the last fiscal was at 100 per cent and 131 per cent respectively of their installed capacit y.

The Rs 668-crore MCF, which fell into BIFR hands, has bounced back from the red, reporting a profit before tax of Rs 40.73 crore for the year ended March 31, 2001.

UB recently infused Rs 20 crore towards the ongoing revamp of the ammonia and urea plants. But industry analysts believe that `volatile' unionism among the company workers may weigh heavily on the minds of prospective buyers.

The UB group Chairman, Mr Vijay Mallya, bought into MCF almost a decade back as part of his foray into the chemical, fertiliser and pharmaceutical sectors. Following the recent decision to focus on core alcoholic beverage business, Mr Mallya has outlined plans to exit non-strategic sectors.

The industry analysts see this as critical since UB is keen on retiring its high-cost debts, estimated in the region of Rs 275 crore.

Related links:
MCF posts 17% rise in PBT
MCF net higher at Rs 7.93 cr in Q1

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