Ferro Alloys div to become seperate co: GMR Ind

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS GMR-Demerger of Ferro Alloys & merger of Bharat Sugar Mills ALSO READ See latest News about Parrys Sugar See previous management interviews See what other Experts & Brokerages are saying about Parrys Sugar Parrys Sugar BSE | NSE 25/05/12 Are Mutual Funds betting on Parrys Sugar?

GMR Industries board has given a nod to demerger of Ferro Alloys division to a separate company as GMR Ferro Alloys.

MD of GMR Industries Narayana Rao says that for every 100 equity shares held in GMR Industries, post demerger shareholders will get 38 shares in GMR Ferro Alloys and the remaining 62 shares will be given in GMR Industries.

Excerpts from CNBC - TV18's exclusive interview with Narayana Rao:

Q: What is the reason to spin off these two divisions, your ferro alloys business and sugar business into two separate companies?

A: Basically business synergies, they are two different lines of industries. So we thought it is best and in the interest of the company to go for a demerger and run the ferro alloys business to a separate company namely GMR Ferro Alloys Limited. We would like to concentrate and focus on our core competence sugar industry and expand aggressively in sugar business.

Q: In the light of your merger with Bharat Sugar Mills, what kind of expansion plans do you have for the combined entity?

A: Bharat Sugar Mills is a new Greenfield project sugar complex near Hubli in Karnataka. It has 5000 tonnes crushing capacity with 24-megawatt cogeneration and 45,000 litre ethanol distillery. It is a new sugar complex coming up at the cost of Rs 275 crore and Bharat Sugar is getting merged with GMR Industries.

So this will be our second Greenfield sugar complex in Karnataka. One we already have in Andhra Pradesh, which has 3125 (tonnes) capacity. In this financial year by October 2006, we are expanding it to 5000 tonnes crushing capacity, 16-megawatt cogeneration and 40,000-litre distillery making ethanol.

Q: When will the revenues start kicking in from these Greenfield projects?

A: The revenues will start coming from the next financial year starting from October 2007 onwards.

Q: How are you funding this project as this is a Rs 275 crore project?

A: It is Rs 175 crore-term loan from Central Bank of India, about Rs 10 crore soft loan is from government of India SDF (Sugar Development Fund) and balance Rs 90 crore are from internal accruals.

Q: Give us an idea of the size that each of these new entities would have separately?

A: It is all going to be combined. For example, we have got Andhra Pradesh sugar complex, which is called Sankili sugar complex. Now with this merger, it will be called Karnataka Haliyal sugar complex.

Q: What is the size of GMR Ferro Alloys and GMR Industries post Greenfield acquisition? What will be the size of these two separate entities, ferro alloys and sugar? In terms of revenues what would each of them be individually?

A: After demerger, GMR Ferro Alloys will have a turnover of Rs 100 crore. Similarly GMR Industries will have a turnover of Rs 200 crore. But after merging in next financial year it will be Rs 500 crore. Both Andhra Pradesh project as well as Karnataka put together, the turnover of sugar GMR Industries will be about Rs 500 crore and turnover of GMR Ferro Alloys will be about Rs 100 crore.

Q: Give us an idea of whoever is holding 100 shares of GMR Industries currently; what does he get post demerger? Would you be listing GMR Ferro Alloys in the near future?

A: As per our scheme of arrangement GMR Ferro Alloys is a separate company. GMR Industries is a public limited and listed company. For every 100 equity shares held in GMR Industries, post demerger one will get 38 shares in GMR Ferro Alloys and the remaining 62 shares will be held in GMR Industries.

Q: Are you saying GMR Ferro Alloys is a listed company or are you looking at its listing?

A: We are expecting this by end of September as we are applying to stock exchange today. We anticipate that it will take four-six weeks time, once we get the court's approval, which we expect towards the last quarter of this financial year, that is January-March it should take place.