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Dec 10, 2010, 05.01 PM IST
Orient Abrasives has been in the news; they have gotten approval for demerging their refractory business from their other businesses. SG Rajgarhia, MD at Orient Abrasives in an exclusive interview with CNBC-TV18 discusses the reasons for this demerger.
Below is a verbatim transcript of the interview. Also watch the accompanying video.
Q: Could you take us through the demerger process itself what goes into the new company that you are setting up in terms of sales numbers and profit percentage?
A: Our refractory business will totally be demerged into a new company in the name Orient Refractories Limited. The business value of refractory at this point of time is 60-65% and the profitability also is in line, the profit is about 60-65%.
The existing company will retain the abrasive grains division which makes the raw materials and the power division including captive power plant and also the wind turbines that we are installing at various locations.
Q: What is the reason for this demerger- will you be looking at some strategic investments in either of units?
A: The main reason is that both the businesses have got different challenges and different opportunities and we want to maximize the growth of both the businesses without interfering with each other. As far as strategic investors are concerned that will be an option available to us once we separate the two businesses. Whether that will be necessary in the future or not, I cannot comment at this point of time but if the need arises that option will be available to us.
Q: So nothing is on the table, you are not looking at a short list already for either of them?
A: There is nothing on the table at this time but the feasibility and possibility is open once we do the demerger.
Q: What kind of revenue or bottomline growth can you forecast for FY12 for the two demerged units?
A: FY12 will be a very good year for us because the refractory business in the last 2-3 years has been growing at 15-20% with corresponding growth in the bottom line. But the abrasive grains and the power business has been down this year because our wind turbines will be fully operational by March ’11. So for 2011-12 we will have 11 MW capacity of wind turbine which should give us revenue of about Rs 9 crore. Also the problems that we have faced in the current year in the raw material division the abrasive grains division they are al over and behind us now. So we will have full year of operations next year, so we expect a substantial growth there.
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