Surana Telecom to demerge solar biz into Surana Ventures

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Hyderabad-based Surana Telecom and Power has decided to demerge its solar business into Surana Ventures in order to consolidate company's solar business.

In an interview with CNBC-TV18, Narender Surana, MD of Surana Telecom and Power spoke about the demerger process and his outlook for the company.

Below is a verbatim transcript of the interview. Also watch the video.

Q: What is the timeline for this demerger of solar business and going forward what is the guidance for this business you are giving us?

A: Based on the current estimates, we should be completing the process by March 5, 2010 and the demerger would be effective from October 1, 2009. The guidance for this year and next year would be as follows: We would be doing business of approximately Rs 50 crore in the solar business this year, which is the second year of operation. The first year we did about Rs 13 crore. It is touching about Rs 50 crore this year and we would be having a growth of about 25% quarter on quarter (QoQ) in this business.

Q: What is the logic of this demerger and are you also considering an Alternative Investments Market (AIMs) listing for Surana Ventures?

A: Yes, the main reason for this demerger is that we had started the process of solar business in a company known as Surana Ventures. The markets were not viewing it too well having solar business in two companies. Surana Telecom started this business just to be able to get into the business faster until Surana Ventures was under construction. Since now the process of construction is complete, we thought better to have company with single focus for our solar business.

Going further, we would like to do solar farms, which would generate power and connect it to the grid. We have already signed a memorandum of understanding (MOU) with Andhra Pradesh government for about 5 MW and we are looking at opportunities in Germany and Australia for setting up solar farms of 5-10 MW.

The Government of UK has also come forward and given us lot of assurances and various programmes under which we can do it with a lot of subsidies in UK. So we are looking at these three markets for future.

Q: Would you therefore be listing Surana Ventures in AIMs since you have lot of interest in the country?

A: That is right. We are planning that once the demerger is done and Surana Ventures get listed as a single entity for solar business, we would be looking at opportunity, which makes us eligible also for listing our name. We would be looking at that opportunity because we would like to grow our business from UK.

In UK we may be one of the first companies to have a solar farm and the first company to manufacture some of the solar products like Solar Modules and other products, which we would have easy access into the European Union.

Q: Could you guide us on the shareholding pattern of Surana Ventures?

A: Surana Ventrues currently has 49% each from two of our companies known as Surana Telecom and Bhagyanagar India and 2% belongs to us personally as promoters. After the demerger, Surana Telecom shareholders would get 25.75% which would be in the ratio of 3, Rs 10 shares every 4, Rs 5 shares held by the shareholders.

In other words each Surana Telecom shareholder having four shares would get three shares of Rs 10 paid up automatically, so it's something like a bonus. And we would be holding about 38% as promoters. And Surana Telecom and Bhagyaangar India would hold approximately 17.9% each.

Q: What is left with Surana Telecom is businesses which are not businesses that are seeing too much of volumes like optical fibre, CDMA etc so what kind of revenues in FY11 do you see for Surana Telecom?

A: FY11 we are looking at revenues between Rs 50-75 crore coming from our power cables business and from our aluminum business. We are now fully manufacturing aluminium and we have reached a turnover of Rs 3 crore a month or Rs 36 crore per annum already.