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Abhinaba Das/Arijit De
Mumbai, Dec 2: India Cements, which stunned corporate India with a daring takeover of Raasi Cement, is now shoring up its own end through a proposed sale of stake in all non-core businesses, including ceramics, paper and sugar, as well as through a slashing of workforce by a whopping 1,100 employees.
Carrying a massive institutional debt burden incurred to fund its Rs 445-crore aggressive acquisition of rival Raasi Cement, the company is seeking to squeeze extra profit out of its resources by focussing totally on cement, which contributes 95 per cent of its turnover.
In the process, non-core businesses -- ICL Sugar, Raasi Ceramics (which came aboard with Raasi Cement), paper, shipping -- have all been put on the block, and it is believed that negotiations are in advanced stages to find the right suitors.
N Srinivasan, promoter and vice-chairman of India Cements, told The Financial Express: "We want to stay totally focussed on cement and are looking at opportunities to get out of the non-corebusinesses."
The company has also taken up a major manpower restructuring by reducing its employee strength by almost 1,100 over the last six weeks. "This will translate into a substantial savings on wages of Rs 1 crore per month," Srinivasan said.
ICL Sugars, an associate company of India Cements, is setting up a sugar plant with an installed capacity of 2,500 tonnes crushed per day. The unit, which is coming up in the Mandya district of Karnataka, is likely to be commissioned early next year.
The company, it is learnt, is also planning to get out of its shipping business, and the new subsidiary floated after hiving off the shipping division may soon be put on the block. The shipping subsidiary currently has 3 ships, after having sold one ship for Rs 25 crore to part-fund the Raasi acquisition. The shipping division had a turnover of Rs 58 crore last year.
"We are not going for a distress sale. Now that the industry is going through bad times, we would instead wait so that we get the right price,"Srinivasan said.
Raasi Ceramics, the ceramic division of group company Raasi Cements, is also up for sale and the company, it is learnt, is in final stages of negotiations to seal the deal.
India Cements, although facing a Rs 170-crore interest liability in the current fiscal, is confident that it will end the year on a profit mode. "Raasi Cement will be merged with ICL with effect from April 1, 1998, and with the revenue stream coming from Raasi, there is no reason for the company to slip into the red," Srinivasan said. India Cements has provided only around Rs 58 crore as interest in the first half of the current fiscal.
Srinivasan is confident that cement demand will shoot up in the fourth quarter after the spell of monsoon is over.
The company has already contracted a 7-year loan of Rs 180 crore from ICICI at 17 per cent, with a specific clause that there will be no pre-payment penalty. It is also raising Rs 160.85 crore through a 1:1 rights issue at a premium of Rs 15 ashare.
INSIGHT
-- a costly acquisition
The difficulties which India Cements is having in obtaining funds raises the whole question of the cost of the takeover. India Cements is financially in a very tight position. In order to fund the takeover at Rs 445 crore, the company has to source high-cost funds, Rs 180 crore debt at 17 per cent and a rights issue of Rs 160.85 crore (at a premium of Rs 15). Over and above that the company now has to sell some of its own divisions as well as those that came with Raasi Cements. Since December last year, while the Sensex has dropped by 16 per cent, the India Cements scrip has fallen by 56 per cent, showing what the market thinks of the takeover attempt.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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