The board of directors of the public listed Kothari Products is likely to take up the merger proposal at a board meeting on Friday.
The highly cash rich and profit making Kothari Products has been looking at restructuring and de-risking of its pan masala business ever since the Maharashtra and Uttar Pradesh governments banned the product on health grounds last year and the central government initiated moves to impose a ban throughout the country.
Kothari Products managing director Deepak Kothari could not be contacted for more details on the merger as he was reported to be out of the country.
In July last year, the board of directors had expressed concern over the future and survival of the gutkha (tobacco flavoured pan masala) industry and even considered restructuring of the share capital under Section 391 of the Companies Act 1956 to provide an exit to small shareholders at a fair price.
This would have meant delisting of the company from the stock exchanges. The promoters holding in the company is 74.75 per cent.
The company had also announced a diversification into the entertainment industry over three years by setting up multiplexes in Uttar Pradesh.
Kothari Beverages was incorporated in 1994 and manufactures the Yes bottled water at five units located at Nadiad, Kanpur, Bangalore, Baddi and Shahpur and three franchisee units at Kathmandu, Raipur and Jaipur besides having a namkeen division. It has over 700 dealers throughout the country and abroad.
Kothari Products share price has declined sharply over the last one year and is presently hovering around Rs 150, nearly 45 per cent lower than the 52-week high of Rs 266 and just 20 per cent above the 52-week low of Rs 125.
Turnover and profits during the current financial year ending March 2003 could be lower than the previous year in view of the ban on gutkha by some states. During the first six months ended September 2002, the company reported a turnover of Rs 106 crore with a net profit of Rs 35 crore. During the year ended March 2002, turnover was Rs 293.29 crore with a net profit of Rs 92 crore.