Man Group plans to wind up its investments in real estate and focus on its core business of steel pipe manufacturing, a senior official of the company said.
The group, which has invested R350 crore in real estate via its subsidiary Man Infraprojects, will sell off its projects in 18 to 24 months, said Man Industries? senior vice-president, corporate affairs, KG Mantri.
He said: ?We have decided to focus on our core business and sell off the real estate projects. After this, we will be a completely debt-free company.?
Currently, the group does not have any outstanding debts apart from $44 million of outstanding foreign currency convertible bonds (FCCBs). Fresh debt won?t be raised in the coming years as the company has not planned any capital expenditure. The group?s steel-pipe-making arm, Man Industries, also got a boost with Japan?s Kobe Steel picking up a 3.18% stake in the company.
?We are issuing 1.8 billion equity shares to Kobe at a price of R165 per share,? he added. ?This is a premium of 50-60% to our market price, which reflects the confidence of Kobe in Man Industries.? Man Industries is a leading supplier of pipes to the oil and gas industry and the partnership with Kobe is unlikely to bring in any new domestic customers.
?We are already supplying to ONGC, Reliance Industries, GAIL and other top players in the Indian oil and gas segment,? said Mantri.
?What we are looking at with this partnership with Kobe is an expansion in the global markets like Australia where we are not present.?
Kobe Steel, a $22-billion steel-maker, will also provide Man Industries with the option of sourcing high-quality flat steel from them, given the price offered is the same as the competition. ?We do not have a steel plate manufacturing facility; so, for this, we go to vendors,? said Mantri. ?While we have not given Kobe a preferred vendor status, the partnership with them will give us access to their high quality products if the price offered is similar to the competition.?
The investment in Man Industries gives Kobe a quick entry into the Indian market, said a consultant. ?Japanese steel-makers have been eyeing an entry into the Indian market via partnerships and this is one such example,? said a consultant with a foreign audit and consultancy firm, who didn?t want to be named as his firm doesn?t comment on individual deals.
?There is a huge demand for steel pipes in India as both gas and water infrastructure grows. So, for Kobe, it is an entry into a high growth sector. Man Industries will definitely benefit from access to better materials and technology.?
In the 2010-11 fiscal, Man Industries had net revenues of R1,631 crore while net profit grew 37% to R92 crore. Mantri expects a similar growth this year for the RC Mansukhani-promoted company as orders from the gas sector are looking positive. The company caters mostly to the oil and gas sector as its production capacity for the water transportation sector is based out of multiple locations.