The demerger of Deepak Fertilisers and Petrochemicals (DFPCL) business and the creation of three distinct companies could open up a number of doors for the company including listing these companies, getting strategic investors in a specific business, raising funds from private equity players, Sailesh C Mehta, chairman and managing director, DFPCL, said.
This would also enable them to look at joint ventures and alliances with global players, he said. The process would take six to nine months to complete and the scheme will come into effect from January 1, 2022, Mehta said.
“For the investor community, now the visibility will be far sharper and far more focused on a specific business. Earlier when you are a conglomerate it becomes difficult to understand the business dynamics of the corporate entity,” Mehta said. The business dynamics of the individual corporate entity would be far more clearly visible to the investors. It would also create an ideal match between investor profile and their appetite for a particular business as some investors would be interested in the agriculture sector while others’ interests would be in the mining sector, Mehta said.
Also read: Fintech app UpScale launches e-invoicing solution for SMEs
Mehta said the market had reacted positively to this demerger move and considered it to be a logical step and they were keen on knowing when the listings would happen. Around 54% of the company is held by non-promoter shareholders with around 20% held by institutional investors. DFPCL market cap was Rs 9,986.67 crore. DFPCL’s consolidated H1FY23 revenues were at Rs 5,750 crore with net profit at Rs 711 crore and Ebitda margins at 21.5%.
Currently, there is only one listed company, DPFCL in the group. Two new companies have been created as 100% subsidiaries. Post-demerger, there will be a subsidiary, Deepak Mining Solutions focused on mining, Mahadhan Agritech will focus on specialty fertiliser and the industrial and pharma chemical business would remain with the listed company. The new Rs 45,000 crore Ammonia plant that is coming up in Gopalpur, Odisha, which was a separate entity would now be part of the mining business.
The currently listed company, DFPCL, will hold equity in the two new entities and carry out operations in the specialty chemicals space that would include the Nitric Acid and Isopropyl Alcohol business.
Fertilisers account for around 40-45% of DFPCL revenues while the remaining 60-65% is split between the mining chemicals business and the industrial & pharma chemicals and all three businesses were growing.
Four years ago, the company had moved out the two businesses from DFPCL and moved it to downstream 100% subsidiaries. From a management perspective, the company had already separated the business into strategic business units (SBU) with different reporting structures which would ensure a smooth passage into the new entities.
Also read: Over 1 crore people employed in MSMEs incorporated in FY22, shows govt data
The sharply focused business was expected to bring in the right kind of innovation, R&D, technology and investments required for that specific business with the company looking at infusing new technologies and a deep understanding of end consumer needs into their businesses. Each business had a different set of customers and different market dynamics which would be best served by different corporate entities.
The whole restructuring was part of the strategy of shifting from being a commodity player to a specialty player and aligning the organisational structure, work culture, people competencies, rewards and recognition and the board to the end consumer market in each business.
