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EID Parry to de-merge units

Read more on:    Eid Parry | Murugappa Group | Parry Sugar | Gmr Group
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company, (India) Limited, is planning to add two of the three facilities of its subsidiary Industries Limited (PSIL), in which it has acquired a 65 per cent stake from , to itself.

The restructuring is expected to reduce the cost of funding of these units, which have been making losses until recently, according to company officials. The company is looking at merging the sugar facility at Sankili in Andhra Pradesh and Haliyal in Karnataka with itself.

The two facilities have a combined capacity to crush around 4,000 tonne of sugar cane per day (TCD). The two units together have a capacity to produce 40 Mw of co-generation power apart from a distillation capacity of up to 90 kilolitre per day.

However, a leased unit of PSIL at Ramdurg in Karnataka, with a 3,500-TCD capacity, would remain under the subsidiary. This facility is under 25-year lease agreement. The company's board of directors on Thursday approved a scheme of arrangement to implement the de-merger plan, subject to various statutory and regulatory approvals, the company said.

Speaking to reporters, Ravindra S Singhvi, managing director of EID Parry said, “These units were making heavy losses till last year, but are turning around now. The funding for these facilities, however, was at a higher cost and our move is to reduce the cost of funding through which the expenses will come down.”

The long-term weighted average cost of funding the EID Parry's facilities in Tamil Nadu is at 9 per cent, while PSIL's is upwards of 13 per cent. The de-merger scheme would support the company in bringing down the cost of funding of the two facilities.

The average recovery of sugar per tonne is above 11 per cent at the PSIL's facilities, while it is only around 9 per cent from its units in Tamil Nadu. The higher recovery of sugar would help the company to increase production.

“With the addition of the two units to our existing facility, we will be adding around 8,000 tonne capacity to our 19,200-tonne capacity. Besides, a turnover of Rs 600 crore will be added to EID Parry,” said P Gopalakrishnan, vice-president (finance), EID Parry.

Around 23 per cent stake of PSIL is currently with the GMR Group, while the rest is with the public. The company expects these four units to make profits in the current financial year.

The company is planning a capex of Rs 100 crore, of which around Rs 30 crore would be infused into the subsidiaries. The investment would be into de-bottlenecking of the current issues and improving productivity among others, Singhvi said.

The company has registered an increase of 18.34 per cent in net profit before minority interest, on a consolidated basis, to Rs 172.37 crore for the quarter ended March 2012, as against Rs 145.65 crore for the same period last year. Total income increased 87.71 per cent to Rs 3,602.27 crore for the quarter, as against Rs 1,919.05 crore in the corresponding period of the previous year.

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