Promoters' pledge will be down to zero by Mar 2021: Emami Group director

A day after Emami Group announced it would sell its cement business to Nuvoco Vistas, Emami Group Director Mohan Goenka tells Ishita Ayan Dutt & Avishek Rakshit that the firm will focus on FMCG, agro paper and real estate sectors. Edited excerpts:

What is the promoters’ pledge now in Emami and by when will it come down?

Currently, the pledge is around 70 per cent. After we receive the money, post-regulatory approvals, which is expected by May-June, we would receive a total of Rs 3,300 crore. This is a 100 per cent cash deal.

The promoters’ debt, that is loan against shares, is Rs 3,000 crore. What we are getting is Rs 3,300 crore, but we have to keep aside roughly Rs 800 crore for taxes and other requirements. So, there would be a debt of Rs 500-600 crore. Otherwise, we would have fully paid.

For that, the pledge would be anywhere between 15-18 per cent. Besides, we are giving a pledge of 8 per cent to the buyer, Nuvoco, which is against some warranties. So, 8 per cent will be lying with Nuvoco and 15-18 per cent is another pledge; the total pledge would be around 25 per cent.

Is the 8 per cent pledge to Nuvoco for the transaction to go through?

In due diligence, there were some observations, on that basis they had requested some security from us. We had an option to reduce the money. But we decided to give Emami shares as security. Once regulatory approvals are through, and we are confident that we will get it freed by March 2021. It could be even earlier, but the matter is sub-judice.

Is there a case?

Yes, there is some clarification that we need from lawyers, but we wanted to conclude the deal. So we said, let us settle it and as things progress, if it happens in six months, we will free our shares.

Do you think, in hindsight, Emami Group had diversified too much?

From a business perspective, say for example, I invested around Rs 1,000 crore in cement in the last four years. If I am making Rs 2,500 crore on Rs 1,000 crore, is it a bad deal? What more returns can one expect?

Going forward, what would be the focus areas for the group?

We are very committed as a promoter entity to bring our debt to zero. We are doing whatever needs to be done in that direction. By March 2021, our promoter pledge, whatever it is going to be, will be brought down to zero.

What will be the focus of the group?

Hospitals, we want to divest. Fast-moving consumer goods (FMCG), edible oil, paper and real estate, these will be our focus.

Will you exit the hospitals business fully or will the Bhubaneswar hospital sale be a one-off?

We are looking for a full exit. Whatever helps in reducing debt to zero, we will do that.

Earlier, we were thinking of selling 49 per cent in the cement business. But then we thought it is not sufficient enough to reduce our debt to zero and we went for 100 per cent.

Apart from hospitals, are there any more assets you want to monetise?

No, we will not need to.

Would it be fair to say that FMCG and agro would be the main businesses for the group going forward?

Yes, but also paper and real estate.

Emami Q3 PBT up by 5%: In line with Street estimates, Emami on Friday reported flat revenue growth at Rs  813 crore for the December quarter, even as its pre-tax profit increased by 5 per cent to Rs 184 crore.

The same in the third quarter (Q3) of the last financial year stood at Rs  811 crore and Rs 176 crore, respectively.

Net profit also rose by 5 per cent at

Rs 144 crore, as against Rs 138 crore in Q3 of the last financial year.