Saroj Poddar restructures KK Birla Group companies

With an eye on consolidation, the Saroj Poddar-led Adventz Group is set for a major restructuring of its key businesses, agri and fertiliser.

These businesses are housed under Zuari Industries Ltd, a listed flagship of the erstwhile KK Birla Group, as its 100 per cent subsidiaries. Poddar, a son-in-law of K K Birla, manages the group as its chairman. Last year, he had initiated a brand campaign for a new corporate identity, Adventz Group.

The plan is now to restructure operations and unlock value for investors. Zuari Fertilisers and Chemicals Ltd and Zuari Seeds will be demerged from Zuari Industries, which also owns the group’s engineering and lifestyle businesses. Subsequently, these will be brought under the newly created Zuari Holdings, which will then get listed on exchanges.

Zuari Fertilisers produces two million tonnes of complex fertiliser and urea a year from its Zuari Nagar unit in Goa. It also manufactures di-ammonium phosphate and other NPK complex fertilisers. With its specialised complex fertilisers catering to a niche market, Zuari does not have a large market share. Its urea manufacturing capacity is 398,000 tonnes. For 2010-11, Zuari Industries had a cash balance of Rs 677 crore, debt of Rs 1,600 crore and revenue of Rs 5,562 crore.

Though the listing process was on, officials said shareowners of Zuari Industries would get additional shares in Zuari Holdings in a 1:1 ratio by the month-end.

“The markets have already been informed and the shareholders should get the split shares soon,” Suresh Krishnan, managing director of Zuari Holdings and former managing director of Zuari Industries, told Business Standard, adding the matter was pending with the Securities and Exchange Board of India.

After listing, Zuari Industries will own 30 per cent of Zuari Holdings. The residual shareholding will reflect that of the parent.

Analysts feel the demerger will be of significant interest for investors, as this will give them a focused portfolio if they want to invest in the fertiliser business of the group or other businesses.

“Zuari Industries will consolidate and build on the verticals that it is already in — lifestyle products, services, real estate and engineering — and will not foray into wholly new sectors,” the company said.

“Investors were not very comfortable in holding complex investments. Hence, it will be very useful for investors aiming at investing in a specific business of the group,” said Tarun Surana of Mumbai-based Sunidhi Securities.

The company was serious about its fertiliser and agri businesses, said Satish Mishra of PINC Research.

The Zuari Industries stock has fallen from Rs 500 on April 4 to Rs 170.

“The new shares are expected to start trading at the difference amount, considering there is no negative or positive impact of the demerger,” Surana said.

At the end of the March quarter, the total shareholding of promoter and promoter group in Zuari Industries was 58.19 per cent, while the rest was with the public. Of the public share holding, mutual funds owned 13.07 per cent, insurance companies had 8.27 per cent and foreign institutional investors held 7.72 per cent.