There Will Be Significant Savings

One company is a lubricant maker, the other an explosives producer. On the face of it, it might seem that they share nothing in common. But early this year, Gulf Oil India and IDL Industries (both part of the Hinduja group) announced that they would merge to form Gulf Oil Corporation.

The merged entity will have interests in lubes, chemicals, mining and infrastructure. Gulf Oil Corporation appears to be confident about its future growth and officials insist that the deal brings to the table many synergies. Subhas Pramanik, managing director, Gulf Oil Corporation, tells Indira Vergis, what those synergies are and the business plan chalked out for the new company.

What financial and other benefits does this merger bring for Gulf Oil?

First of all, IDL is a low-profile Hyderabad-based company, while Gulf Oil is more a media attention-getter. Gulf Oil, however, was not able to grow fast enough because of its resource constraints.

IDL, on the other hand, has resources, which are under-utilised. IDL has about Rs 500 crore of assets, though on the books, it is stated as Rs 40 crore.

We had done a valuation of our assets by A F Ferguson, but we never brought it onto our books. Bringing together both of them creates a company that has a strong reserves base, a low equity base of Rs 13.87 crore and an annual turnover of nearly Rs 450 crore. And this way, Gulf Oil gets the reserves it needs, while IDL gets the benefit of visibility and good managerial talent.

IDL is 40 years old, while Gulf Oil India is nine years old. Gulf Oil has a lot of young people, especially in senior levels, while most of the employees of IDL are older. Gulf Oil could provide IDL with some young blood. So, you see, the deal makes sense.

What is the game plan for the combined entity?

IDL originally started out in explosives and detonators. Then it diversified into mining. Mining is an emerging sector. After all, even during the past two years of an economic slowdown, mining was one of the few sectors that continued to show growth. IDL has grown with that. Over the past three years, our company has grown by 25 per cent, even when prices in the sector fell by 17 per cent.

Now we are entering the infrastructure sector. Because of our mining work, we