Southern Online Bio to spin off Internet division

Southern Online Bio technologies Limited, a Hyderabad-based IT and biotechnology services provider, is planning to spin off its Internet services provider (ISP) division into a separate entity soon. The new entity, to be christened Southern Online Services Limited, would offer services wrapped around the existing Internet business and would be listed on the bourses in the next six to nine months, managing director of the company N Satish Kumar said.

"A few of our clients are keen on their investments and have insisted that the company has a clear vision on each of its businesses. To provide a cushion and protect their interests, the board had decided to deamalgamate the company. We have already engaged a local consultant, which would come out with a scheme of demerger shortly," Kumar told Business Standard.

The spin-off company would provide Internet protocol television (IPTV), video on-demand, network support, data management, wireless Internet services (Wi-Fi), call centre and business process outsourcing (BPO) services within the Hyderabad market. Southern Online Bio's ISP business contributed Rs 8 crore to its revenues during the last financial year, with its biodiesel division accounting for Rs 14 crore.

Stating that the usage of diesel would touch 150 million litre per day in India by 2010, the sixth largest diesel consumer in the world, he said the usage was growing at 6.2 per cent annually.

"Based on this data, the requirement of biodiesel is going to be in the range of 8.5 to 33.5 million litre per day subject to the biodiesel blend of 5 per cent to 20 per cent per litre," he said, adding the company was in the process of ramping up its manufacturing capabilities to cash in on this demand.

Southern Online Bio had recently started construction work on its biodiesel plant in Visakhapatnam, which would have a 270,000-litre per day capacity. The project entails an investment of Rs 90 crore, with Rs 36 crore as equity component and the rest through a term loan. "The Vizag plant is expected to commence commercial production in April 2009," Kumar said.

The company already has a biodiesel manufacturing facility at Samsthan Narayanpur in Nalgonda district with a 40,000-litre per day capacity. The plant went onstream in July 2007, and has been catering to clients like the Andhra Pradesh State Road Transport Corporation (APSRTC), Indian Railways, Tata Teleservices, Kirloskar Oil Engines, Idea Cellular and Bharti Airtel.

"On the back of the additional manufacturing capacities, we expect our topline to touch Rs 35 crore, with our biodiesel business alone contributing Rs 25 crore this fiscal," Kumar said.

The scrip of the 10-year-old company, which went public in 2000, is currently trading at Rs 25 per share of Rs 10 on the Bombay Stock Exchange.