Dalmia Group For Ghcl, Meenakshi Mills Merger

The Sanjay Dalmia group is merging Sree Meenakshi Mills Ltd with Gujarat Heavy Chemicals Ltd (GHCL).

"The GHCL board is meeting on Thursday (June 13) to consider the amalgamation," said GHCL managing director S K Mukherjee.

According to Mukherjee, the amalgamation of the Madurai-based Sree Meenakshi Mills with GHCL has three advantages: the accumulated losses in its books which can be used by GHCL for tax advantages, its rich asset base which will now form a part of the GHCL balance sheet and the positive cash flows of the company.

While GHCL makes soda ash, Sree Meenakshi Mills is a textile company. Set up in 1921, the company makes cotton and blended yarn. Dalmia is the chairman of the company.

 

Sree Meenakshi Mills was referred to the Board for Industrial and Financial Reconstruction (BIFR) in the mid-1990s after it had recorded losses.

According to Mukherjee, the company has shown an operating profit of Rs 1.8 crore in 2001-02 and is now out of the operating table of BIFR.

"The company is showing good cash flows now," he said. While Dalmia controls around 40 per cent in GHCL, his stake in Sree Meenakshi Mills is close to 85 per cent. However, Mukherjee said that the merger is unlikely to raise Dalmia's stake substantially in GHCL. "The valuation of Sree Meenakshi Mills is low. Overall, the merger will increase GHCL's share capital by only three per cent. The promoter's stake will go up only marginally," he said.

The amaplgamation, according to Mukherjee, is being steered by IFCI Ltd.

With the amalgamation, GHCL will have three businesses: soda ash, textiles and information technology. The company has set up a wholly owned subsidiary called Icon Data Management for infotech-enabled services such as business process outsourcing.

"The prospects for this business are very bright," Mukherjee added.

That apart, Dalmia also has business interests in tobacco through GTC Ltd and explosives through Bharat Explosives.