The Essar Shipping management yesterday announced that it would consider the merger of group company South India Shipping Company (Sisco) with itself. The proposed merged entity would become the countrys third largest largest shipping company.
The boards of the two companies will meet in Chennai on June 24 to consider the merger and appoint the valuers.
Top Essar sources said the merger would lead to lower cost of operations and create major synergies, which is why we are meeting to consider it.
Both Essar and Sisco operate in the bulk carrier and tanker segments and this is the main reason for the merger, they added.
The merger, if it goes through, would lead to a turnover of over Rs 600 crore and a net profit of over Rs 100 crore for the merged company with gross assets of over Rs 1,200 crore. It would be the second largest private sector shipping company after Great Eastern Shipping.
The merger of the two companies was always on the cards, ever since Essar took control of Sisco in 1994 from J H Tarapore and A J Gotkal.
The Ruias hold more than 60 per cent in Sisco, while in Essar the holding is lower at about 51-52 per cent.
The merger ratio is expected to favour the Ruias as they hold more than 50 per cent in both companies.
The financial institutions hold a 21 per cent in Sisco and the rest is held by the public. A favourable merger ratio for Sisco shareholders will benefit also the Ruias as they hold larger stake in the company.
Essar has a fleet of 14 ships while Sisco has a fleet of 10. The ships have been deployed in voyage as well as time charter. The merged entitys fleet strength will aggregate to about 1.4 million dead weight tonnes (dwt).
Essar Shipping posted a turnover of Rs 137.21 crore, down 19 per cent in the first half of 1996-97. Its net profit rose by 14.5 per cent to Rs 27.06 crore from Rs 23.63 crore.
South India Shipping Corporations income from operations rose by 21 per cent to Rs 95.37 crore from Rs 78.53 crore. Its net profit, however, dipped to Rs 17.55 crore from Rs 20.5 crore.
The Ruias had sometime back initiated a move to increase their holding in Sisco by buying out the institutions stake in the company
The move was, however, dropped.
