Three Mac Group Firms Merged Into Si Sugars

The Chennai-based M A Chidambaram group has announced the merger of three companies, MAC Industries Ltd (MIL), Southern Agrifurane Ltd (SAFL) into SI Sugars (SISL) in the ratio of 2.5:1:1. The merger stands with retrospective effect from 1st April, 1996.

Earlier in a press meet, Ashwin C Muthiah, deputy chairman of the group said the merged entity would be renamed as MAC Industries.

While the equity capital of the individual companies is Rs 14.83 crore (MIL), Rs 4.79 crore (SAFL) and Rs 2.93 crore (SISL), the merged entity will have a total share capital of Rs 13.66 crore.

MAC Industries, which was primarily in the agro business had tapped public funds about four years back for the purpose of foraying aquaculture, an industry which at that time was perceived to be at sunrise stage and holding great promise for shareholders.

 

However, in the last couple of years, the industry has been plagued by several problems which has been capped by the recent Supreme Court order, banning all aqua-activity within the 500 metre-high tide zone. The business is now a drag on the companys profitability, stated Ashwin C Muthiah, deputy chairman of the group.

MILs share capital before the merger was Rs 14.83 crore. Servicing this large base in the light of the industry conditions would have been difficult, stated a senior source in MIL. It may be recalled that MIL had posted a turnover of Rs 126 crore and a net profit of Rs 1.7 crore for 1995-96. The reduced equity base can be serviced by the balance assets in the company.

SISL which is in the sugar industry had posted a net loss of Rs 1.43 crore for the year ended March 1996 on a turnover of Rs 52 crore. According to the management, the merger would be a hedge against the cyclical nature of the sugar industry.

The shareholders of SAFL which is into distilleries, would benefit from the merger as they become a part of a larger balance sheet. Further, there would be a savings in sales tax payments which will translate into lower costs and consequently better margins. During fiscal 1995-96, SAFL had declared a net profit of Rs 3.4 crore on a turnover of around Rs 100 crore.

The merged company would have a reserves of Rs 74.79 crore and a net worth of Rs 88.45 crore. Meanwhile, the book value post-merger also improves to Rs 64.79 per share.

With the existing synergy in the businesses of the three companies, the merged entity would focus on agro outputs- coffee, sugar, alcohol and palm oil. For the year 1996-97, the merged entity is likely to post a turnover in the region of Rs 240 crore.

Meanwhile, the group has got a licence to put up a new sugar mill of 2,500 tonnes crushing capacity per day expandable up to 5,000 tpd. While this would be executed over the next two years, it would call for investment of around Rs 80 crore. Meanwhile, modernisation of the existing sugar unit with a capacity of 4,500 tpd would also increase its efficiency, stated Muthiah.