AB Group in Talks to Sell Indo Gulf to In­do­rama

Group look­ing at val­u­a­tion of .₹ 3,300-4,000 crore for Indo Gulf Fer­tilis­ers; ex­perts say move in line with plan to exit low-mar­gin busi­nesses

The Economic Times - - Companies: Pursuit Of Profit - Ari­jit.Bar­man@ times­group.com

Mum­bai: Af­ter ini­ti­at­ing the .₹ 60,000-crore mega merger be­tween Grasim and Aditya Birla Nuvo and a po­ten­tial al­liance be­tween Idea Cel­lu­lar and Vodafone to cre­ate In­dia’s largest telco, Ku­mar Man­galam Birla is tak­ing a long hard look at his fer­tiliser op­er­a­tions.

The Aditya Birla Group is in talks with In­dia-born In­done­sian bil­lion­aire Sri Prakash Lo­hia of In­do­rama Cor­po­ra­tion to sell Indo Gulf Fer­tilis­ers, a di­vi­sion of Aditya Birla Nuvo, four of­fi­cials aware of the sit­u­a­tion said.

Petro­chem­i­cals pow­er­house In­do­rama is among the world’s largest pro­duc­ers of polyester, syn­thetic rub­ber gloves and resins used in plas­tic bot­tles. If suc­cess­ful, this will mark Lo­hias’ en­try into the In­dian fer­tiliser space af­ter last year’s petrochem foray with a 50:50 joint ven­ture with Dhun­seri Petrochem to make PET resins.

An Aditya Birla Group spokes­woman de­clined to com­ment on mar­ket spec­u­la­tion. Mails sent to In­do­rama chair­man SP Lo­hia and his son and vice-chair­man Amit Lo­hia, who op­er­ates out of Sin­ga­pore, did not gen­er­ate a re­sponse till the time of go­ing to press Mon­day.

The de­ci­sion to ex­plore divest­ment of Indo Gulf is not new, say old-time Birla watch­ers and is part of a big­ger port­fo­lio re­struc­tur­ing to exit low-mar­gin busi­nesses in gov­ern­ment-reg­u­lated sec­tors.

Ac­cord­ing to in­vest­ment bank­ing sources, the $41-bil­lion tele­com-to-ce­ment con­glom­er­ate had man­dated HDFC Bank last year to scout for po­ten­tial buy­ers. Pre­vi­ous me­dia re­ports sug­gested that Bir­las had even ex­plored a po­ten­tial sale to In­dian Farm­ers Fer­tili- Deal Buzz pro­duc­ers of polyester, syn­thetic rub­ber gloves and resins used in plas­tic bot­tles

ser Co­op­er­a­tive (IF­FCO) but most of th­ese talks fell through, largely on ac­count of val­u­a­tion mis­match. Sources said the AB Group is look­ing at a val­u­a­tion of around .₹ 3,300-4,000 crore ($500-600 mil­lion) for the busi­ness.

Indo Gulf is the eighth-largest ur-

ea man­u­fac­turer in In­dia with a plant at Jagdish­pur, Ut­tar Pradesh. The com­pany po­si­tions it­self as a ‘to­tal agri so­lu­tions provider’ of­fer­ing a full range of agri inputs — fer­tilis­ers, seeds, agro­chem­i­cals and spe­cial­ties from sow­ing to har­vest­ing. Birla Shak­ti­man Urea en- joys mar­ket lead­er­ship in UP, Bi­har, Jhark­hand and West Ben­gal.

The do­mes­tic urea busi­ness is ham­strung by gov­ern­ment reg­u­la­tions, price caps and un­avail­abil­ity of gas to run plants. Some sub­sidy pay­ments are de­layed by up to six months, forc­ing com­pa­nies to re­sort to short-term bor­row­ings for work­ing cap­i­tal.

In 2015-16, Indo Gulf Fer­tilis­ers re­ported earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­sa­tion (Ebitda) of ₹ 209 crore on rev­enue of ₹ 2,498 crore, com­pared with Ebitda of ₹ 148 crore on rev­enue of ₹ 2,557 crore in FY15.

“Even though the Bir­las have been re­luc­tant sellers al­ways, the need to re­struc­ture the port­fo­lio and un­lock max­i­mum value is far more acute now. The group’s key fo­cus is now tele­com,” said an old group watcher who is fa­mil­iar with the on­go­ing dis­cus­sions.


“Only those who have long term vi­sion will take a punt. In­do­rama has very large fer­tiliser op­er­a­tions in Nige­ria and own sig­nif­i­cant potash re­serves. They are look­ing to make big bets in In­dia. Indo Gulf would of­fer them an op­por­tu­nity to for­ward in­te­grate,” said an­other of­fi­cial in the know.

One of the of­fi­cials quoted above even said Lo­hias may also buy out the resid­ual fer­tiliser op­er­a­tions of Tata Chem­i­cals, but th­ese could not be in­de­pen­dently ver­i­fied.

In­do­rama draws its name from its base in In­done­sia and the Hindu de­ity Lord Rama. Its op­er­a­tions, to­gether with Thai­land-listed flag­ship In­do­rama Ven­tures, to­day spans the globe with over 57 fac­to­ries in 21 coun­tries. Sri Prakash Lo­hia, shut­tles be­tween Lon­don, where his brother-in-law Lak­shmi Mit­tal is based out of, and Jakarta.


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