Business
SPIC to get out of JV
By K. T. Jagannathan
CHENNAI
FEB 7.
Southern Petrochemicals Industries Corporation (SPIC) is proposing to exit from the three-way joint venture Indo-Jordan Chemicals Company Ltd. (IJC), which went commercial way back in July 1997.
It has appointed Rabo Bank as a consultant for sale of its stake in the venture which has a phosphoric acid facility at Eshidiya in Jordan.
SPIC holds 52.2 per cent stake in the joint venture. Incidentally, SPIC is also the buyer of finished product, phosphoric acid, from the IJC. Jordan Phosphate Mines Company Ltd. (JPMC), among the largest producer of high quality rock phosphate in the world, holds 34.8 per cent stake. JPMC is also the supplier of raw material for the project. The balance is held by TAIC, a joint stock company owned by 15 Arab States. The $170 million project has a capacity of 700 tonnes a day. It has a debt-equity ratio of 60:40. French firm Kremps did the process and design engineering. It had sub-contracted a part of the work to SPIC-SMO. A part of the SPIC portion of equity came into the venture via equipment supply to IJC.
The joint venture had reported a profit of $7.185 million on a turnover/other income of $78.05 million for the year 2000 as against a profit of $11.14 million on a turnover/other income of $ 88.19 million in the preceding year.
Highly-placed company officials expressed optimism that the sale of the SPIC holding would fetch anything between Rs. 400-500 crores since the joint venture had been running profitably.
The sale move could not have come at any better time for SPIC which is now reeling under heavy interest burden. For the year ended March 2001, the interest cost for the company had risen by Rs. 34 crores to Rs. 214 crores. For the nine months ended December 2001, the interest cost had been placed at Rs. 160 crores. This is having a telling impact on the company's bottomline. SPIC has reported a heavy net loss of Rs. 99.77 crores for the nine-month period ended December 2001.
Top mandarins had indicated that proceeds arising out of stake sale in IJC would help reduce the loan burden of the company substantially. The company, it may be mentioned, has been negotiating with the banks and institutions for restructuring its debt.
With Ashwin Muthiah taking over as the vice-chairman of the company and in control of the day-today operational management, SPIC is seeking to focus on core areas and trying to get out of non-core businesses. As part of the move, it has proposed to hive off its pharma division into an independent entity for a possible sale. Now the thinking appears to have changed. It is now thought the SPIC will rather scout for acquisition of a formulation unit and merge the pharma division with it. Sources said the stake sale in IJC could also go a long way in getting the requisite funds for the proposed takeover of the pharma unit.
Sources further said that even after the stake sale, SPIC could still continue to buy phosphoric acid from IJC through a negotiated agreement.
Send this article to Friends by
E-Mail
Business
|
