Ajmeras to hive off steel arm for better funding

Shree Precoated Steels (SPSL), the flagship company of the Rs 2,000 crore ($500 million) Ajmera Group, is hiving off its steel business as a separate company soon. SPSL is a steel sheet manufacturer with real estate interests in Mumbai and Bangalore.

The SPSL board has already approved the change of company's name to Ajmera Realty & Infrastructure.

"Private equity players, analysts and investment bankers have advised us to hive off our steel business into a separate sector-specific company to get better funding. We were affected by the curbs on real estate lending. This has prompted us to hive off the steel business,'' said Dhaval Ajmera, director, Ajmera Group of Companies.

SPSL reported a topline of Rs 458.43 crore for the third quarter ended December 2007, with contribution from steel being Rs 373.58 crore and realty chipping in with Rs 84.85 crore. But the company reported a higher bottomline from realty. The realty business contributed Rs 55 crore and steel business Rs 16 crore to the bottomline.

While the steel business has a margin of 5-7 per cent, the figure for realty would be in excess of 30 per cent.

The company is expecting a topline of nearly Rs 2,000 crore from steel and Rs 1,000 crore from real estate in the next financial year. While steel would contribute nearly Rs 75 crore to the bottomline, realty's share would be around Rs 400 crore in the period, Ajmera said.

"In the next three years, our topline will be equally derived from steel and real estate. We are exploring private equity participation in both the businesses,'' said Ajmera.

The company is planning major real estate development in central suburbs of Mumbai with a total area of 2 crore sq ft. The five projects including Kanjurmarg and Wadala suburbs were valued at Rs 20,000 crore, he said

In March 2007, the group merged its real estate businesses with SPSL to unlock its real estate value.

The move increased the enterprise value of the company to Rs 5,334 crore as against the earlier Rs 3,457 crore.

The company is also exploring a real estate investment trust (Reit) for its Kanjurmarg (a central Mumbai suburb) property, which has a total area of 8 million sq ft valued at Rs 1,200 crore.

"The state government has earmarked 300 acres for making a central business district in the area, wherein we hold 66 acres. The project will be operational by year end. Once completed, we may look at both Indian as well as overseas Reit,'' said Ajmera.

The company is looking for properties in Ahmedabad, Vadodara, Pune, Bangalore and other cities. "We want to become a pan-India player,'' said Ajmera.