HEG completes textile business divestment

The company had begun the demerger process in April 2003, when the unit was merged with the Rajasthan Spinning & Weaving Mills (RSWM).

Ravi Jhunjhunwala, chairman and managing director, HEG, said, "The decision to hive off the non-core textile business was to enable a renewed focus on HEG's core graphite electrodes business and to further leverage its global market position."

HEG is currently one of Asia's leading manufacturer of graphite electrodes.

According to the hive-off plan, the valuation of the fixed assets of the Rishabdev textile unit has been arrived at Rs 23.5 crore.

RSWM is expected to make a payment to HEG towards the consideration for the textile unit by issuing Rs 2.5 crore through 6.5 per cent preference shares and by taking over the unit's long-term debt of Rs 21 crore.

The demerger will reduce HEG's debt burden by Rs 37.9 crore, and also decrease the working capital requirement by around Rs 16.9 crore.

HEG's domestic and export turnover are expected to decline post-demerger, considering the contribution of Rs 105 crore by the textile unit.

However, the company's margins and profitability are likely to show an improvement as the textile unit registered a loss of Rs 2.35 crore in 2002-03.