POCL plans demerger to tap potential of metal business

Pondy Oxides & Chemicals Ltd (POCL), producers of metals, metallic oxides and plastic additives, is planning to demerge its metallic oxides and plastic additives business to a subsidiary, keeping the metal business in the main entity, as part of reorganising its operations. The process is expected to help the Rs 400 crore company in focusing on lead metal business, which offers more opportunity, while the rest of the business would be handled by a different team.

The company currently has four separate divisions for metallic oxides, PVC stabilisers, smelter and zinc. Plans are to have lead metal business in main entity and keep the rest as a separate entity, to leverage more opportunity in the metal business, said K Kumaravel, general manager for finance and company secretary, POCL.

The rest of the business would be transfered to a resulting company, which is POCL Enterprices Ltd.

The company expects that with the merger, the metal business, which currently accounts to two-third of the total turnover, could grow to around Rs 500-600 crore. The other divisions, which accounts to the rest of the turnover would also see a growth of 30-40%, said Kumaravel.

"The Scheme will enable independent evaluation of the said respective businesses through two separate companies and participation therein of suitable investors and strategic partners," according to a company filing with the Stock exchange. So far, in case of any potential financial investor or other strategic partner interested in supporting and taking a stake in the business comprised in metallic division may not be interested in the rest of the business and vice versa by reason of the difference and divergence in the nature and financial of such businesses.

The company, in the filing, said that in order to ensure accelerated growth and improved profitability, it would be avantageous for the main company, to focus more on the individual products and to give value addition to the shareholders by demerging the verticals and retaining the verticals representing the Remaining Business to have a positive impact on the company's growth plan to create a stronger foot hold in the market space by further increase in its presence as a focused player in the non-ferrous metals industry.