Sale proceeds to be used to cut Rs 470-crore debt in sugar business; SBI Capital appointed as advisor
A month after Kanoria Chemicals sold its chloro chemicals business to Aditya Birla Group for Rs 830 crore, Siddharth Shriram-controlled Mawana Sugars has initiated the process for selling its chemical business. The proceeds would be used to bring down the company's debt, currently at Rs 470 crore, to below Rs 200 crore.
“We are looking at reducing our debt by disposing off some of our assets, particularly in the chemical business. We need to get our balance sheet back in shape,” managing director Sunil Kakria told Business Standard.
| CHEMICAL UNIT PRODUCES | |
| Product | Installed capacity (tonnes per annum) |
| Caustic soda | 82,500 |
| Stable bleaching powder | 18,000 |
| Chlorine | 73,095 |
| Hydrogen | 2,063 |
| HCL | 66,000 |
| Sodium Hypochloride | 23,100 |
| Caustic soda flakes | 33,000 |
The company has appointed SBI Capital as an advisor for evaluating strategic options for the chemical business. Its reserve price has been fixed at Rs 151 crore. The bid will close tomorrow.
Of Mawana’s annual revenue of Rs 680 crore, 24 per cent comes from the chemical business. This business is, however, debt free.
Besides the chemical business, that comes with an 87 acres land, the company is selling an adjoining lot of 48.67 acres. Its chemical unit operates out of Punjab.
Like the Kanoria sale, Mawana Sugars is planning to take the slump sale route that will enable the buyer to value the business independent of its assets and liabilities at a lump-sum amount. On April 17, Kanoria Chemicals sold its chlor alkali business in an all-cash deal.
Shriram has, over the past, sold a number of businesses and assets — the vanaspati brand Rath to ITC Agrotech (the company is now know as Agro Tech), refrigeration business to Daikin and some of his lands in Delhi to DLF.
Located at Rajpura in Punjab, the chemical plant manufactures caustic soda, chlorine and caustic flakes. It also also manufactures chlorine, hydrochloric acid, hydrogen, stable bleaching powder and sodium hypochlorite. Caustic soda finds application in soap, textile rayon, pulp and paper industries, petroleum refining, detergent and for reclaiming rubber.
The major demand for caustic soda comes from aluminium, pharmaceuticals and the paper industry-all these sectors are witnessing buoyant growth. Other users like soap and the detergent industry are also growing.
As backward integration the unit offers an opportunity to set up a captive power plant, not only for the captive consumption of 35 Mw, but also having the option of selling surplus power to the grid. The basic infrastructure for setting up such a plant-land and water is already available. Forward integration is possible in the form of setting up of downstream industries as these are yet to develop in Punjab.
The plant is strategically located for catering to the domestic demand of caustic soda and chlorine in the north zone at a competitive price as compared to the most of the other chlor-alkali manufacturing units located in western India which incur additional cost due to logistics.
Mawana has an established network of dealers through which it sells caustic soda and other chemicals to institutional buyers. The company has a diversified customer base with not more than 24 per cent revenue coming from a single buyer.
