The Vinod Baid-owned Rs 300-crore Prudential group has chalked out a recast plan which entails merging a number of its subsidiaries into a single corporate entity, Prudential Industries Ltd, and setting up two new companies--Prudential Capital Corporation and Prudential Securities Corporation. The groups Prudential Capital (PCML) reported a 52.82 per cent drop in net profits for 1996-97 yesterday.
While all the PCMLs non-banking financial company activities would be transferred to Prudential Capital, its stockbroking functions would be taken care of by Prudential Securities Corporation.
The group's main focus would now be sugar and sugar-related items such as molasses and bagasse, to be carried out under the Prudential Industries banner as a separate sugar division. Other units would be textiles, pharmaceuticals, plastics, agrotech, plantations and a financial services division. At present, the group has several companies ranging from Prudential Mouli Sugars to Prudential Tea, Prudential Infotech and three securities firms.
Baid told Business Standard that the restructuring programme had been geared to ensure group growth and benefit shareholders and depositors. Prudential Securities Corporation would now be a member on National Stock Exchange, Calcutta, Ahmedabad and OTC Exchanges.
Both Prudential Securities and Prudential Capital Corp have paid-up capital bases of Rs 5 crore each. The net worth of the flagship, Prudential Industries, has been pegged at Rs 250 crore, with an asset base of Rs 400 crore. Borrowings have been estimated between Rs 80 and 85 crore.
Prudential Industries' turnover for 1997-98 has been projected at Rs 400 crore, with post-tax profits between Rs 40 and 50 crore. The legal formalities for the revamp plan are under way, Baid said.
He said Prudential Capital Corp and Prudential Securities would scout for foreign partners for both technical collaboration and equity partnerships. The financial services division of Prudential Industries would limit itself to bill discounting and short-term funding.
Prudential's profit after tax has declined to Rs 12.39 crore in 1996-97, from Rs 26.26 crore in the previous year. The number of issues handled by Prudential has also declined sharply.
"The downswing in the net profits is mainly attributed to the general slowdown in merchant banking activities in the economy, Baid said.
"The dull nature of the capital market has drastically brought down the number of issues lead-managed by us to 53 in 1996-97, compared with 139 issues handled by us in 1995-96, he added.
Baid also said that the company had, in the 1996-97 annual results, made full provision for non-performing assets. Moreover, out of a Rs 3.54-crore provision for taxation, a substantial portion went to the income tax department as minimum alternate tax (MAT).
Gross profit after interest but before depreciation and taxation declined by 9 per cent to Rs 39.05 crore in 1996-97, from Rs 42.92 crore in the previous year.
The company has registered a marginal increase in turnover to Rs 67.37 crore in 1996-97 from Rs 62.39 crore in the earlier year.
Depreciation rose to Rs 23.12 crore from Rs 10.65 crore, while interest paid was higher at Rs 17.14 crore compared with last year's figure of Rs 8.02 crore.
The board of directors of the company has recommended a final dividend of 20 per cent for the year ended March 31, 1997.
