Orient Paper to demerge cement business
Orient Paper and Industries Ltd (OPIL), a C K Birla group company, on Wednesday said it had decided to demerge its cement business to sharpen focus on the rapidly growing industry. It would transfer the unit to a newly incorporated wholly owned subsidiary, Orient Cement Ltd (OCL).
OPIL shareholders will get one new share of OCL for each share they own, in addition to their existing OPIL shares. OCL is proposed to be listed on the Bombay Stock Exchange and the National Stock Exchange, where OPIL is listed.
The demerger will be undertaken subject to the approval of the Orissa High Court, the Securities and Exchange Board of India and other statutory bodies. All these formalities are expected to be completed by April 1, 2012.
“The rationale behind the demerger is to sharpen focus on the cement business. Today, there are three business verticals within this company and hence, all are given equal focus. Now, cement becomes an individual company. The attention will be sharper, which will help faster business decision, resulting in rapid growth," said C K Birla, chairman of the company.
OPIL is the largest producer of tissue paper in India, with an installed annual capacity of 100,000 tonnes. It has an electrical division, with fans and CFL bulb manufacturing capacity of 6.5 million units and 8 million units, respectively.
The cement division contributed nearly 50 per cent, or Rs 1,033 crore, to the company’s total revenue of Rs 2,175 crore last year.
From shareholders’ point of view, he said, this definitely was going to be a much better option. The demerger would unlock shareholders’ value, he added.
The company has 5 million tonnes of cement manufacturing capacity, and plans to set up a 3-million tonne facility in Karnataka at an investment of Rs 1,750 crore. The facility is scheduled to commence operation by 2014. A significant part of the proposed investment will be met through internal accruals and the remaining through debt.
Promoters hold 37.5 per cent in OPIL, which will remain unchanged after the demerger, since the basis of allotment of share remains 1:1, according to M L Pachisia, managing director of OPIL.
OPIL posted a 73 per cent rise in net profit at Rs 59.4 crore for the quarter ending June, compared to Rs 34.2 crore last year Net sales jumped 21 per cent to Rs 533.9 crore from Rs 441.6 crore.
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