PE-backed Dalmia Bharat Enterprises to hike stake in promoter group’s sugar biz
Dalmia Bharat Enterprises

A year and half after demerging the cement and power business into a separate listed firm Dalmia Bharat Enterprises Ltd, Dalmia family has initiated a process to hike the promoter group holding in the sugar company Dalmia Bharat Sugar & Industries.

Dalmia Bharat Enterprises has come with an open offer to buy up to 26 per cent of Dalmia Bharat Sugar, in what could cost as much as Rs 41 crore ($7.3 million). The promoter holding (including stake held by Dalmia Bharat Enterprises) in Dalmia Bharat Sugar is pegged at 65.19 per cent and, if the open offer is fully successful, the promoter holding will cross the delisting threshold of 90 per cent.

However, the intent does not appear to take the sugar firm private.

Dalmia Bharat Enterprises has disclosed that if the public holding after the open offer process falls below the 25 per cent mark (the minimum required for a public listed firm) then it would seek to bring its holding down to meet the public listing norms. Promoters and promoter groups are to meet the minimum public holding limit of 25 per cent by June 30, 2013. 

The open offer is triggered by a purchase order by Dalmia Bharat Enterprises to buy additional 6.8 per cent of the listed sugar firm. 

The listed firm has acquired 4.9 per cent since April this year and the additional purchase order would cross the five per cent creeping acquisition limit in a financial year.

The open offer has been made at Rs 19.5 a share, the same price offered by Dalmia Bharat Enterprises in its purchase order to buy more shares of the sugar firm.

Dalmia Bharat Sugar & Industries’ scrip rose 1 per cent and was quoting at Rs 20 a share on the BSE in mid-day trade in a flat Mumbai market on Thursday. But the news of the potential move by the promoter group appears to be have been out on the street as the share price has rocketed 73 per cent over the last three months. The Dalmia Bharat Enterprises scrip shot up 13 per cent and was trading at Rs 136.2 a share on BSE.

Last month, emerging markets PE major Actis had sold its entire 5.5 per cent stake in Dalmia Bharat Sugar & Industries (formerly Dalmia Cement Bharat). The PE firm still holds 5.5 per cent stake in Dalmia Bharat Enterprises, the demerged cement and power business of Dalmia Bharat Sugar & Industries. 

In FY12, Dalmia Bharat Sugar reported revenues of Rs 738.8 crore, with net profit of just Rs 90 lakh. While the company reported losses in the first three quarters of FY12, it registered a profit of Rs 28.33 crore in Q4 FY12.

Last year, Dalmia Bharat Enterprises was demerged from Dalmia Bharat Sugar & Industries, which become a pure play sugar firm. Dalmia Bharat Sugar operates three integrated plants with cane crushing capacity of 22,500 TCD and sugar production capacity of 3 lakh MT per annum.

The cement business (housed under Avnija Properties, a subsidiary of Dalmia Bharat Enterprises) is backed by PE giant KKR.

(Edited by Prem Udayabhanu)

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