With $1 billion revenue, today Nirma is the seventh largest soda-ash maker in the world.
Ahmedabad: The board of directors of Nirma Ltd Sunday approved the proposal made by chairman Karsanbhai Patel and other promoters for acquiring 3.63 cr equity shares of the company, being all the equity shares not held by promoters in the company and seek delisting of equity shares from the Stock Exchanges pursuant to and in accordance with the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations), 2009, the company said in a corporate announcement.
Presently, Nirma’s equity shares are listed on Bombay Stock Exchange Limited and National Stock Exchange of India Limited.
Incorporated in 1984, Nirma Limited paved way for consolidation of operations leading to listing of the company in 1994. The company’s main line of business is soaps and surfactants. The company recently diversified to pharma and processed minerals and cement businesses.
Total income and gross fixed assets of the company, on consolidated basis, for the financial year ended on 31 March 2010 is Rs4696 crore and Rs5032 crore, respectively. Share capital and reserves of the company as on 31 March 2010, on consolidated basis, is Rs79.57 crore and Rs2746 crore respectively. As on date promoters hold 77.17% of the paid up equity share capital of the company.
“The acquirers believe that it is this changing nature of the business of the company that has led to market valuations of the company to be valued as diversified conglomerate, rather than as a consumer products company or at a valuation that reflects the sum of its parts. The acquirers believe that given the low trading liquidity in the stock, the delisting offer should provide investors with an opportunity to get an exit at a fair value, while according the company the flexibility to carry on its operations,” the company said in a press statement.
The acquirers are of the view that a price of Rs235 per share is an attractive price for the public shareholders of the company under the present circumstances. The price represents a premium of approximately 19% to the price determined as the average of the weekly high and low of the closing prices of the equity shares of the company as quoted on NSE, during the 26 weeks preceding the date of the decision, the company said. The share price of Nirma Ltd stood at Rs224.45 when the markets closed on Friday.
The success story of Karsanbhai who started manufacturing phosphate-free detergent powder in his backyard and sold it while cycling to work has already become business folklore.
With $1 billion revenue, today Nirma is the seventh largest soda-ash maker in the world.
In 2004, the Nirma group expanded into pharmaceuticals by acquiring an IV fluid factory in Ahmedabad. It also acquired US-based Searles Valley Minerals to become one of the top producers of soda ash in the world.
Today, nine manufacturing locations of the company serve four continents globally and 37% of total income is generated overseas.
Nirma's surprise delisting plan stokes sell-off buzz
AHMEDABAD/MUMBAI: The surprise announcement by the Rs4,600-crore Nirma to delist itself is being viewed as a decision taken by a fiercely-private person to keep his company away from the public glare.
There are rumours suggesting that a major restructuring or even a sell-off may be in the offing after the company’s board on Saturday evening announced delisting of the soaps-to-chemicals company from BSE and NSE. But, people close to the company insist that the company wants to stay off the disclosures mandatory for a listed entity. The company does not respond to media queries and few analysts track the company.
Started by Karsanbhai Patel, who would sell home-made detergents on a bicycle in the 1970s, Nirma took on the might of FMCG giants like Hindustan Unilever and Proctor & Gamble (P&G) in the eighties, with low-priced (one-third) products. However, the company now finds competition in the detergent market too stiff and is losing its grip in the consumer care segment as well.
A company press release said the promoters, who hold 77.2% in the company would buy out 3.63 crore shares with the public at Rs235 per share, a 19% premium. The open offer would cost the company Rs850 crore and help its foray into “capital-intensive businesses” with long-gestation period, the release said. However, analysts say the company wants to avoid compliance as required by a public limited company. Karsanbhai, who likes to keep to himself, could not create any institutional fancy, says a Mumbai-based analyst, adding that it is not hard to get institutions’ support provided there is management transparency.
After all, Gujarat-based groups like Adani, Torrent and Cadila have expanded and diversified with the support of FIs, he added.
Despite being a runaway success since its inception in 1984, Nirma has never really opened its doors to analysts or consultants. “Normally, brokers don’t track conservative managements who deny meetings,” said another Mumbai-based broker. Observers say, Nirma’s de-listing is a clear signal that the company wants to stay out of the public realm. “Listing requirements are very stringent for listed companies and so the company prefers to get de-listed,” said an Ahmedabad-based market analyst who is also a chartered account.
“The company may have a big plan ahead in which it may want to do corporate restructuring. But, currently it is not showing the normal valuations on the stock market for the assets it created during the past few years. So it could have decided to de-list first and opt for internal restructuring and subsequently relist on the bourses with de-merged businesses. The reason behind this strategy could be non-co-operation from investors,” he added.
Another set of analysts says Nirma is a financially strong company with ample cash, Rs2,700 crore reserves, on its balance sheet. Further, it has no big expansion plan in the pipeline and so it need not remain listed and be part of the market capitalisation game. Listing is typically needed for those companies who want to raise money from the market every two-three years. The company registered revenues of Rs821 crore and a net profit of Rs47.2 crore in that quarter that ended June 2010. FIs and corporates hold 1.49% and 2.55%, respectively while non-institutional holding remains at 21.34%. Promoters have maintained their holdings at 77% since many years. The company’s floating stock is limited.
While some HNI investors find de-listing announcement a good exit opportunity for their investment that has not generated good return, a few others are undecided.
“I am the shareholder of the company since Nirma’s listings. I have not sold my holdings despite the stock not generating good returns since many years. I don’t know how I should look at this announcement,” said an Ahmedabad-based HNI investor, who is clearly confused.
In the past few years, Nirma has been losing its grip in the consumer care business, says Anand Mour, senior vice-president, Indiabulls Securities . “The company is now looking to focus on capital-intensive businesses like cement and chemicals and on backward integration. As a result, it has been consistently losing market share in both detergents as well as soaps category.”
In the last annual general meeting, Nirma indicated that the detergents segment is increasingly getting competitive. The company , until a few years back, was the second-largest player in the Rs11,000-crore detergents business, has now been piped by P&G. Even in the soaps category, Nirma has been losing market share to players such as ITC, Godrej Consumer Products and Reckitt Benckiser. Experts also feel that with both multinationals P&G and Hindustan Unilever as well as homegrown firms like Godrej and ITC getting aggressive in terms of marketing and new product launches, there is very little chance of Nirma making a mark. As a business house, Nirma is not viewed as a “friendly” company by the politicians.
“Karsanbhai has never entertained politicians and bureaucrats and this has generated negativity among the establishment,” says a businessman who has establishments in Gujarat. Regarded as a man of principles, the next generation — his two sons and son-in-law— too believe in staying aloof from the powers that be.
Nirma’s proposed cement plant at Mahua in Gujarat faced a lot of opposition from farmers and the company had to return 100 hectares out of the allotted 268 hectares, after a prolonged litigation.
People close to the promoters say the company has faced a lot of local political pressures. “The group is facing strong political opposition. A Saurashtra lobby is working against the group since the past many years.”
There are rumours suggesting that a major restructuring or even a sell-off may be in the offing after the company’s board on Saturday evening announced delisting of the soaps-to-chemicals company from BSE and NSE. But, people close to the company insist that the company wants to stay off the disclosures mandatory for a listed entity. The company does not respond to media queries and few analysts track the company.
Started by Karsanbhai Patel, who would sell home-made detergents on a bicycle in the 1970s, Nirma took on the might of FMCG giants like Hindustan Unilever and Proctor & Gamble (P&G) in the eighties, with low-priced (one-third) products. However, the company now finds competition in the detergent market too stiff and is losing its grip in the consumer care segment as well.
A company press release said the promoters, who hold 77.2% in the company would buy out 3.63 crore shares with the public at Rs235 per share, a 19% premium. The open offer would cost the company Rs850 crore and help its foray into “capital-intensive businesses” with long-gestation period, the release said. However, analysts say the company wants to avoid compliance as required by a public limited company. Karsanbhai, who likes to keep to himself, could not create any institutional fancy, says a Mumbai-based analyst, adding that it is not hard to get institutions’ support provided there is management transparency.
After all, Gujarat-based groups like Adani, Torrent and Cadila have expanded and diversified with the support of FIs, he added.
Despite being a runaway success since its inception in 1984, Nirma has never really opened its doors to analysts or consultants. “Normally, brokers don’t track conservative managements who deny meetings,” said another Mumbai-based broker. Observers say, Nirma’s de-listing is a clear signal that the company wants to stay out of the public realm. “Listing requirements are very stringent for listed companies and so the company prefers to get de-listed,” said an Ahmedabad-based market analyst who is also a chartered account.
“The company may have a big plan ahead in which it may want to do corporate restructuring. But, currently it is not showing the normal valuations on the stock market for the assets it created during the past few years. So it could have decided to de-list first and opt for internal restructuring and subsequently relist on the bourses with de-merged businesses. The reason behind this strategy could be non-co-operation from investors,” he added.
Another set of analysts says Nirma is a financially strong company with ample cash, Rs2,700 crore reserves, on its balance sheet. Further, it has no big expansion plan in the pipeline and so it need not remain listed and be part of the market capitalisation game. Listing is typically needed for those companies who want to raise money from the market every two-three years. The company registered revenues of Rs821 crore and a net profit of Rs47.2 crore in that quarter that ended June 2010. FIs and corporates hold 1.49% and 2.55%, respectively while non-institutional holding remains at 21.34%. Promoters have maintained their holdings at 77% since many years. The company’s floating stock is limited.
While some HNI investors find de-listing announcement a good exit opportunity for their investment that has not generated good return, a few others are undecided.
“I am the shareholder of the company since Nirma’s listings. I have not sold my holdings despite the stock not generating good returns since many years. I don’t know how I should look at this announcement,” said an Ahmedabad-based HNI investor, who is clearly confused.
In the past few years, Nirma has been losing its grip in the consumer care business, says Anand Mour, senior vice-president, Indiabulls Securities . “The company is now looking to focus on capital-intensive businesses like cement and chemicals and on backward integration. As a result, it has been consistently losing market share in both detergents as well as soaps category.”
In the last annual general meeting, Nirma indicated that the detergents segment is increasingly getting competitive. The company , until a few years back, was the second-largest player in the Rs11,000-crore detergents business, has now been piped by P&G. Even in the soaps category, Nirma has been losing market share to players such as ITC, Godrej Consumer Products and Reckitt Benckiser. Experts also feel that with both multinationals P&G and Hindustan Unilever as well as homegrown firms like Godrej and ITC getting aggressive in terms of marketing and new product launches, there is very little chance of Nirma making a mark. As a business house, Nirma is not viewed as a “friendly” company by the politicians.
“Karsanbhai has never entertained politicians and bureaucrats and this has generated negativity among the establishment,” says a businessman who has establishments in Gujarat. Regarded as a man of principles, the next generation — his two sons and son-in-law— too believe in staying aloof from the powers that be.
Nirma’s proposed cement plant at Mahua in Gujarat faced a lot of opposition from farmers and the company had to return 100 hectares out of the allotted 268 hectares, after a prolonged litigation.
People close to the promoters say the company has faced a lot of local political pressures. “The group is facing strong political opposition. A Saurashtra lobby is working against the group since the past many years.”
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