The company’s board of directors approved a scheme to demerge its oil business into a separate entity called Nagarjuna Oil Refinery. However, this has made minority shareholders of the company unhappy due to the proposed share swap formula, which they feel is in favour of the promoters. Nagarjuna Fertilizers shares have fallen 13% since the demerger proposal.
Nagarjuna Fertilizers and Chemical Ltd (NFCL) is demerging its oil business under a scheme of arrangement and amalgamation that has been approved by its directors, in to a separate entity. The scheme is expected to come into effect from 1 April 2011. However, minority shareholders have raised doubts over the plan with regard to the post-merger shareholding of the promoters. In addition, the company shares have also fallen 13% to Rs25.85 since January 2011, just above its 52-weeks low.
According to a letter, dated 10 January 2011, from the company to the Bombay Stock Exchange, the board of directors considered and approved a composite scheme of arrangement and amalgamation of iKisan Ltd, Kakinanda Fertilizers Ltd (KFL), NFCL and Nagarjuna Oil Refinery Ltd (NORL). The scheme envisages "demerger of oil business undertaking of NFCL into NORL and the merger of the residual NFCL and iKisan into KFL."
KFL is a subsidiary of NFCL, while iKisan is a company, which provides Information Technology Enabled Services in Agriculture.
Pursuant to this scheme, the share allotment for the demerger of the oil business undertaking, will be "one equity share of Re1 each fully paid up of NORL for every one equity share of Rs10 each fully paid up, held by the shareholders in NFCL." Also, "one preference share of Rs10 each fully paid up of NORL for every one preference share of Rs100 each held in NFCL" the company states.
For the merger of residual NFCL into KFL, the letter says that "11 equity shares of Re1 each fully paid up of KFL for every ten equity shares of Rs10 each fully paid up, held by the shareholders in NFCL" and "one fully paid preference share of Rs90 each of KFL shall be issued and allotted for every one preference share of Rs100 each held in NFCL."
The share allotment for the merger of iKisan into KFL will be "43 equity shares of Re1 each fully paid up of KFL of every 10 equity share shares of Rs10 each fully paid up, held by shareholders in iKisan," the letter says.
The company informed that the share exchange ratio has been recommended by Grant Thornton, Bangalore. Mumbai-based Keynote Corporate Service Ltd has also provided fairness opinion.
In another statement, NFCL informed the National Stock Exchange, that in an order on 4 March 2011, the Andhra Pradesh High Court had directed the company to convene a meeting of its members on "15 April 2011 for the purpose of considering and, if thought fit, approving with or without modification(s), the proposed arrangement and amalgamation embodied in the Composite Scheme of Arrangement and Amalgamation."
There has been much speculation among retail investors, who feel that the proposed scheme goes against the interests of minority shareholders.
The NFCL stock price has slipped nearly 13% since the demerger plan was approved early January. In fact it has been on a sharp losing streak for over four months, down nearly 40% from its 52-week high of Rs 42.45 on 10 November 2010. The Sensex has lost about 14% in this period.
Moneylife has sent a detailed questionnaire by email to the NFCL company secretary, seeking an explanation on the valuation details and the method used to arrive at the valuation. The message to the company also seeks information about KFL and iKisan. No reply has been received so far.
According to the 'India Economic Outlook' by global research firm Nomura, slower agriculture output, increased margin pressure from rising cost to manufacturers, adverse base effects and lagged effects of policy tightening will restrain growth to 8% in 2011
New Delhi: The tight monetary policy of the Reserve Bank of India (RBI) and declining capital goods output is expected to moderate India's economic growth rate to 8% in 2011 from 8.6% in the previous year, reports PTI quoting global research firm Nomura.
"In 2011, slower agriculture output, increased margin pressure from rising cost to manufacturers, adverse base effects and lagged effects of policy tightening should restrain growth to 8% Y-o-Y," Nomura economist Sonal Varma said in the report, 'India Economic Outlook'.
In view of rising inflation, the RBI has hiked key policy rates eight times since March 2010. The report said industrial activity during 2011 has suffered on account of rising raw material costs, among other things.
In its mid-quarterly policy review last week, the RBI hiked repo (lending) and reverse repo (borrowing) rates by 25 basis points each to 6.75% and 5.75%, respectively.
"Industrial activity has suffered because of rising raw material costs, higher wages and sluggish investment, restraining demand for capital goods production," Nomura said.
India's industrial output growth in January slowed to 3.7%, compared to 16.8% in the year-ago period, dragged down by the poor performance of the manufacturing sector, particularly capital goods.
The capital goods sector contracted by 18.6% during the month against a robust growth of 57.9% in January 2010.
Nomura said it expects the growth momentum to be higher on account of robust consumption demand (including from the rural sector), resurgence of exports and a pick-up in credit growth.
"Overall, having experienced a sharp recovery in 2010, we expect the economy to enter a period of consolidation," it said.
The projections by Nomura are in line with that of global rating agency Standard & Poor's, which said growth would moderate to 8%-8.5% in 2011 from 8.6% in the previous year.
On inflation, Nomura said the March-end figure would remain a tad above the RBI projected level of 8%. The overall inflation in February was 8.31%.
"We expect headline wholesale price index (WPI) inflation to average 8.1% YoY in 2011, on high food, oil and other commodity prices...
Inflation is likely to remain above the RBI's comfort zone, prompting another 50 basis points of rate hikes," it said.
The report said overall inflation pressure would remain intense due to rising business input costs, among other factors.
Heavy industries minister Praful Patel's remarks come within a month of corporate affairs minister Murli Deora favouring CSR spends of 2% of net profits in the new Companies Bill
Mumbai: Another member of the Union Cabinet today batted in favour of making CSR (corporate social responsibility) spends mandatory for private companies with Union heavy industries minister Praful Patel saying it is necessary for the upliftment of the people, reports PTI.
"I think the corporate sector cannot avoid the responsibility of bringing about change in our country and should support initiatives not only of the government but also outside the government," Mr Patel told reporters here.
"It is not the government's responsibility alone which can ensure change in our country...corporate sector (should also help)," Mr Patel said, after inaugurating the National CSR Hub at the Tata Institute of Social Sciences here.
Mr Patel's remarks come within a month of corporate affairs minister Murli Deora favouring CSR spends of 2% of net profits in the new Companies Bill. Mr Deora's comments were met with sharp criticism from India Inc, with many calling it as "retrograde".
Speaking to reporters today, Mr Patel said the very purpose of mandating companies-both private and government-owned-is to deliver the benefits of overall economic progress which the country has made, to the backward people.
He added that the Department of Public Enterprises under his ministry will be working "proactively" and will see to it that the state-owned companies meet their CSR targets.
Meanwhile, when asked if loss-making public sector carrier Air India should be declared as a sick company, the former civil aviation minister said, "Let the ministry of civil aviation send a proposal before I can give you any comments."