Kiri Dyes buys German DyStar; may raise Rs400 crore through equity, debt

After buying Germany-based DyStar for €50 million, Kiri Dyes and Chemicals may raise about Rs400 crore through equity and debt for expansion and launching new products

Dyes and intermediates manufacturer Kiri Dyes and Chemicals Ltd may raise about Rs400 crore equally through equity and debt, said a top official. The Ahmedabad-based company may use the funds for expansion of its intermediaries as well as adding a new dye to its portfolio.

“We are planning to raise about Rs200 crore through equity but we have still not finalised the plan and the route of raising the fund. We can look at any route for raising funds like qualified institutional placement (QIP), preferential allotment or global depository receipts (GDRs),” said Chetan Vora,  corporate advisor, Kiri Dyes and Chemicals.

Out of the total Rs400 crore fund which the company plans to raise in the near future, it would use Rs150 crore for expanding its existing intermediaries, vinyl sulphone dyes and high exhaust dyes. It plans to spend Rs200 crore on launching a new dye Levafix while the balance Rs50 crore would be used for capital expenditure (capex).

The company which last month decided to buy Germany-based DyStar said it had completed the deal through a special purpose vehicle (SPV) and with support from its Chinese joint venture partner Longsheng Group. Longsheng Group holds 20% stake in the SPV, Kiri Holding Singapore Pvt Ltd while Kiri Dyes holds the balance.

Last month Kiri Dyes and Chemicals bought DyStar in Germany by paying €50 million. The deal includes DyStar’s patents, IP rights, brand names, trademarks and subsidiaries in 22 countries across the world.

Kiri Dyes and Chemicals said that it plans to turn around DyStar by replacing its high-cost German manufacturing base with low-cost manufacturing in India and China. It expects that DyStar will be cash surplus from 2010 and will start generating a net profit from 2011. Kiri Dyes and Chemicals and its associate Lonsen Kiri Chemical Industries Ltd will benefit by transferring production of reactive dyes, acid dyes and direct dyes from Germany to India.

“Our major restructuring is transferring (the) product base and technology into the existing business. We are also looking at putting up a new plant in Baroda for manufacturing Levafix. It will take almost a year to put up the plant,” said Manish Kiri, managing director, Kiri Dyes and Chemicals.

The company is planning to reduce the cost of production by shifting the headquarters from Germany to Singapore. At present, in Germany, it costs €1.70 per kg to €3 per kg and by shifting the headquarters to Singapore, cost of production would come down to €0.25 euro per kg. 

“Kiri’s immediate focus is to take DyStar to the 2008 level, when it was a €800 million company. Due to insolvency, it has came down to €650 million, we would try and take it back to the same level and then try to turn around the company to €1 billion,” said Mr Vora.

Kiri Dyes and Chemicals was advised by SBI Capital Markets Ltd and its German counterpart Angermann M&A International GmbH in this acquisition. SBI Caps was also the exclusive arranger for the acquisition financing required for the deal. The company secured debt financing from a consortium of banks led by State Bank of India, Export Import Bank of India, Oriental Bank of Commerce and Central Bank of India.

 

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