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Rabindra Nath Sinha

The reorganisation involves transfer of business, dissolution of one relatively small outfit, change of name and formation of two firms for tea and fertiliser.

KOLKATA, Feb. 3

THE reorganisation initiated recently by Duncans Industries Ltd (DIL), flagship company of the G.P. Goenka group, is distinctly different from the one carried out by the group in 1994.

Upon completion of the exercise in 1994, DIL had emerged a much larger outfit with two distinct divisions, tea and fertiliser.

The occasion was the acquisition of Chand Chhap Fertilisers & Chemicals Ltd (CCFC) from ICI. For DIL, traditionally known for its tea business, it was simultaneously a case of diversification and consolidation.

Before the acquisition of CCFC, the company's name was Duncans Agro-industries Ltd (DAIL). As part of consolidation, initially for a short period, DAIL was merged with CCFC. Subsequently, CCFC was re-christened DIL.

The reorganisation now taken up involves transfer of business, dissolution of one relatively small outfit, change of name and is to culminate in the group having two companies, one for tea and the other for fertiliser.

Involved in the recast are DIL, Santipara Tea Company Ltd (acquired a few years back, it has one tea estate called Dem Dima in West Bengal) and Shubh Shanti Services Ltd (SSS), which is engaged in the business of investing in shares and securities. In the scheme of arrangement, SSS is the transferee company.

The scheme envisages transfer of DIL's tea business to SSS, amalgamation of Santipara with SSS and thereafter dissolution of Santipara without winding up, continuation of the fertiliser business under DIL, re-christening of DIL as Duncans Fertilisers Ltd and rechristening of SSS as Duncans Industries Ltd, which will be solely a tea outfit.

Upon the scheme becoming operative, DIL members are to get one Rs 10 share of SSS for every four held by them ``prior to reduction of capital''.

Santipara members are to get one Rs 10 share of SSS for every eight held by them. Reduction of the equity share capital of DIL has been proposed to ensure that the aggregate holding of each shareholder in DIL and SSS is consequently the same as the original shareholding in DIL.

Accordingly, the equity share capital of DIL shall stand reduced by cancellation of a sum of Rs 2.50 per share of Rs 10 each.

Simultaneously with such reduction, every four resulting fully paid up equity shares of Rs 7.50 each shall stand consolidated into three fully paid up equity shares of Rs 10 each.

As the scheme gets translated into reality, SSS will cease to be in the investment business and will acquire the identity of a manufacturing firm.

After the demereger of Herdillia Chemicals' non-chemical business into SSS under a separate scheme, the latter's structure will be further enhanced.

DIL manufactures urea at its unit at Panki near Kanpur, which has an installed capacity of 6,75,000 tonnes per annum. DIL's tea production is about 17 million kg (mkg) annually.

All its estates are in West Bengal. It also outsources some quantum of tea. Santipara's lone garden produces about 0.8 mkg tea annually.

In DIL, fertiliser is the largest business segment, accounting for nearly 80 per cent of its turnover. Though tea prices are currently ruling at low levels, the tea business of both DIL and Santipara is intrinsically sound, notes the scheme of arrangement.

Perhaps, synergy was the consideration behind the earlier consolidation exercise. This is because fertiliser is an important input for tea production. But, the Union Government's fertiliser allocation policy ruled out use of urea manufactured at Panki for the tea gardens, as they are within the command area of fertiliser units at Barauni in Bihar and Namrup in Assam.

Being the flagship company of the group, DIL obviously was required to extend financial support to weak links in the chain.

The reorganisation will naturally see existing DIL's loans split between Duncans Fertilisers and DIL in its new incarnation, which will take care of the tea business exclusively.

For Duncans Fertilisers, after it comes into being, one major issue to cope with will be the Centre's new norms for capacity utilisation and feedstock/energy consumption and, therefore, for determining retention prices, which will get reduced. Meanwhile, it may be mentioned that DIL's accounting period beginning April 1, 2000 was extended by six months to September 30, 2001.

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