Godrej to demerge consumer products division

Godrej to demerge consumer products division
ENS ECONOMIC BUREAU

MUMBAI, JULY 31: In a major restructuring drive, Rs 787-crore Godrej Soaps Ltd (GSL) has decided to offload its stake in Sara Lee joint venture to the public and demerge its consumer products business into a new company.

Addressing a news conference, Godrej Soaps chairman Adi Godrej said after a board meeting held here today, that the board has cleared `in principle' to demerge the consumer products division into a new company which would have the same shareholding pattern as of Godrej Soaps.

``This is intended to be a `classical' demerger, with both the companies having identical shareholding pattern. Each shareholder will hold the same number of shares in each of the companies, as is held in Godrej Soaps,'' Godrej said.

The consumer products business of Godrej Soaps is a highly profitable business with a turnover of Rs 382 crore as of March 31 this year. ``We have appointed a committee of directors which will consider the details of the scheme of demerger. The committee is expected to give its report within the next six months,'' Godrej said. ``As the rump Godrej Soaps will be left with chemicals business... the name of Godrej Soaps may be changed,'' he added.

The consumers products business has been hived off in order to create a focused FMCG company which will enhance shareholders' value, Godrej said. When asked why consumer products business has been hived off, Godrej said the board has taken this decision to save tax.

On its joint venture with Sara Lee, which manufactures household insecticides, Godrej said the company wanted to offer shares to the public so that GSL can reduce its debt and improve its debt equity ratio.

The Rs 276-crore joint venture with Sara Lee would disinvest 25 per cent equity shares of the 49 per cent held by the company. The pricing, timing and exact numbers of shares offered through the book building method would be known before the year-end disinvestment. The management of the company will also be transferred to the multinational partner, Godrej said.

Meanwhile, GSL has recorded a 176 per cent surge in its net profit for the first quarter of 2000-01 at Rs 14.40 crore as against Rs 5.21 crore a year ago.

The gross profit for the quarter stood at Rs 30.28 crore while income from operations has increased to Rs 199.41 crore for the quarter as against Rs 187.68 crore for the same period a year earlier. The sales of consumer products improved 17 per cent, while sales of chemicals improved by 18 per cent.