It was a ‘sudden' and good offer, says Kanoria CFO

Having divested its main business of Chloro Chemicals to Aditya Birla group, the Kolkata-headquartered Kanoria Chemicals & Industries Ltd (KCIL) is yet to decide on the future course of its activities.

According to Mr N.K. Nolkha, Chief Financial Officer (CFO), the divestment of the caustic soda business was not the result of any considered business decision to either foray into new areas or expand other existing lines of business.

“It was a sudden offer,” Mr Nolkha told

Business Line . “They were offering good valuation (for the assets), so we went ahead and struck the deal,” he added.

The Renukoot-based Chloro Chemicals division contributed nearly 77 per cent of the Rs 507 crore revenue (net of excise) and nearly 89 per cent (Rs 47 crore) of the Rs 53-crore profit before tax interest and finance charges clocked by the company in 2009-10.

Though revenues from the business were impacted in the recent past, Mr Nolkha described it as a temporary phenomenon.

Repay debt

“Our power generation unit was closed for 7-8 months and there were incidences of dumping affecting the industry. However, the scenario has changed in the last few months and caustic soda sector is doing well,” he said.

According to Mr Nolkha, the divestment would help remove “the limitations on fund raising capabilities” of the group and repay the debts.

The company has a total borrowing of Rs 300 crore including $20 million (Rs 90 crore) FCCB, due for repayment on June 7.

A company release quoted Chairman Mr R.V. Kanoria saying that the funds (Rs 830 crore) “will be used by KCIL in expanding its other existing businesses, as well as actively seeking opportunities in new and related businesses through both organic growth and acquisitions.” Mr Nolkha said the company would take 2-3 months to decide on utilisation of the proceeds and business plans.

“We may expand the existing facility at Vizag for manufacturing speciality and fine chemicals as well as derivatives of formaldehyde. There may also be opportunities to enter new business segments. However, we have not discussed any such options as yet,” he said.

According to him, the company did not consider entering any new business area in the recent past.