Promoters of FMCG company Emami Ltd are going to secure the release of their shares pledged with the financiers after collecting the much needed cash from the sale of cement business.
Emami Ltd, which is listed on the bourses, informed that the promoters have concluded the sale of 100 per cent shares of Emami Cement to Nirma’s Nuvoco Vistas Corporation Ltd at an enterprise value of Rs 5,500 crore.
Emami Cement is an unlisted company which has been promoted by the Radhe Shyam Agarwal and Radhe Shyam Goenka families, the promoters of Emami Limited.
The FMCG company did not directly own any share in Emami Cement, which had an 8.3-million-tonne combined capacity, including a plant in Bengal.
The promoters held a 52.74 per cent stake in Emami Ltd as on March 31, 2020. However, 89.24 per cent of the shares are pledged with financiers as collateral for loans taken by the owners to pursue other businesses, such as cement.
In a conference call with the investors about a week back after announcing the fourth-quarter results, Emami guided that the pledges will come down to 45 per cent once money from cement flows to the promoter entities.
Mohan Goenka, director of Emami Ltd, told the investors that pledges would be cut to zero by the end of March 31, 2021, with “further one or two divestments”.
Emami promoters have interest in paper, real estate, healthcare, pharmacy retail and edible oil. The owners are willing to offload any business, barring edible oil.
When the deal was announced in February, promoters had around 70 per cent of their holding pledged.
The company had guided the pledge to come down to 24-25 per cent, including an 8 per cent fresh pledge which is being created to Nuvoco Vista to provide additional comfort against a limestone mining lease dispute linked to the cement transaction.
According to the initial plan, promoters would have a free cash flow of around Rs 2,500 crore, after adjusting transfer of Rs 2,200 crore debt on the books of Emami Cement and Rs 800 crore expense for payment of tax and other group activities.
