Rossell India Ltd has set in motion the process to demerge the tea and aerospace divisions into separate companies to pursue growth opportunities in two disparate line of businesses.
Following a mirror-image split, which could take at least a year from now to become effective, the aerospace division of Rossell, listed on the BSE and NSE, will be vested with a newly floated vehicle Rossell Techsys Ltd.
Shareholders of Rossell India will get one share of the new company, which will also be listed on the NSE and BSE, for every share held in the present company. The promoters of Rossell India, the family of Harsh Mohan Gupta, hold 74.8 per cent stake.
The city-based company has made applications to the bourses seeking no-objection certificates (NoCs). Subsequently, the scheme of arrangement will needs to be approved by the lenders, shareholders and the National Company Law Tribunal among others before becoming effective.
The aerospace division, based out of Bangalore, was established in 2011, while the tea division continues to be managed from Calcutta. The two divisions roughly contributed equally to the Rs 303.31 crore income of Rossell in the last fiscal. However, the tea division added more to the bottomline than the aerospace division which is still in the development stage.
Explaining the proposed demerger scheme, N.K. Khurana, director (finance) of Rossell India, said the demerger would enhance efficiencies by having different business interests into separate corporate entities, resulting in operational synergies, simplification, focused management, streamlining and optimisation of the group structure and efficient administration.
Moreover, each undertaking will be able to target and attract new investors with specific knowledge, expertise and risk appetite corresponding to their own businesses. Consequently, each undertaking will have its own set of like-minded investors, thereby providing the necessary funding impetus to the long-term growth strategies of each business, Khurana added.
Aerospace division
The aerospace division makes electrical wiring and interconnect systems, among others, for OEMs such as Boeing, Lockheed Martin and Honeywell, which together account for 97 per cent of the division’s revenue. The business has mostly focused on the defence segment with Boeing being the single largest customer. It has so far focused on the export market, which contributed 95 per cent to the revenue.
Tea business
With six gardens in Assam and own crop of 5.2 million kg, Rossell is known for quality tea. Despite sectoral challenges of wage-hike-led cost push, climate change and stagnating selling price, the division managed to remain profitable. The company believes by focusing on quality in an environment of static black tea consumption globally, its offerings will remain in demand.
The plan
■ The aerospace division of Rossell, listed on BSE and NSE, will be vested with a newly floated vehicle Rossell Techsys
■ Shareholders of Rossell India will get one share of the new company for every share held in the present company
■ The mirror-image split could take at least a year from now to be effective
