Marico extends gains on restructuring plan

capital market | Mumbai |

Marico jumped 3.47% to Rs 235.35 at 9:40 IST on BSE, extending Monday's 1.36% rise triggered by the company announcing demerger of its Kaya skin care solutions business.

The announcement was made during trading hours on Monday, 7 January 2012. The stock rose 1.36% to Rs 227.45 on that day.

Meanwhile, the BSE Sensex was down 24.37 points, or 0.12%, to 19,667.05.

On BSE, 18,000 shares were traded in the counter compared with average volume of 18,000 shares over the past two weeks.

The stock hit a high of Rs 236 and a low of Rs 228 so far during the day. The stock had hit a record high of Rs 250 on 3 December 2012. The stock had hit a 52-week low of Rs 146.10 on 23 January 2012.

The large-cap company has an equity capital of Rs 64.47 crore. Face value per share is Re 1.

Marico announced demerger of its Kaya skin care solutions business. The company said it propose to create two separate companies through partitioning of Marico into an FMCG business company which already in existence and a Skin Care Solutions Business company which will be Marico Kaya Enterprises (MaKE, to be formed) or any such other name as may be approved by the Registrar of Companies. MaKE will house the Kaya business, through its subsidiaries and all Kaya entities overseas. Initially MaKE will be formed as a 100% subsidiary of Marico. Once the demerger is effective, the shareholding structure of MaKE will mirror the shareholding structure of Marico on the date of the demerger.

The business undertaking of Kaya housed in Marico, comprising investment in equity of Kaya, related IPRs, employee contracts and cash and bank balances will be demerged into MaKE through a High Court approved Scheme of Arrangement under sections 391 to 394 read with sections 78 and 100 to 103 of the Companies Act, 1956, subject to approvals by the shareholders and creditors and lenders in Marico. As per the demerger ratio, one fully paid-up equity share of Rs 10 each of MaKE will be issued and allotted at a premium of Rs 200 per share for every 50 fully paid-up equity shares of Re 1 each held in Marico. MaKE will also be listed on the BSE and the NSE separately. The listing of MaKE may take about 60-75 days from the date of receipt of approval of the Scheme of Arrangement from the Court, Marico said.

MaKE will have a separate Board of Directors, distinct from Marico's Board. Harsh Mariwala will continue to be the Chairman and Managing Director of both Marico and MaKE. The appointed date of the demerger is April 1, 2013.

Marico said that the demerger will lead to sharper focus and greater energy across both organizations and businesses. It will also create synergies across the value chain, product portfolios, talent pool and capability through an integrated FMCG business, in India and overseas. It will also help resurgence in the Kaya Business through a distinctly entrepreneurial approach and independent leadership team, Marico said. The demerger will provide more customized ways of managing Kaya-specific talent, Marico said.

The Finance Function will continue to be centrally organized and will act as a Shared Service Group (SSG) for both Marico and Kaya. Milind Sarwate, Group CFO will continue to report to Harsh Mariwala.

As on 30 September 2012, Marico's exposure to Kaya was Rs 180.64 crore (equity of Rs 73 crore and interest free loan of Rs 107.64 crore). It is proposed that the loan be converted into equity prior to the demerger. Further, in order to achieve the vertical split of the FMCG business and Kaya business, it is proposed that ownership of Kaya Middle East FZE (part of Kaya group), currently held by Marico Middle FZE (part of FMCG group) be transferred to MaKE or one of its subsidiaries. Marico will further capitalize Kaya for concluding this transfer, the company said in a statement. Consequently the total investment by Marico in Kaya to be transferred as part of the Kaya undertaking may undergo a change between September 30, 2012 and March 31, 2013, Marico said.

Marico's consolidated profit after tax rose 10% to Rs 86 crore on 19% growth in revenue from operations to Rs 1159 crore in Q2 September 2012 over Q2 September 2011.

Marico is a leading Indian Group in consumer products and services in the Global Beauty and Wellness space.

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