VHCL Industries to demerge Metal Division for raising funds

The Board of Directors of VHCL Industries Ltd at its meeting held on Monday, March 31, 2014, decided to consider the possibility of de-merging the Metal Division of the company into a separate entity in order to invite industry specific investment as well as unlock shareholder value.

The metal division of the company has two on-going projects:

- 36,000 MTPA Aluminum Alloy Plant, which is undergoing pre trials, and is expected to achieve commercial Production in a few weeks time.

- 18,000 MTPA EOU project for production of Non-Ferrous alloys, which will soon start construction activity as the techno-economic feasibility of the same was approved by the Board.

The Proposal outlined that the second phase expansion would require an investment to the tune of Rs. 400Cr. in fixed assets and working capital which may not be possible for the company to generate from its existing shareholder base and internalaccruals. The Proposal suggested that the company go in for FDI for the project. Initial discussions with a few players indicate that the investment may come in only if the metal division is a separate entity. To achieve this, the metal division would have to be demerged from the plastic division through a court order to retain the licenses obtained till date intact. The demerger would have the added advantage of unlocking shareholder value of the existing stakeholders as well as allow the metal division to growfaster.

The Board discussed in detail the proposal that also entailed creating a new company as well as have a new management team which will include members from new investors for the metal division. After deliberations, the Board is pleased to announce that they have agreed for a demerger of the metal division effective 1st April 2014 and gave a go-ahead to proceed with the due legal process. Mr. Pankaj Valia, Managing Director, has been appointed by the Board to carry out all required process and do all acts necessary to implement the de-merger.

The Board was also presented with a proposal to merge the plastics business of UIC Corporation Pvt. Ltd. (herein after referred as UIC), an associate company, with itself. UIC is engaged in similar business of reprocessing / recycling plastic materials and has achieved a sales of Rs.415 Cr. in the current financial year. The merger will provide the company with operational synergy as well as a reduction in operational cost apart from addingto the revenue ofthe company.

After due discussion, the Board was of the opinion that in order to enhance the company's focus towards its core business of plastics recycling and increase its market share, the company should proceed with the merger as this would be in line with the overall vision of the company to achieve a turnoverof Rs. 1000Cr. during 2014-15 and create value for all its stake holders. Hence, it approved the merger, in principle, and appointed Mr. Pankaj Valia, Managing Director, to submit a detailed proposal indicating the process to be carried in relation to this transaction.

Shares of VHCL INDUSTRIES LTD. was last trading in BSE at Rs.15.1 as compared to the previous close of Rs. 18.85. The total number of shares traded during the day was 103276 in over 766 trades.

The stock hit an intraday high of Rs. 20.9 and intraday low of 15.1. The net turnover during the day was Rs. 1654536