Khorakiwalas to delist Carol Info Services

The Khorakiwala family, which owns a majority stake in pharmaceutical company Wockhardt, is planning to delist a lesser known group company, Carol Info Services. This may be a precursor to a restructuring, which could include a second attempt at selling its nutrition products business or even dispose some properties owned by Carol. The company has a market capitalisation of Rs 460 crore, with the promoter shareholding at 63.7%.

The delisting will be done by Khorakiwala Holdings & Investments Pvt Ltd, through a reverse book-building process, under Sebi’s delisting rules. The company has announced this in a disclosure made to the Bombay Stock Exchange. Carol has announced a floor price of Rs 106, but the discovered price could be much higher. Thus, the promoters will pay a minimum of Rs 170 crore to buy out minority shareholders. That is a sizeable sum, for a company that had a turnover of Rs 24 crore in fiscal 2010, and earned a profit before interest and tax of Rs 3.44 crore but disposal of part of its property allowed it to earn a net profit of Rs 65.3 crore.

Carol had come into the limelight when Wockhardt had agreed to sell its nutrition products business to Abbott Inc. As part of that transaction, Abbott was to pay Carol Rs 50 crore to buy out its manufacturing facilities. The transaction fell through, because Wockhardt’s creditors blocked the deal, which finally led to both parties deciding to scrap the acquisition.
The Khorakiwala family does appear to have a gameplan in place, for restructuring their business operations. That could explain why they are willing to shell out such a large sum to acquire the minority stake in Carol. A sale of its nutrition manufacturing facilities or even the properties under its possession could yield rich dividends, considering how real estate prices have been rising in the past few years. In 2009-10, Carol earned Rs 14 crore from contract manufacturing and Rs 9 crore as lease income.

If the family owns 100% of Carol, they can restructure its operations easily, and any sale proceeds will accrue entirely to them. The key issue will be if Carol’s shareholders let go of the company easily. The first hurdle will be in obtaining shareholder approval, as at least two-thirds of the voting minority shareholders have to approve the transaction. Second, the price obtained through the book-building method should be palatable to the promoters. The share price is locked at the 5% limit and will continue to rise, as shareholders attempt to guess how much the promoters will be willing to pay to buy out the minority.

Comments are closed.