Videocon plans to split businesses

MUMBAI: Durables-to-oil and gas conglomerate Videocon Group said on Thursday it is planning to split its various businesses, a move that could help them raise capital or induct strategic partners into some businesses.

“With the help of independent external consultants, the company will look at various options available to reorganise and segregate various business segments of the company,” said Videocon in a statement to the Bombay Stock Exchange (BSE).

This move will ensure greater focus on the operation of each of the company’s diverse businesses and enhanced value for shareholders and improvement in the business prospects of the company, said the release. The company is run by three brothers, Venugopal, Rajkumar and Pradeepkumar but Venugopal has always the first among equals.

On Thursday, the company announced a 7.1% increase in its net profit at Rs 159.9 crore in the quarter ended September 30, over the same period last fiscal. The company had a net profit of Rs 149.3 crore as on September 30, 2009, Videocon Industries said in a filing to the BSE. During the quarter, the company’s income from operations stood at Rs 2,985.5 crore, a 13.9% jump from Rs 2,621.2 crore recorded in the corresponding period last fiscal.

On Thursday evening, two of the scions of the Dhoot family, Anirudh, and Saurabh, said that only Mr Venugopal, the chairman, would be able to elucidate on the logic behind the announcement. But calls to Venugopal Dhoot’s mobile remained unanswered.

The group had earlier indicated that it will separate a few of its businesses in order to have a more focused approach.

Earlier this week, Videocon had said it has appointed merchant bankers ICICI Securities and Morgan Stanley to help unlock value from its oil and gas assets, either through an initial public offering or a demerger. The company has recently discovered hydrocarbons in the Tarakan basin of Indonesia and had also announced a gas find in a second well in Mozambique in Africa.

Exactly a decade ago, Videocon group had restructured its operations by forming eight strategic business units or profit centres. Since then, the $2-billion Videocon Industries has diversified into capital-intensive businesses such as power, telecom, media, oil and gas.

Some experts feel such restructuring is an easy way to get new partners and financial options. “A company, which is diversified, will generally get lesser value compared to a single–focused company put together,” said Avinash Gupta, VP–research equity, Bonanza Portfolio. If the businesses are split, then it can help them get better valuation from each business and raise fresh resources from the market, he added.

On the day of the announcement, the company’s stock closed 0.25% up at Rs 260.50 on the BSE while the benchmark index Sensex closed 2.09% up to 20893.57.