Emami promoters will cut their pledge against shares to 25 per cent post the completion of the sale of the cement business and progressively bring this down to zero by the end of March 31, 2021.
The debt against the pledge of promoter holding, which now stands at 52.74 per cent in Emami Ltd, is Rs 3,000 crore at present, a little over 70 per cent of the stake.
The debt would be reduced to Rs 500-600 crore after the conclusion of the sale of Emami Cement to Nirma, bringing down the pledged shares of promoters to 16-18 per cent.
However, Emami Ltd promoters will have to create an 8 per cent fresh pledge to Nirma’s Nuvoco Vista to provide additional comfort against a limestone mining lease dispute.
“We wanted a complete payout for the transaction. We are happy that Nuvoco agreed to it. But they also wanted comfort in a legal case involving one of the mines. We accepted their position,” Mohan Goenka, director of Emami Ltd, told The Telegraph. Once the legal matter is resolved, the pledge will be released.
The Emami group will look to sell further assets, possibly real estate (land parcel), to release pledges related to promoter level debt at Emami Ltd.
Emami Cement has signed a binding agreement with Nuvoco to sell 8.3-million-tonne cement assets for an enterprise value of Rs 5,500 crore.
While Rs 2,200 crore will be a transfer of debt, Rs 800 crore will be utilised in payment of tax and financing group activities, leaving free cash of Rs 2,500 crore to the promoters.
Emami Ltd came out with its third-quarter result on Friday where volumes remain flat because of the late onset of winter. However, the non-winter portfolio grew 13 per cent.
Goenka said the group was expecting overall double-digit growth in the present quarter and margin expansion. The consolidated profit grew 5 per cent to Rs 144.4 crore in the third quarter, while total income at Rs 828.22 crore was up 1.02 per cent.