RP-Sanjiv Goenka Group's CESC revamps existing businesses, retail now separate entity

RP Sanjiv Goenka Group’s flagship company CESC Ltd on Thursday announced a business restructuring based on demerger of certain existing businesses.
CESC Ltd, which clocked revenue from operations at Rs 13,903 crore in 2016-17, would be divided into four entities, according to the restructuring scheme.
“This (the restructuring scheme) will lead to four entities focusing on generation, distribution, organised retail and other ventures,” group’s Chairman Sanjiv Goenka told reporters here.
All four entities will be listed with stock exchanges and the appointed date is October 1, he said, adding that the business restructuring scheme aimed at simplifying the present corporate structure.
After the de-merger, one company will house all the power generation, which is now at 2,550 MW, while CESC Ltd will handle power distribution business, Goenka said.
It has power distribution franchise at Kolkata, Noida, Bikaner, Kota and Bharatpur serving about 35 lakh consumers.
According to Goenka, the third entity will house Spencer’s Retail while fourth company, CESC Ventures, will house BPO, FMCG, non-power and non-retail businesses.
The restructuring scheme is, however, subject to regulatory approvals which are expected to be in place in the next six months, he said.
“This is a mirror image demerger. Every shareholder of CESC will get shares of all these four companies exactly same as his proportionate holding today. They will get same proportion of shares in each of the four companies,” he said, adding there will be no holding company.
Goenka said CESC’s share capital today stands at Rs 132 crore.
“We are going to increase that to Rs 198 crore. It means Rs 66 crore worth of additional shares will be issued to the shareholders,” he said.
Post restructuring, a CESC shareholder against every 10 CESC shares will have 18 fully paid shares in the resultant four companies — five shares each in the distribution and generation companies, six shares in the retail company and two shares in the company for other ventures.
Goenka said resultant share capital for each of the company will be Rs 66 crore for generation and distribution company, Rs 40 crore for Spencer’s Retail, and Rs 26 crore for CESC Ventures. “It is totalling up to Rs 198 crore,” Goenka said.
Speaking about the existing debt distribution among four companies, Goenka said CESC Ltd’s debts are very low.
Whatever debt has been taken for distribution will go to distribution company and whatever debt was taken for generation would go to generation company.
Spencer’s is debt free and it has had company level EBITDA profit for the last eight months in a row.
“What remains to be covered is depreciation. We are covering depreciation and hopefully, we will be able to cover all the depreciation soon,” he said, adding that the retailer will grow aggressively in Uttar Pradesh, West Bengal and Andhra Pradesh where it has good concentration.
A new brand ‘2Bme’ for apparels was launched recently by the retail company.
“Apparel sales are growing exponentially. First month, sales were at Rs 2.3 crore, last month Rs 6.6 crore and by June we expect to be Rs 8 crore a month,” Goenka said.
He said two thermal power stations in Haldia and Maharashtra each with 600 MW capacity are in operation now.
Speaking on the distribution business, he said: “We will grow more aggressively in distribution. We have three distribution franchises in Rajasthan and will take more in other states as and when appropriate opportunities come up. At least, a couple of states would come up in the next 12 months.”
CESC Ltd’s net profit for the quarter ended March 31, 2017, stood at Rs 281 crore as compared to Rs 277 crore in the year-ago period.
Its net profit for 2016-17 was at Rs 824 crore as against Rs 812 crore in the previous fiscal.