Aditya Birla Nuvo to sell carbon black unit to group firm

Aditya Birla Nuvo today said it will sell its carbon black business to another group firm SKI Carbon Black (India) for Rs 1,451 crore.

The move, aimed at reducing debt, follows a decision of the company's committee of directors who felt that it will be "extremely challenging" for Nuvo to become a global leader as multi-national tyre makers prefer tie-ups with firms that have global spread.

Nuvo, which had clocked Rs 1,983 crore revenue in FY12, has three plants for making carbon black, used for making tyres, and is among country's top three firms in the business.

Globally, however, its share is minuscule at 2 per cent.

The company has presence in finance, telecom and textiles business, among other areas.

"The committee of directors of the company at its meeting held on April 6, 2013 has...decided to divest carbon black business, on a going concern basis, by way of slump sale to SKI Carbon Black (India), an Aditya Birla Group company, for a lump-sum consideration of Rs 1,451 crore as enterprise value," the diversified firm said in stock exchange filing.

"Moreover, in view of the company's capital commitment towards funding the growth of its other businesses, it is extremely challenging for the company to become a global carbon black player," the filing said.

The sale is subject to approvals from shareholders and others, it said, adding that the valuation of the business has been done by Deloitte Touche Tohmatsu India.

"The cash inflow from the divestment of the carbon black business will reduce debt and strengthen the company's balance sheet. This will support growth plans and ensure greater focus on the other businesses of the company," it said.

Aditya Birla Nuvo's net debt to equity ratio stood at 0.66 and net debt to annualised EBITDA at 4.2 as on September 30, 2012.