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Tuesday, Sep 17, 2002

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HDFC, IDFC, IL&FS may pick Sical stake

M. Ramesh

CHENNAI, Sept. 16

HDFC, IDFC and IL&FS are likely to pick up equity stake in South India Corporation (Agencies) Ltd (Sical), sources from the financial institutions told Business Line. Sical is a part of the Chennai-based M.A. Chidambaram group of companies.

It is understood that the stake-taking will be through an issue of partly-convertible debentures, which would be converted into equity shares after about 18 months.

At a company function at Pondicherry last month, the Chairman of the company, Mr A.C. Muthiah, said that all the non-logistics businesses of Sical (such as auto components, automotive dealership, boat building and agri businesses) would be hived off into separate company(ies) and Sical would remain a purely logistics-business company.

This is expected to be done in one years' time.

At that time, the financial institutions would convert their debentures into equity shares. The price at which the conversion would be done is to be decided then.

It is not clear as to how much of Sical's equity would be picked up by the three institutions, as none of Sical's officials was available for comment.

However, when asked about the move, the Deputy Chairman of Sical, Mr Ashwin Muthiah, had told Business Line: "We will let you know at the appropriate time." It is understood from sources in the financial institutions that the move is imminent.

Sical is a major player in the port-based logistics services business. It also has a warehouse and runs a fleet of trucks. Over the last few years, the company has been getting offers for jobs for moving bulk cargoes at various ports.

In the year before last, the company bagged a 20-year contract for handling coal at the Chennai port, from Tamil Nadu Electricity Board (TNEB).

In 2001-02, the company handled a 19 million tonnes, which is the largest volume handled by any Indian company.

The company's latest annual report says that the logistics business yielded profits of Rs 50 crore.

However, in accepting the jobs, Sical is somewhat hampered by want of funds. The company inherited the non-logistics businesses from a series of intra-group mergers a few years ago. Some such businesses like sugar and alcohol have since been turned around and sold off. But the inheritance has put a financial burden on Sical; last year, the company had to incur interest charges of around Rs 70 crore.

Sources from the financial institutions said that the coming on-board of HDFC, IDFC and IL&FS would give the company the necessary financial muscle to take up orders, of which there is no dearth.

For the financial companies, the move will mean an entry into the logistics business, which is expected to grow in the coming years, they said.

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