The Hindu Business Line : CESC board nod for Pathik Retail merger

Kolkata April 17 The Board of Directors of CESC Ltd today approved the merger of Pathik Retail Ltd, the holding company which owns 94 per cent of the equity stake in Spencer's Retail, with itself. The idea behind the initiative is manifold, primary among them being a desire to "create a conglomerate with multiple revenue streams de-risked from each other," according to Mr Sanjiv Goenka, Vice-Chairman of CESC Ltd.

Addressing newspersons after today's board meeting, Mr Goenka said the merger would take effect from April 1, 2007 after completion of necessary formalities. Following the merger, CESC would own 94 per cent of Pathik Retail's stake in Spencer's Retail. KPMG has valued CESC at 2.57 times that of Spencer's and the swap ratio had been fixed at 1.98:1, he said. "It is my dream to make CESC a very, very large corporate entity," he added.

Post-merger, CESC would have a paid-up equity capital of Rs 113 crore, even as the promoters' shareholding in the company would go up from 40.9 per cent at present to beyond 50 per cent.

Mr Goenka said the exercise would help "create more value" for shareholders of CESC. It would help integrate the operations of different businesses of the group and also ensure multiple revenue streams that were de-risked from each other. These businesses were in the domains of power, retail and real estate and each one of them would remain separate legal entities with separate books of accounts.

"The profit and loss account of CESC would remain exactly as it is," he said, adding that dividends paid by the retail and real estate subsidiaries would, however, find reflection in CESC's books of accounts, whenever it happens.

Retail business

Mr Goenka outlined the group's plans with regard to its retail business. The number of Spencer's outlets would go up from 135 at present to 2,000 by 2009-10. The retail rollout would entail an investment of Rs 1,000-1,200 crore. This amount would be financed by a "combination of debt and equity and may include capital raising which may happen within the next 6-12 months from now," he said.

Revenue from the group's retail business was expected to touch Rs 5,000 crore by 2009-10, he said.

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