Orient Refractories promoters sells biz for Rs 516 crore

SG Rajgarhia, MD, Orient Refractories , says that the company has entered into a share purchase agreement with subsidiary of RHI, which is one of the largest refractory companies in the world. The agreement has been entered at the price of Rs 43 per share and the public offer would also be made at the same price. The total value of the deal stands at Rs 516 crore.

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Below is the edited transcript of his interview to CNBC-TV18.

Q: Can you brief us about the deal that you have entered with BV Netherlands. What it amounts of the total money paid and the open offer price that has been settled?

A: We have entered into a share purchase agreement with subsidiary of RHI, which is one of the largest refractory companies in the world. They will acquire around 43.6% shares from the promoters and they will make a public offer of around 26% as per Sebi guidelines. The agreement has been entered at the price of Rs 43 per share and the public offer would also be made at the same price. The total value of the deal stands at Rs 516 crore.

Q: Why did you choose to enter into the agreement?

A: We choose to sell keeping in mind the best interest of the stakeholders because RHI is the largest refractory manufacturer in the world. It will give Orient Refractories access to larger international markets, the employees will get better opportunities in future and share holders will also be happy with the money they will receive. 

Q: What about the option of delisting if the open offer is successful?

A: Frankly, RHI should answer this question but I don't think they have any intention on their part to delist the shares. After the open offer, they will hold about 70% shares and my holding would be less than 5%.

Q: Where will the proceeds of Rs 516 crore be used for and will the promoters completely exit their stake going ahead?

A: The money will go to the share holders.

Q: By when is the transaction expected to be completed?

A: The public offer should take about three months. We expect the total transaction to complete within two-three months.

Q: Do you also expect to see a material change in the financial performance with the entry of a large foreign player?

A: The company has been doing very well. In the current year we expect the top line to grow by 20-25 percent and bottom line by 15-20 percent. A company like RHI coming in should definitely add to the performance. If nothing, RHI can source our products from them. So it should definitely have a positive impact and that was the objective of this deal.

Q: Have you signed any kind of non-compete agreement with them?

A: What do you mean by non-compete agreement? If I have sold the company to them, where is the question of competition? Yes, if I have sold my business to RHI, I have no intension of entering into refractory business again on my own.