Brands, trademark transferred from promoters'' firm into Nirma

Mumbai: Nirma promoters finally responded to the long-awaited demand of transferring the brands and trademark from the promoter-held company into Nirma Ltd, the listed company, along with its soap-stone manufacturing business.

Nirma, the market miracle of the 20th century, and its various brands are at present held by the promoters in their closely-held company and licensed to Nirma Ltd and its wholly-owned subsidiary Nirma Consumer Care Ltd.

Both domestic and international capital market analysts were of the view that on account of brands not held by Nirma Ltd, a listed company, the real value of the company was not assigned by the markets. With the proposed merger of the operating division, Nirma Ltd will now own the brands and trademarks and will no longer have to pay royalty.

Pursuant to a scheme of demerger of Nirma Industries Ltd (NIL) that will be effective from 1 February 2003, its operating division, comprising Nirma, Nima, others brands, trade marks and other assets related to the soap-stones business, will now be transferred to Nirma Ltd.

The board of directors of the two companies, in separate meetings, has approved the scheme of the arrangement, which will be submitted to the Gujarat High Court for approval. The approvals of shareholders and creditors will also be sought for the scheme. Post-demerger, NIL will retain with it investments, financial assets and other assets.

In consideration of the merger, Nirma Ltd will issue 6-per cent redeemable preference shares of a total value of Rs 2.8 crore to the shareholders of NIL. Nirma Ltd will also undertake to service the liabilities of the operating division amounting to Rs 442 crore (as on 1 February 2003).

Curiously, Deloitte, Haskins and Sells has, in its interim report, valued the brands and trademarks in the range of Rs 1,400 crore to Rs 1,600 crore, considering the capitalisation of royalty, whereas the merger considers only the book value of the assets being transferred, which totals up to Rs 445 crore. It is, therefore, apparent that the terms of the merger are value accretive to Nirma Ltd and its stakeholders.

Nirma, a saga of enterprise, is a distinct example of successful Indian entrepreneurship. The journey of Nirma, which began as a one-man operation in 1969 with Dr Karsanbhai Patel, to a company with a turnover of Rs 2,500 crore, has been exceptional. Today, 33 years later, Nirma is a household name across India.

As a vibrant and proactive corporate citizen, the promoters of Nirma have undertaken a host of activities in the educational and social development areas and have also founded institutions like Nirma University of Science and Technology, Nirma Institute of Diploma Studies and Nirma Institute of Management. The Nirma name, however, will continue to be used by these institutions and promoters for their other public charitable and non-profit-making activities.

The company believes that it is well positioned to take advantage of the anticipated economic upturn. At the same time, it is reasonably insulated from the vagaries of the price movements of the key input raw materials for detergents, having completed the backward integration.