Balaji group restructuring, raising funds

The promoters of the Balaji group are reducing their equity holdings in three group companies - Balaji Distilleries, Balaji Hotels and Enterprises, and Balaji Industrial Corporation. The reason: they need funds to invest in a new brewery at Nellore and in some other projects currently in the planning stage.

The disinvestment will leave the promoters still very much in control. Their stakes (along with those of associates) are expected to decline from their current levels of 80-85 per cent to around 60 per cent after the disinvestment.

The group has hired KPMG Peat Marwick to advise it on restructuring as well as on the mobilisation of funds from the market. Among the recommendations made by KPMG is one about consolidation of the group's alcohol units in one company. This product is made by the following group companies:

• Balaji Distilleries
• Balaji Industrial Corporation
• Balaji Hotels and Enterprises
• Goa Fruits and Distilleries
• Peral Distilleries
• Deven Seas Distilleries

The group has not yet decided whether it will implement this recommendation.

The main part of the fund raising is likely to take the form of foreign flotations:

• $ 50 million (Rs 210 crore) through external commercial borrowing by Balaji Distilleries
• $ 32 million (Rs 135 crore) from a foreign currency convertible bond to be issued by Balaji Distilleries
• Rs 125 crore through private placement of the shares of the three companies with banks and institutions.