Indian firm Aditya Birla Nuvo has decided to sell its carbon black business to a group company, SKI Carbon Black (India), for about US$26 million as part of its plan to exit the business in the near future. An option being considered is to bring all carbon black business, including Columbia Chemicals’, under one umbrella and selling shares through an initial public offering. Earlier, the group had bought the carbon black business of Columbia Chemicals for US$800 million.
While bankers said the company would sell its entire carbon black business, analysts said the Aditya Birla Group was shifting focus from commodities to high-margin businesses. Aditya Birla Nuvo plans to sell the carbon black business and focus on fertiliser, information technology(IT)/information technology-enabled services (ITES), retail and telecom businesses. In a statement, the company said its directors had reviewed the carbon black business in the Indian, as well as the global context and had decided to exit. Given multi-national tyre manufacturers prefer to engage with carbon black players that have global delivery capabilities and scale, global positioning in the carbon black sector has become increasingly important. Aditya Birla Nuvo’s carbon black business accounts for merely 2% of the global industry capacity. More, in view of the company’s capital commitment towards funding the growth of its other businesses, it is extremely challenging for the company to become a global carbon black player,” it said.
Hence, the company has decided to divest the carbon black business, on a going concern basis, by way of slump sale to SKI Carbon, an Aditya Birla group company. The cash inflow from the divestment of the carbon black business will reduce debt and strengthen the company’s balance sheet. This will support growth plans and ensure greater focus on the other businesses of the company, the company said.
The company is also planning to spend Rs 5,400 crore to double its urea capacity. After investing in businesses such as financial services, fashion and information technology, it plans to sell the increased urea output in Bihar, Jharkhand, West Bengal, Uttar Pradesh and Chhattisgarh.
The company’s IT and ITES segments are also recording a comeback. Analysts say in the US, the company works with the automotive sector, which suffered significantly in 2008; General Motors and Chrysler were the some of the company’s major customers. The US automobile sector has, however, rebounded significantly, and Aditya Birla Nuvo is expecting outsourcing by these companies to increase. Within the automobile sector, the company has diversified, adding Hyundai Motor Company, Toyota Motor and Honda Motor Company to its clients.