HLCL Board Approves Merger With TCL

The Board also approved the exchange ratio of shares. It has been proposed to exchange 2 shares of HLCL for 5 shares of TCL. The merger is proposed to become effective from April 1, 2002. Steps will now be taken to obtain the approval of the shareholders and the High Court of Punjab & Haryana.

HLCL's employees will, consequent to the merger, become employees of TCL with continuity of service and with full protection of existing terms and conditions of service.

The exercise of determining the share exchange ratio between the two companies was carried out jointly by two highly reputed firms of Chartered Accountants, M/s N. M. Raiji & Co and M/s Deloitte Haskins & Sells. The recommended ratio has also been reviewed and independently confirmed by S.B. Billimoria & Company to the Boards of the two companies and Lazard India Ltd. to the Board of HLCL.

HLCL is among India's premier Fertiliser and Bulk Chemicals manufacturers, with an integrated manufacturing facility comprising eight plants in Haldia (West Bengal). Its product portfolio comprises the Paras range of Phosphatic and Potassic Fertilisers, which has a dominant share in the eastern region. HLCL also manufactures Sodium Tripolyphosphate (STPP). HLCL's turnover for the 15 months ending March 31, 2002, was Rs.1285 crores, of which the Fertilisers turnover was Rs.1130 crores. The PBT during the period was Rs.60 crores, while the PAT was Rs.47 crores. The company declared a dividend of 150%. The company has 480 employees, including 40 managers.

While HLCL has hitherto continued to consolidate its dominance in its core markets, the business context of the Indian Fertiliser industry is undergoing a fundamental change. The policy of decontrol augurs well for the industry, but necessitates a quantum shift in its competitiveness, in terms of cost efficiencies, width of product portfolio, scale economies and market reach. Indian manufacturers will also have to be globally competitive, as the global Fertiliser industry operates on much larger scales with plants of multi-million tonnes per annum. With the government progressively decontrolling the industry, India is becoming attractive to such multinational corporations. In response, industry majors have already begun to make strategic investments to enhance scale/reach.

The need of the hour for HLCL too is to sustain its dominance by exploiting scale economies, leveraging synergies in the supply chain and offer a more comprehensive product portfolio for long term growth. On the other hand, Hindustan Lever Limited's (HLL) core areas, similar to those of its parent company, Unilever, are Home & Personal Care (HPC) and Foods & Beverages, and Unilever does not have a presence in the Fertiliser and Chemicals business sectors outside India. To exploit the full latent potential of the business in the emergent market scenario, HLCL can leverage its current strengths only through a strategic association with an organisation, whose core business too is Fertiliser and Bulk Chemicals with a complementary product portfolio and market reach.

It is in this context that the Board of HLCL has approved the merger of the company with TCL. Fertilisers and Bulk Chemicals is the core business of TCL, with inherent technological strengths. Also, its product portfolio and geographical spread are complementary to that of HLCL. While HLCL is dominant in the Phosphatic segment, commanding over two-thirds of the DAP market in West Bengal, Bihar and Jharkhand, TCL is strong in Urea in the Northern region, with complementary dealer networks. Both companies have very strong brands in their respective areas of operation, built up over the years through intensive farmer extension programmes. HLCL's factory is in Haldia, while TCL factories are in Mithapur in Gujarat and Babrala in Uttar Pradesh. The merged company will be able to offer a comprehensive portfolio of Phosphatic and Nitrogenous Fertilisers in the East and in the North. It will similarly have a combined and wider portfolio of Bulk Chemicals, like STPP (from the HLCL side) and Soda Ash (from the TCL portfolio), which is also a key raw material for STPP.

Furthermore, TCL and HLCL, apart from being responsible corporates, have a compatibility in corporate culture since both companies share the same core values of honesty, integrity, and the highest standards of corporate behaviour towards employees, trade, consumers, society and environment.

This association will further fuel the growth of the HLCL businesses, more than it could have achieved on its own in the changed business context. Given the strength of a broader portfolio of products in wider geographies and stronger focus due to its status as a core business in TCL, the proposed merger will lay the foundations of creating a mega organisation, which will be hugely beneficial to employees and all other stakeholders.

It may be recalled that HLCL was earlier known as Stepan Chemicals Limited and had its lead plant and registered office at Rajpura in Punjab. Though the plant was sold to HLL in 1996, the registered office was retained there in deference to local sentiments.