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Delta Paper bags 4 Nizam Sugar units for Rs 654 mn

Syed Amin Jafri in Hyderabad

The Andhra Pradesh government has decided to hand over four units of the state-owned Nizam Sugar Factory to Delta Paper Mills Limited for a total consideration of Rs 654 million.

According to Implementation Secretariat chairman and principal secretary public enterprises Deepar Kumar Panwar, the cabinet sub-committee on divestment at a meeting on April 1 approved the proposal of the highest bidder Delta Papers to take over the four units of NSF at a consideration of Rs 654 million, which was Rs 120 million higher than the next bidder, Goldstone-promoted consortium Jalcon.

A new company will be formed as a joint venture with an equity share capital of Rs 200 million in which the Delta Papers will hold 51 per cent (Rs 102 million) of the equity and the state government/Nizam Sugars will hold 49 per cent (Rs 98 million).

The joint venture will absorb 500 permanent and 335 seasonal employees out of 1,395 permanent and 847 seasonal employees. The remaining employees will be offered VRS (voluntary retirement scheme).

The assets of the four units of Nizam Sugars - two (including a distillery) at Shakkar Nagar in Nizamabad district and one each at Metpally in Karimnagar district and Mombojipalli in Medak district - will be transferred to the joint venture company at the bid price of Delta Papers.

This will be Rs 41 million higher than the actual value of assets (Rs 613 million).

The Delta Papers has agreed to go in for expansion of the four units, raising their production capacity from the present 7,500 tonnes crushing per day to 10,000 TCD in three years' time, with an investment of Rs 1.75 billion.

The joint venture will set up new distilleries at Metpally and Mombojipally each having the capacity to produce 30,000 litres per day.

Moreover, the Delta Papers will invest Rs 1.26 billion in co-generation projects for captive generation of power at all the units.

The bid proposals of Goldstone Limited, which had earlier offered to make outright purchase of the Nizam Sugars units, were rejected since the bid amount was low and it had violated the guidelines.

Apart from Goldstone, the Delta Paper Mills and Kundan Exports offered the bids. G R Cables, Dhanpur Sugars and Ganapathi Sugars had come together with Goldstone to form a consortium but they did not give any authorisation. The fact that Goldstone came up with two bids, one for a joint venture and another for outright purchase, also went against it.

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