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Rediff News  All News  » Business » GE Shipping splits offshore business

GE Shipping splits offshore business

September 01, 2005 10:49 IST

Great Eastern Shipping , the largest private sector shipping firm in the country, will spin off its offshore oilfield services business comprising drilling services, marine logistics, marine construction and port, and terminal services, into a separate company.

The de-merger plan was approved by the company's board of directors in Mumbai on Wednesday. The shipping division contributed 82 per cent of the company's revenue of Rs 2,100 crore (Rs 21 billion) in the year ended March 2005, while the offshore division accounted for 17 per cent. The company posted a net profit of Rs 808 crore (Rs 8.08 billion) last year.

"Given the current growth momentum in the offshore oil services industry, the new company will be able to harness the potential of this business," KM Sheth, executive chairman of GE Shipping, said in a statement.

The GE Shipping stock rose to its lifetime high of Rs 198.50 on the BSE on Wednesday before closing at Rs 193.55, compared with yesterday's close of Rs 190.70. Sources said the company had appointed a committee of directors to work out the details of the de-merger, including the share allotment ratio.

Kotak Investment Banking is also helping the company for this. The sources added that the share allotment ratio might be announced in two to three weeks. Vijay K Sheth, managing director of the offshore business, will manage the new company.

Bharat Sheth, deputy chairman of the group and managing director of the shipping division, will continue to manage the shipping business.

The statement added that the shareholding of the new company would mirror the shareholding in GE Shipping.

This means the shareholders of GE Shipping will hold proportional stakes in the new company and the share capital of GE Shipping will be commensurately reduced. The de-merger will be effected from April 1. The new company will be listed with the Bombay and National stock exchanges.

The de-merger, which will be in compliance with the provisions of Section 2(19AA) of the Income Tax Act, is considered an efficient tax-neutral and shareholder-friendly mechanism to restructure businesses.

BS Corporate Bureau in Mumbai