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GOCL Corporation Limited
Media DEMERGER OF LUBRICANTS BUSINESS BY GULF OIL CORPORATION LIMITED : CLARIFICATIONS ON CERTAIN NEWS ITEMS

DEMERGER OF LUBRICANTS BUSINESS BY GULF OIL CORPORATION LIMITED : CLARIFICATIONS ON CERTAIN NEWS ITEMS

27-Jan-2014


DEMERGER OF LUBRICANTS BUSINESS BY GULF OIL CORPORATION LIMITED : CLARIFICATIONS ON CERTAIN NEWS ITEMS


The Company has announced a restructuring of its operations through a Scheme of Arrangement in accordance with Section 391 to 394 read with Section 78, 100 to 104 of the Companies Act 1956 on 7th August, 2013, in which the demerger of the Lubricants Division of Gulf Oil Corporation Limited ( GOCL ) to Gulf Oil Lubricants India Limited ( GOLIL ) a wholly owned subsidiary of the Company.


Other than the Lubricants business, the residual Company, namely, GOCL would continue to hold the other 3 Divisions namely Explosives, Mining Products & Services and Realty / Infrastructure.


This Scheme of Arrangement is planned to be made effective from 1st April 2014 after completion of all formalities by way of Court orders etc.


Details of the two entities

The value of shareholdings of all the shareholders of GOCL would remain unaffected by this Scheme of Arrangement mainly because they would have equal shareholding in both the entities ( GOCL and GOLIL ) as per the scheme i.e. for every existing 2 shares ( face value Rs. 2 ) held in GOCL they would receive 1 share of each of the two companies of the same face value Rs. 2 each.


At the time of merger of Gulf Oil India Limited with IDL Industries Limited in 2002 w.e.f. 1.1.2002, the turnover of Lubricants business was Rs. 51.58 crores. After merger the business has been growing at a CAGR of 30% and for the Financial Year 2012 - 13 the turnover has reached Rs. 970.87 crores. Therefore, it was decided by the Board that the business be demerged to allow the Lubes business to grow further in a focused environment rather than as a Division of the diversified Company. Besides, the focus which would be available due to its single business of lubricants and greases, it would also get market valuations applicable to Lubricant companies thereby enhancing shareholder value.


The residual business which would continue in GOCL would consist of explosives, mining products and services and property development/realty / infrastructure. GOCL will be focussing significantly on its Property development business and the work at its Bangalore site is in full swing. The other businesses have been subdued over the last 3 years although growth has been steadily upwards but at a slower pace because of the lack of clarity in Government policies with regard to mining and infrastructure. Therefore, as far as GOCL is concerned, its assets will consist of explosives, mining services and products, and the realty assets.. The growth of this entity, however, will depend to a great extent on Government policies for mining, and the expansion of its realty businesses in Bangalore, Hyderabad and Bhiwandi ( Maharashtra ).


Technical Collaboration

Since the Gulf lubricants business in India is dependent on technical collaboration cum brand licensing arrangement with Gulf International, this collaboration and brand license arrangement will continue with GOLIL. The Agreement is currently valid for 7 years and is renewable. The combined Royalty is being paid on arm's length basis, which effectively is around 1% of the turnover. There is no Royalty being paid for other businesses of the Company.


Acquisition of Houghton Inc.

This acquisition was announced in November 2012 vide our announcement to the Stock Exchanges on 7th November 2012 and the change in position to a 10% holding on 7th August, 2013. Total clarity on the dilution of 90% stake in GHGL was announced on 7th August, 2013, in which it was also mentioned that out of USD 300 mn. loan availed for this purpose from SBI, USD 120 mn had already been repaid and Gulf Oil International Limited, Cayman "has agreed to take full responsibility of servicing and repayment of entire balance loan(s) outstandings."


As a result of this, Gulf Oil Corporation Limited having provided the security to Lenders for this loan would have to continue this item on its consolidated balance sheet till repayment and receive a commission for the same @ 0.5% p.a.


Hence 10% of the holding in Houghton Inc. through its subsidiary HGHL Limited, UK would continue to be on the books of GOCL as an investment with no cash outflow from GOCL for servcing the debt.


Disinvestment in Foreign Subsidiaries

Since the main objective of this Scheme of Arrangement is to give specific focus to the lubes business in India it was also announced on 30th September, 2013 that the subsidiaries of GOCL in Bangladesh, Indonesia and China would be disinvested for an overall amount of Rs. 54.9 crores ( cost of investment Rs. 29.1 crores ). This transaction has already been completed and the Company has received Rs. 54.9 crores.


AGM Enabling Resolution

Further, the Company would like to clarify that currently no major equity dilution is planned in GOCL and the resolution passed at the last AGM held on 30th September, 2013 for USD 100 mn ( approx Rs. 600 crores ) is in the nature of an enabling resolution, which is passed every year to provide quick management action in case of any large business opportunity that may arise.


The Court convened meetings of shareholders and creditors are scheduled for 30th January, 2014, at Hyderabad.


For further information please visit www.gulfoilcorp.com or contact:

Mrs. R. Chaudhry, Senior Manager – MD’s Secretariat, Gulf Oil Corporation Limited, Hyderabad at 040-23700750, Mobile : 9849052064
Mr. Ashish Kaul, Vice President (Corporate Communications), Hinduja Group at 022-28248359 – Extn. 232, Mobile : 9820279349
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