Athar Shahab, MD, Zuari Industries, says two major liquidity events have taken place. More recently, the group has announced the merger of MCFL with itself. The group is evolving and will simplify its structures going forward. The value will become very crystal clear on the investments that we hold. On the other side, we have operating businesses. We have a substantial sugar complex in Uttar Pradesh which we have modernised over the years and which is doing quite well and then we have a big focus on real estate and biofuels.
Shahab says “we will stay invested in sectors that are important to the Indian economy. We will continue to simplify our structures. But at the same time, we will continue to pursue growth opportunities.”
You have given a presentation talkinh about a lot of value unlocking growth strategies in the next three to five years. Where would you start the conversation? What was the trigger behind the strategy which you have shared with the exchanges?
Athar Shahab: We have been doing a lot of work in the background for the last couple of years. If you have noted the broader group, there have been significant events starting from the IPO of Paradeep Phosphates Limited, a group company, and more recently a very successful QIP of our group company Texmaco Rail. We thought it was very appropriate that Zuari Industries Limited, which is the apex holding company of the group, should put out something in the public domain. This company was set up by late Dr KK Birla in 1967. It started off as Zuari Agro Chemicals and Chambal Fertilisers was set up initially as a division of the company and now it is a full-fledged formidable player in the fertiliser sector.
We straddle many sectors in the economy. It was in the fitness of things to put out a simple presentation and bring certain facts to the knowledge of investors.
One is your operating business and the second your investment business. The way markets look at Zuari is what investments you have and how you unlock it. As a result, Zuari never gets the right PE multiple because it ends up becoming a holding company. How are you planning to address it?
Athar Shahab: Two major liquidity events have taken place. More recently, the group has announced the merger of MCFL with itself. The group is evolving and the group will simplify its structures going forward. The value will become very crystal clear on the investments that we hold. On the other side, we have operating businesses.
For example, we have a substantial sugar complex in Uttar Pradesh which we have modernised over the years and which is doing quite well and then we have a big focus on real estate and biofuels. The way we would like investors to look at us is, of course, as somebody who is holding these very large, substantial strategic investments in core sectors of the Indian economy and a company which is focused on unlocking value through its operating investments. As we go forward, you will see action in both the buckets and you will see unlocking opportunities.
How is real estate and sugar and ethanol connected? Are these not two very separate businesses?
Athar Shahab: Yes, they are and these are legacies of our conglomerate. But you must remember we have been in real estate now for more than 10 years. We have delivered a project successfully in Mysore, a project in Goa, and now we are building an ultra-premium luxury tower in Dubai. The franchise is now ready to take off. And in the fullness of time, it could become a sizable business by itself. We have recently had a joint venture with a very large European player to set up our first grain-based distillery in Uttar Pradesh.
We believe that business has a huge potential to grow and we would be looking at not only bioethanol, but biodiesel and a whole range of bioenergy products in that business. The point to note here is that we are a group that is going to evolve. We are going to look at opportunities. Of course, we will stay invested in sectors that are important to the Indian economy. We will continue to simplify our structures. But at the same time, we will continue to pursue growth opportunities.
What are your debt reduction plans and how do you plan to do that? Will it be some fundraise or asset monetisation based debt reduction or how do you plan to go about it?
Athar Shahab: Right now, the biggest source of debt reduction is monetisation of our land parcels in Goa. We hold a substantial amount of land in Goa, which we are selling. We have made some public announcements recently as well. And the recently announced merger, as and when it takes shape, will also bring in liquidity to our group companies, Zuari Agro Chemicals and that will also bring in turn liquidity to the apex holding company. These two plus the potential cash flows coming in from our Dubai project will be sufficient to deleverage the company.
Given how sugar and real estate are going to be cash generative businesses for you going forward, you are currently developing residential projects not just in Mysore and Goa, but even Dubai as we understand. What is the revenue potential?
Athar Shahab: I cannot share the revenue potential figures. I only want to tell you that we had picked up a property through a joint venture in Dubai and we have hit the market absolutely at the right time and it is a branded property. It is a St. Regis branded property in downtown Dubai. We sold 80% of it on the day of launch. It is a 55-storied ultra-premium tower coming just behind Burj Khalifa, running a couple of months ahead of schedule and with this, we have announced our presence on the global markets.
As an emerging real estate player, we are very focused on the India market as well, but if you do a project internationally, establish yourself, do a great job, it gives a tremendous amount of confidence to the team. So, we will look at opportunities in Dubai as well after the first project gets over. But we will stay very focused on the India market as well.
