Bengal Chemicals Divestment to turn into a real estate play

Bengal Chemicals Divestment to turn into a real estate play
17/02/2017 , by , in News/Views

Privatization could potentially turn India’s oldest pharmaceutical company, 125-year old Bengal Chemicals and Pharmaceuticals Ltd into a real estate play, say key officials and experts.

The company has a 1.65-acre property in central Mumbai’s Prabhadevi neighbourhood, which may not be carved out ahead of the strategic disinvestment of the central public sector enterprise.

At conservative estimates, the property is worth at least Rs1,000 crore, P.M. Chandraiah, the company’s managing director had said in an interview in October, based on a valuation done by an external agency. If properties in Kolkata and Kanpur are considered, the company has assets worth at least Rs1,500 crore.

Bengal Chemicals would surely get the attention of real estate developers because of its properties across India, said O.P. Pareek, partner at VN Purohit and Co., an audit firm that has previously been one of Bengal Chemicals’ internal auditors.

The motivation for such acquirers “may not necessarily” be revival of the firm’s core business of chemicals and pharmaceuticals and make money out of it, said Pareek.

To be sure, any company bidding for Bengal Chemicals will have to account for its fixed assets, including the prized Mumbai property.

The successful bidder will have to pay for the real estate assets, and it will be impossible to justify the price by the cash flow of its core business, said the official cited above.

Chandraiah had said that in the current fiscal year, Bengal Chemicals’ operating revenue will go up to Rs110 crore and to Rs200 crore by 2019-20. Freed of working capital constraints and under private ownership, the company’s performance may improve at a faster pace.

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