Clariant Chemicals Sells Three Business Lines

Clariant Chemicals India (CCI) has sold its textile chemicals, paper specialties and emulsion businesses to a US-based private equity fund, SK Capital. As per the agreement, CCI will transfer its R&D, sales and marketing operations, production plants and sites worldwide to the said entity. CCI’s promoter is a Swiss chemical company, Clariant, which has initiated the sale of these business lines located in many countries. The total consideration of this asset sale is USD 550 million (Rs 3020 crore).

Early in 2012, Clariant had indicated that it was looking for strategic options to these businesses until 2013. This asset sale has been as per the expectations of the Swiss parent. As per the company’s press release, Clariant is now focussing on business segments in which it has pricing power. It has also given early indications that its leather services, detergents and intermediates business lines may be divested in future.

Clariant's Indian arm, CCI, operates in two business segments, viz. intermediates and colors (ICs) and specialty chemicals. As per its annual report for the year 2011, ICs form 40% while specialty chemicals form the remaining 60% of CCI’s total revenues. Both of these business verticals manufacture and sell chemicals used for detergents, additives, pigments, emulsions, leather services, paper, textiles, masterbatches (an additive used for colouring plastics) and industrial consumers. How the company classifies these businesses in its two main business verticals is unknown, hence, the impact of the sale on its topline cannot be gauged at the moment.

The company generated a total revenue of Rs 956 crore in 2011, of which 23.6% came in from the export markets. In the same year, it also sold a part of its land, which generated exceptional gains of Rs 240 crore. It announced higher dividends last year to reward its shareholders. This year, it has seen some downturn in its financial performance as profits have declined by 72% to Rs 79 crore for the first nine months of FY12.

When we contacted the CCI, the company spokesperson flatly declined to comment on the divestment. He also said that the decision to sell the business has been taken by the parent company Clariant, and all the information available with the company has been notified to the stock exchange. From the information available in public domain, it is understood that the rest of business operations will continue to perform normally.

It remains to be seen whether CCI rewards its shareholders after selling some of its businesses.