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BW Businessworld

The Midas Touch

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Shirpur Gold, a refining unit for the yellow metal, has  shown a sharp spike in both sales and assets. Ever since Subhash Chandra’s Jaymeer Capital acquired it in 2008 from Asset Reconstruction Company of India (ARCIL), Shirpur has been on the turnaround path.

From zero production in FY10, the company sold Rs 199 crore of refined gold in FY11. Thereafter, it has shown a huge expansion in sales, notching up Rs 2,559 crore.

Himanshu Mody, Essel Group’s head for strategy and finance, told BW: “We have been able to secure lines of supply of the raw material from various African countries. We have also developed several value-added gold products like minting gold coins.” With India importing as much as 800 tonnes of gold a year, Shirpur Gold has a huge opportunity waiting. “The margins in the business are just 2 per cent, but considering volatile prices of the metal and the arbitrage possibilities as well as the volume of thousands of crores, it can be very profitable,” added Mody.

Weighed Down 
UB Holdings bleeds on account of its stake in Kingfisher

The travails of the Vijay Mallya-led United Breweries Group are well chronicled. It has seven listed entities. Mallya controls the group through an apex holding company, United Breweries Holdings (UBHL), in which the promoters have a 51.82 per cent stake. UBHL, in turn, owns stakes in other entities. What has mostly undermined UBHL has been its single largest holding of a 60.58 per cent stake in the ailing Kingfisher Airlines (KFA). KFA has dragged down UBHL’s asset base by nearly 40 per cent. On the bourses, however, UBHL has been a sterling performer. This run has primarily been driven by the expectation that Diageo, the world’s largest spirits company, will pick up a stake in United Spirits and thus UBHL’s shareholders may benefit.

Vijay Mallya, chairman
Total income Rs 6,614.81 cr
Operating loss Rs 316.59 cr
Net loss Rs 1,569.19 cr
(BW pic by Tribhuwan Sharma)
An analyst with a leading brokerage says: “Even if the deal with Diageo happens, given the exposure to Kingfisher, UBHL shareholders might not benefit much.” Unless KFA manages to attract an investor, UBHL shareholders might still see it eroding wealth.

Venkatesha Babu

(This story was published in Businessworld Issue Dated 29-10-2012)