GE Shipping demerger inches closer to reality

MUMBAI: More than eight months after it received the Bombay High Court approval, Great Eastern Shipping (GE Shipping) is finally set for the demerger of its offshore division into a separate company — Great Offshore Ltd (GOL). Sources said a board meeting would be called in a week, and the proposed demerger would soon be a reality.

Every five shares of India’s largest private shipping company will be split into one share of GOL and four shares of the GE Shipping. Post de-merger, both the entities — GE Shipping and GOL — would be headed by KM Sheth as chairman and will have identical promoters. On Tuesday, GE Shipping’s stock closed at Rs 300 on the BSE, down from the previous close of Rs 301.25.

On August 2, when the 6-month deadline given by the high court expired, GE Shipping was in two minds whether to continue with the demerger process. However, a few days later, the company’s board met and decided to go ahead with the demerger and had sought the court’s extension. Subsequently, it received three months extension for completing the demerger process.

“ONGC, which holds 36 contracts with the offshore division of GE Shipping, had put forth some conditions including a performance guarantee for the demerger. The board of GE Shipping had declined to provide any guarantee. However, ONGC had subsequently withdrawn those pre-conditions, paving the way for the de-merger,” said sources. The new deadline given by the court will expire on November 2, ’06.

The process is expected to be completed before the deadline, sources added. The vertical split in GE Shipping was proposed late last year, in a move to enhance shareholder value. The company had denied strong rumours that the demerger proposal stemmed from a family dispute.

All the assets under the offshore division as on March 31, ’05, will be shifted to the new company. Some 80 people who are currently working for the division will also be shifted to the new entity, which will be head-quartered at ‘Energy House’ on DN Road. The new company will be effective from April 1, ’05.

GE Shipping has, meanwhile, floated a separate subsidiary Greatship (India) to focus on offshore activities, and is expected to compete with GOL post-demerger.