Recent News: The House of Dempo

The Dempo Group divests its Goa Mining and Logistics Business to Sesa Goa Limited

The Chairman of the Dempo Group Of Companies, Mr. Shrinivas Dempo, announced on Thursday, 11th June 2009, that the Dempo Group had signed an agreement with Sesa Goa to sell a part of their mining operations to it. Mr. Dempo also spoke about restructuring and the future of the Dempo Group of Companies.

What is the transaction?
The Dempo Group has embarked on a major restructuring exercise involving all its businesses in the group, which include Mining, Calcined Petroleum Coke, Pig Iron, Shipbuilding, Food, Travel and Media, Dempo Football Club and its interests in Education. As a part of this restructuring, the Dempo Group has sold V S Dempo & Company Private Limited (VSD), which houses the Group's Goa mining assets, to Sesa Goa Limited.

Towards this objective, the Dempo Group and Sesa Goa Limited (Sesa) have signed a definitive Share Purchase Agreement (SPA) on 11th June 2009, under which Sesa will acquire all the outstanding common shares of VSD (which in turn also holds 100% equity of Dempo Mining Corporation Private Limited and 50% equity of Goa Maritime Private Limited) for a purchase consideration of Rs.1,750 Crore on a debt-free and cash-free basis.

The consideration, which is received in cash, will be largely utilised in the restructuring endeavours.

An overview of VSD's iron ore business?

VSD's Financials:
	Sales: 4.36 million tonnes in FY09 (FY08: 3.85 million tonnes)
	Revenue of Rs 976 crore with EBITDA of Rs 417 crore in FY09
	21 mines with mineable reserves and resources of around 70 million tonnes (with around 17 years of mine life)

VSD's Assets include:

	Processing plants
	Barges
	Jetties
	Transhippers (owned & co-owned)
	Dedicated plot at Mormugao port

Geographical Mix of Exports:

	21% to China
	11% to Japan
	8% to Hong Kong

Key Customers:

	Japan - Nippon Steel Corporation
	China - Jinan Iron & Steel, and Quingdao Steel
	Hong Kong - Noble Group

Why was it important to dispose of Goa mining assets?

The Goa mining assets have a reserve of approximately 70 MT having a residual life of around 17 years. On a standalone basis, the size of the asset is nominal and therefore the Dempo Group felt it prudent to monetise this in order to focus on larger mining assets elsewhere, both within the country and overseas.

What was the rationale of closing the transaction with Sesa Goa Limited?

Apart from the fact that Sesa Goa is the largest iron ore player in India in the private sector, while evaluating Sesas offer, four major considerations were given due weightage:

(i) Sesa Goa is a Goan company, and therefore fully familiar with the local sensitivities and industrial practices. the Dempo Group, one of the leading business houses in Goa, was very clear that the owner of this asset should stand by the highest traditions of Goa

(ii) Sesa Goa is an efficient producer, having high growth plans and will therefore fully optimise the strength of our company. In short, VSD under the new parentage will only prosper and gain new heights.

(iii) Sesa Goa is a professional company and has a track record of working along with the existing management team in the companies that they have acquired. The Dempo Group has been assured that this case will be no different and that the existing management team will continue to be offered support and work under the direction of the Sesa Goa management.

(iv) In the current environment and global economic scenario Sesa Goa has paid a fair purchase consideration for the asset.

Is the Dempo Group exiting the mining business?

Dempo Group continues to be bullish on the iron ore sector and in the medium to long term have a sizeable fund corpus lined up for fresh investments in the sector.

Will this transaction mark the exit of Dempo Group from the state?

The Dempo Group has multiple businesses as outlined above and will continue to operate with its businesses, both within the state and outside, from Goa state. The Dempo Group headquarters will continue to be located in Goa. In addition, the Dempo Group will take increased interest in philanthropic activities in education and sports and work closely with the local state government in the upliftment of the State.

Dempo are a responsible corporate group and proud of their rich heritage and culture and it will be the Dempo Group family's endeavour to maintain this culture in the group of companies.