MAC Agro was finding it difficult to sustain itself in its current business lines. It had suffered huge losses in its aqua and marine export business. The more potential divisions like sugar and distilleries lacked funds to grow.

``It would be impossible to fulfill shareholders' expectations in continuing to give dividends under the current scenario,'' Muthiah said at a media briefing. For the first quarter of the current year, the company made a marginal profit of Rs 2.5 lakh on a turnover of Rs 79 crore. The assets of the company stand at Rs 125 crore and liabilities Rs 75 crore.

The merger would have the effect of beefing up SICAL's asset base. Being a service-oriented business now, SICAL lacks the protection of tax shields and manufacturing assets. With the merger, with depreciation facilities on account of assets, the difference between the profit before tax and after tax would lessen, he said. The merged entity, SICAL, could work for a better rating which would help it leverage funds better. It could borrow more and retire high cost debts. It could also borrow more for consolidating operations, and make every division a profit-oriented centre by itself.