Announcing the restructuring plan at a press meet here, Godrej Soaps chairman Adi B Godrej said: "This is intended to be a `classical' demerger, with both the companies having identical shareholding pattern. Each shareholder will hold the same number of shares in each of the companies, as is held in Godrej Soaps."

The board has appointed a committee of directors, which will consider the details of the demerger. The panel is expected to submit its recommendations within the next six months for a final decision by the board.

Amidst heightened activity, the share price of Godrej Soaps hit the eight per cent upper circuit and closed at Rs 37.80 on the BSE on Monday. The volume of shares traded stood at 24,000, which is much more than the normal volume of 5,000 shares.

According to Godrej: "We have put in place various restructuring measures over the last two years, the benefits of which have been reflected in our turnaround results and continuous growth and profitability. This demerger will be the final step towards creating a focused FMCG company and will undoubtedly enhance shareholder value."

As a result of the demerger, Godrej said that the Godrej brand of consumer products is expected to register a 25-30 per cent growth this fiscal. The business (consumer product brands) is expected to continue growing at 25 per cent subsequently, he said.

Consumer products currently contributes to 47 per cent of the company's turnover while chemicals form 42 per cent.

The consumer products division of the company -- with a turnover of Rs 382 crore -- is a profitable business, which deals in toilet soaps, hair colour and toiletry products. Leading brands in the consumer products business are Cinthol, Ganga, Fair Glow, Nikhar, Color Soft and Kali Mehandi, among others.

The chemicals business has recently turned around with a growth of 24 per cent to post a turnover of Rs 291 crore in the previous fiscal. Elaborating on the company's first-quarter performance, Godrej said: "Chemicals has been a drag on the company in the past. The ROCE has increased to 4 per cent in FY00 from zero in the previous year, and is likely to generate net profits from the current year."

The chemicals business, according to Godrej Soaps president (chemicals) Mathew Eipe, will continue to improve capacities and is planning to increase the capacity of its sulphonate business. The company president for consumer products, Hoshedar Press, said that the consumer products division has set up a team to evaluate new product initiatives and is looking at new categories also.

The restructuring, according to analysts, is expected to open up opportunities of growth for the consumer products division, which operates on a higher ROCE (38 per cent in fiscal 2000) and is more profitable.

Previously, Godrej Soaps had announced the restructuring of businesses on business lines rather than functional lines. This created two divisions in the company; a consumer products division and a chemicals division to bring about a better focus.

Godrej Soaps registered a healthy growth for the quarter ened June 2000, with a net profit of Rs 14.4 crore on a turnover of Rs 199.41 crore. This represents a 176 per cent increase in net profit from Rs 5.21 crore from the corresponding period last year. Income from operations in the same period last year was Rs 187.68 crore.

``Despite a sharp increase in the advertising and sales expenditure, which doubled during the first-quarter to Rs 20 crore over that of the previous corresponding quarter, the company posted good profits,'' Godrej said. He said that operational efficiencies led to improved profitability for the company.

He said that the sales were lower than expected as secondary sales were ahead of the primary sales during the quarter. This, however, will provide a spring-board for the next three-quarters to post better results, he said. Operating profit was up in the first quarter at Rs 23 crore from Rs 17 crore in the previous year.