Financial Daily from THE HINDU group of publications
Wednesday, Dec 10, 2003
Financial Daily from THE HINDU group of publications Wednesday, Dec 10, 2003 |
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Corporate
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Restructuring Eicher auto biz to be demerged Our Bureau
New Delhi , Dec. 9 THE Rs 1,300-crore Eicher Group has decided to demerge the automotive business of Eicher Ltd into Eicher Motors Ltd (EML). This implies that the tractors, two-wheelers, gears and engines business of Eicher Ltd would be demerged into Eicher Motors. According to a senior company official, the purpose of the demerger is to synergise the current structures and businesses of the two companies. The restructuring will result in a diversified auto major with presence in commercial vehicles, tractors, two-wheelers, diesel engines and gears segments. "The restructured entity will also have synergistic benefits on account of potential cost savings in many operational areas. Further, apart from being tax efficient, the new entity shall have greater financial strength and this would be conducive for undertaking strategic initiatives," he added. The additional shares to be issued in Eicher Motors Ltd (the resulting company), for the demerged undertaking, shall be issued in the ratio of two equity shares of EML for every five equity shares of Eicher Ltd, as agreed to by the board of directors of the two companies at Monday's company board meeting. The directors of Eicher Ltd have further decided to amalgamate Malbros Investments Ltd, a wholly-owned subsidiary of Eicher Ltd engaged in the business of finance and investment activities with Eicher Ltd (the residual entity after the demerger is effected) thereby combining the investments undertaking in Eicher Ltd. Further, the share capital of Eicher Ltd (residual entity) will be reorganised. The scheme is subject to requisite approvals of the shareholders, courts etc. Shares prices climb: Following news of the demerger, the stock price of EML, which had a turnover of Rs 625.92 crore in the last financial year, jumped by 5.37 per cent on the Bombay Stock Exchange (BSE) to close at Rs 206.95 on Tuesday. The stock price of Eicher Ltd, which clocked a turnover of Rs 532.49 crore in 2002-03, jumped by 8.29 per cent on BSE to close at Rs 101.90 today.
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