The Hindu Business Line : Electrolux Kelvinator Indian promoter opts out of rights

THE Indian promoter of Electrolux Kelvinator Ltd (EKL), the Indian arm of Swedish white goods major AB Electrolux, Mr Harish Kumar, has not opted for the company's nearly Rs 200-crore rights issue. The rights issue was fully subscribed as on April 26.

When asked why he had not subscribed for the rights issue, Mr Kumar told Business Line, "We have opposed the entire proposal. Since the matter is before the Company Law Board (CLB), it was not appropriate for us to subscribe for it. In fact, we are contesting the current equity structure of the company post-merger (Intron Ltd and Electrolux Voltas Ltd were merged with EKL). "

Mr Kumar and a clutch of other shareholders in their petition before the CLB had expressed fear that the parent company was seeking to increase its shareholding through the proposed rights issue and thereby, would have the shares de-listed from the stock exchange. Further, the petitioners said AB Electrolux would then go in for a buyback from the existing independent shareholders at a price extremely beneficial to it.

EKL on Wednesday informed the BSE that the company's board of directors has approved allotment of 19,90,88,995 equity shares (net of abeyance) pursuant to the closure of the rights issue of 19,97,74,709 equity shares of Rs 10 each for cash at par on the basis of allotment, approved by the Bombay Stock Exchange.

The EKL board also took on record the letter dated May 6, 2004, issued by AB Electrolux, Sweden, expressing its intention to adhere to its undertaking given in the Letter of Offer and the option made available to it, to buy out the remaining shareholders at the rights issue price under the SEBI (Delisting of Securities) Guidelines 2003. In fact, AB Electrolux has already obtained FIPB approval to hike its stake to 100 per cent in its Indian joint venture, EKL, by acquiring shares through open offer and subscribing to the unsubscribed portion of the rights issue.

The EKL board has also approved increase in the authorised share capital of the company by creation of additional 250 million equity shares of Rs 10 each and 10 million 6 per cent cumulative redeemable non-convertible preference shares of Rs 100 each, subject to shareholder approval.

On the issue of the parent company raising its stake in the Indian arm from the current 75.96 per cent to 87.9 per cent, Mr Kumar, who holds about 9.64 per cent equity in the company, said, "This is on expected lines."

According to Mr Rajeev Karwal, Managing Director and CEO, EKL, "With our rights issue fully subscribed, we will have substantial funds to continue our planned turnaround strategy. We will further strengthen our position by brand building, a new product development programme and will emerge as the most innovative appliances brand in the country. The rightsizing process is also near its successful completion."

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Electrolux Kelvinator Indian promoter opts out of rights