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Our Bureau

Chennai , Jan. 25

ENNORE Foundries Ltd, an associate company of Ashok Leyland and a member of the Hinduja group, proposes to issue 95,05,860 equity shares of Rs 10 each at a premium of Rs 50 a share in the ratio of 14 shares for every 10 shares held. This will help the company raise Rs 57.04 crore to part-finance a 50,000-tonne foundry and revamp the existing facilities.

The company's board of directors met on Tuesday and approved the proposal to issue shares on a rights basis. The company will seek its shareholders' approval at an extraordinary general meeting in February.

According to an Ennore Foundries release, the proceeds from the rights issue will be used to part-finance modernisation of existing facilities, expansion and acquisition of allied businesses.

When contacted, Mr V. Mahadevan, Managing Director, Ennore Foundries, said the company was looking to spend Rs 160 crore, of which Rs 120 crore would be on the new foundry and the balance at revamping and modernising the existing facilities.

Asked about the proposal to look at acquisition of allied businesses, Mr Mahadevan said that the company would look at segments in the foundry industry itself that would give it export opportunities and help it enter new segments.

With the fresh infusion of equity, the company will be able to borrow at least Rs 100 crore that will be needed for the expansion and modernisation. The expansion will double the company's foundry capacity.

The promoters own 80 per cent of Ennore Foundries equity with the Hinduja-owned LRLIH holding 59 per cent and Ashok Leyland 21 per cent.

Ennore Foundries has a capacity to produce 48,000 tonnes of grey iron and 3,000 tonnes of aluminium castings.

Net profit up: For the three months ended December 31, 2004, the company has reported a net profit of Rs 3.60 crore on sales of Rs 56.46 crore against a net profit of Rs 65 lakh on sales of Rs 47.99 crore for the corresponding period last year. Finance charges have been halved to Rs 84.80 lakh from Rs 1.62 crore previously.

For the first nine months of this year, the company reported a net profit of Rs 9.02 crore on sales of Rs 166.49 crore against a net profit of Rs 77 lakh on sales of Rs 130.70 crore for the corresponding period last year.

The press release quoted Mr Mahadevan as saying that "this improvement in profitability is largely due to better price realisation, lower energy cost through self generation, reduction in interest costs through loan restructuring as also to better product mix."

In a communication to the stock exchanges, Ashok Leyland has said that its board will meet on January 29 to consider a proposal to sell its Ductron Castings unit in Hyderabad to Ennore Foundries. Company officials said the idea was to consolidate all the foundry businesses in the group with Ennore Foundries.

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