The Hindu Business Line : Reliance Capital picks 14.81% stake in Kinetic Engineering

RELIANCE Capital Private Equity (RCPE), a division of Reliance Capital Ltd belonging to Anil Dhirubhai Ambani Enterprises (ADAE), is set to acquire a 14.81-per cent equity stake in 2-wheeler manufacturer Kinetic Engineering Ltd (KEL).

The proposal approved by KEL's board today was seen at the automobile manufacturer as a "financial investment" helpful for growing its auto components business. It is understood that RCPE has not sought a place on KEL's board. Its full investment via three routes adds up to Rs 38.4 crore.

While the 14.81 per cent stake would be had through a preferential allotment of equity shares, the complex deal featuring a mix of preferential shares and convertible equity warrants across three subscribers - RCPE, KEL's promoters and Ambit Corporate Finance Pte Ltd - should eventually increase KEL's capital by Rs 57 crore, once the conversions go through.

Routes of investment: According to an official statement, RCPE would first subscribe to 7,15,000 equity shares of KEL on a preferential basis, at Rs 178 per share, aggregating Rs 12.72 crore. Further, it would subscribe to 6,00,000 equity warrants of KEL, each convertible into an equity share, at a price of Rs 178 per share aggregating Rs 10.68 crore. RCPE would also be subscribing to 1,50,00,000 preference shares of KEL totalling an investment of Rs 15 crore.

From these three routes of investment, RCPE's equity stake in KEL would depend on the first round of preferential shares and the convertible equity warrants. "The Rs 15-crore investment is made up of redeemable preference shares," Ms Sulajja Firodia Motwani, Joint Managing Director, KEL, said.

Ambit Corporate Finance, as financial advisor, will subscribe to 1,00,000 equity warrants of KEL, each convertible into an equity share, at Rs 178 per share. Ambit would also subscribe to 50,500 equity shares of KEL at a price of Rs 178 per share, on a preferential basis. KEL's promoters, through MicroAge Instruments Pvt Ltd, would subscribe to 9,00,000 equity warrants of KEL, each convertible into an equity share, at Rs 178 per share.

Based on these figures, RCPE's investment works out to Rs 38.4 crore, that of KEL's promoters Rs 16 crore and that of Ambit Rs 2.68 crore. The total investment spanning equity and preferential equity would thus be Rs 57.08 crore. "The issue of shares is subject to the approval of shareholders of Kinetic Engineering,'' the statement said.

Promoters stake: KEL's promoters have at present 49.8 per cent equity stake in the company. The warrants being issued are optionally convertible after 18 months. Assuming there are no sales and all scheduled warrant conversions (including that of the promoter's) happen, then it would marginally lower promoter's stake in KEL to 45.3 per cent.

Shares of KEL closed higher Monday by Rs 8.75 at Rs 184.35 on the BSE.

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