The Hindu Business Line : Ruia group stake in Jessop to go up to 93%

As the Government did not exercise its rights options, the stake of the Ruia group is slated to go up from 72 per cent to a little over 93 per cent on an expanded equity base of 59.5 crore.

The Government's stake will slip from 27 per cent to just 4.3 per cent.

Confirming the development, a Jessop spokesperson said that a board meeting held on November 2 had already approved the allocation of shares and the projected change in equity structure.

The public share holding, which was a miniscule one per cent, will continue to be same.

The issue proceeds are expected to bring the company out of the BIFR's purview - which was reportedly creating hurdles for growth - by making the net worth positive.

Jessop had already reduced the net loss from Rs 118 crore to Rs 32.5 crore by capital restructuring, which included reduction in face value of shares from Rs 10 to Re 1.

Accordingly, the paid-up equity capital had come down from 95 crore to Rs 9.5 crore just before the rights issue.

"Once the pending formalities are over, we will move to BIFR for delisting. We hope the entire process will be completed by the end of this fiscal," the Chairman, Mr P.K. Ruia, told Business Line.

Jessop recorded a net profit of Rs 4.82 crore on a turnover of Rs 77 crore in 2004-05.

This was against net profit of Rs 6.38 crore on a turnover of Rs 45 crore in 2003-04.

The Ruia group took control of the company in September 2003.

Earlier this year, the Ruia group approached the Government for buying back its 27 per cent strategic stake in the company.

It was also clear at that point of time that the Ruia group was agreeable to pay a higher price than Rs 2.67 per share (against a face value of Rs 10 per share) paid during acquisition of majority stake.

The proposal received the approval from the Union Law Ministry in May this year based on which the Union Finance Ministry was supposed to appoint an international valuer for fixing the price per share.

A panel of four valuers was also short-listed for the purpose.

However, the following months had witnessed a stalemate on the same.

Public offer likely

WHILE Mr Ruia remains tight-lipped about the future strategies, sources said that after having complete control over the decision-making process post-delisting from BIFR, the company may aim for a public offer to increase the public shareholding as per listing norms.

Though currently listed at the Calcutta Stock Exchange (CSE), the company's stock does not witness any trading due to lack of float.

Depending on the listing norms of the particular exchange, the Ruia group may either divest part of its stake and/or issue fresh capital to bring down the promoters' stake within the defined limits.

On the cards is also the roping in of strategic investors in the company.

The biggest benefit of delisting from the BIFR, however, will come through bankability. Absence of bank finance in working capital management often forces the company towards liquidity crisis.

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