The Hindu Business Line : LGB exits textile biz with sale of mill

The Coimbatore-based auto and industrial components manufacturer LG Balakrishnan & Bros (LGB) has sold its textile mill, which had been converted into a wholly owned subsidiary called LGB Textiles Ltd, for Rs 19.45 crore.

A company source told Business Line said that the company board, which met on Monday, took the decision to sell the mill so that the company could focus on its core business.

The mill has been sold to a buyer at Karur; the entire transaction is expected to be completed in two months.

The company's advisors have been impressing upon the need for it to exit non-core activities in order to focus on the manufacture of auto and industrial components, for which demand is on the rise.

The 12,000-spindle textile mill had clocked turnover of about Rs 22 crore last year, around five per cent of LGB's turnover of Rs 416.12 crore.

The source said that the company would use the sale proceeds for ongoing capital expenditure.

The company is involved in the manufacture of products such as drive chains, cam chains, industrial chains, hot, warm and cold forgings, and fine blanked components.

It is an OEM supplier to many two- and four-wheeler manufacturers in India.

In the first quarter this year, LGB had allotted 55,32,714 equity shares (of face value of Re 1) at a premium of Rs 38.89 each to International Finance Corporation (IFC) on a preferential basis, amounting to 6.58 per cent of the total paid-up capital.

The deal with IFC was worth about $20 million, consisting of an equity investment of $5 million and term loan of $15 million.

This amount was raised to carry out improvement of existing facilities and development of a hot forging facility near Coimbatore.

The company has already received $5 million; the rest would be drawn over a period of two years. It has not offered any seat in the board for IFC, the source said.

LGB recorded net sales of Rs 110.77 crore in the first quarter compared to Rs 87.09 crore in the corresponding previous period.

Net profit, however, was less at Rs 2.63 crore (Rs 3.27 crore). The equity capital, after the IFC share allotment, stood at Rs 8.41 crore.

On Monday, the LGB counter witnessed huge trading volumes on the NSE (2.41 lakh shares) and the BSE (1.49 lakh shares).

The scrip closed at Rs 29.75 in the NSE and at Rs 30 on the BSE.

More Stories on : Mergers & Acquisitions | Automobile Components | Textiles

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page