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R.Y. Narayanan

Coimbatore, May 14 The LG Balakrishnan & Bros Ltd (LGB) stock has been registering a huge volume of trading in the NSE in the last two days following the announcement of the record date for de-merger of the forging division of the Coimbatore-based company on Tuesday.

While on Tuesday the counter saw about 16.35-lakh shares changing hands in the NSE, the volume came down on Wednesday to 8.53 lakh shares. . However, the share price maintained its upturn on Wednesday, closing at Rs 24.50 (FV Re 1) compared with the previous day’s closing price of Rs 23.75. Apparently, there was keen investor interest in the counter as shown by the high percentage of deliverable quantity to traded quantity According to the NSE data, out of 8.53-lakh shares traded, the deliverable quantity (gross across client level) was 3.58-lakh shares and in percentage term it was 41.94, which is considered to be higher than the normal deliverable percentage.

LGB on Tuesday said that it had fixed May 28 as the record date for determining the shareholders of the company, who would be eligible to receive shares of LGB Forge Ltd (LGBFL) in the ratio of 1:1. While LGB is engaged in the manufacture of automotive and industrial chains, auto components and forged components, LGBFL is an unlisted public company, incorporated for carrying on the manufacture of forgings and castings.

LGB said that while after the de-merger LGB Forge could focus on the forging division, LGB would focus on the rest of the businesses. While evaluating the options for realigning the business operations of the company, LGB proposed to de-merge the forging division along with its assets and liabilities including the operations at Bangalore, Mysore and Coimbatore and transfer the forging division on a going concern basis to LGBFL, which will be listed. The board said the new company will pursue the opportunities available for the global footprint of its operations including possible cross-border acquisitions and network.

Speaking to Business Line on Wednesday, a Senior Executive of LGB said the forging division contributed about 20-25 per cent of the turnover of LGB. He expected the share of this division in the turnover of LGB for 2007-08 (the annual results for last year are yet to be published) to be around Rs 100 crore. During the current fiscal, sales from the operations of the forging segment is expected to go up by another 20-25 per cent and the turnover to be around Rs 120 crore to Rs 130 crore in 2008-09. This will come largely from the erstwhile forging division, since the unlisted forging company had a very negligible turnover.

Explaining the logic behind the move, he said once the forging division becomes a separate company, it would be in a position to benefit from the strength of the LGB brand and be able to raise resources through different avenues for expansion. It could also look for acquisitions abroad. This might be difficult if it remained as part of LGB & Bros since the parent company had various manufacturing segments. The major customers of forging segment included Brakes India, Delphi, GKN, Denso, Lucas-TVS, and Visteon.

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