The Hindu Business Line : Texmaco shifting core engg business to subsidiary

Kolkata, May 16 Texmaco has decided to split its stock and transfer the core engineering business to a subsidiary. According to a highly placed company source, Texmaco will retain majority stake in the new subsidiary, while fresh investments from private equity and other outside sources would also be part of the broad plan.

The main company is broadly proposed to have a focus on real estate, civil construction and infrastructure businesses.

The company board, which met here on Friday, has approved the reduction of face value of its share to Rs 1 each from the present Rs 10.

The board also constituted a committee of directors to examine a “scheme of re-organisation” for transferring the core engineering business to a subsidiary company, a company release said without further elaboration.

According market sources, this means that wagon building, foundry, electro-mechanical equipment, and fabrication activities would find way into the books of the new subsidiary.

An analyst with an institutional brokerage said that the market was taken aback by the move of the management. “The appreciation in the stock was mainly because of the 2007-08 results and not the transfer of business proposal,” he added.

A source in the company explained that the committee did not have any timeframe for taking the decision but it would meet soon. “We are on a fast track,” he said indicating that the decisions would be in place by the end of this month.

According to a note to the annual accounts for 2007-08, the proposal of transfer of business is “to focus on accelerated growth and diversification, enhance shareholders’ value and raise financial resources to take advantage of the emerging business opportunities in infrastructure sector.”

The company board has proposed a dividend of 75 per cent for 2007-08. During the year, Texmaco’s net profit went up by 143 per cent to Rs 69.09 crore. Primarily a wagon manufacture, Texmaco has of late entered into EMU coaches and loco components.

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