The Hindu Business Line : HCL Tech seeks shareholder nod to borrow up to Rs 4,000 crore

New Delhi, Oct. 6 HCL Technologies, which is in the race to acquire UK-based Axon Group, would soon seek shareholders’ approval to authorise the Board of Directors to borrow up to Rs 4,000 crore outstanding at any time, over and above the aggregate of the paid-up capital and free reserves of the company.

HCL Technologies has convened an Annual General Meeting (AGM) on October 22, 2008 to seek an approval for the same, among other items on the agenda. When contacted, HCL spokesperson refused to comment on the issue.

“The company has substantially grown during the last three years. It is growing both organically and inorganically. The company has been entering into joint ventures, setting up of subsidiaries and acquiring companies overseas.

"In order to achieve greater financial flexibility and optimal financial structure, the company may be required to borrow funds which exceed the paid up capital and free reserves of the company,” HCL has said in its notice to the shareholders.

Limits

Under Section 293 (1) (D) of the Companies Act 1956, the Board of Directors of the company cannot, except with the consent of the shareholders borrow funds, in excess of the aggregate of the paid up capital and free reserves of the company.

The move comes at a time when the company has announced a cash offer of 650 pence per share for Axon, trumping a 600 pence a share offer by its Bangalore based rival Infosys Technologies. HCL’s bid, which would be recommended by Axon to its shareholders, values the SAP consulting company at about 441.1 million pounds (about Rs 3,800 crore).

HCL has already stated that the proposed acquisition would be funded largely through loans (HCL Technologies has tied up 400 million pounds from Standard Chartered) while the rest would come from internal accruals.