The Hindu Business Line : RPG Group drops rubber business consolidation plans

THE inordinate delay in getting the merger plans okayed, as the approval from the Kerala High Court is still awaited, has forced the RPG Group to drop its plans of consolidating its natural rubber business.

On Tuesday, the boards of Harrisons Malayalam Ltd (HML) and Ceat Ltd announced that they are withdrawing the schemes of arrangement.

In April 2003, the above boards decided to demerge the rubber division of HML and transfer it to Ceat and October 1, 2002 was fixed as the appointed date for the scheme of arrangement.

It was stated that this would help Ceat consolidate its operations through the backward integration. HML was supposed to gain too. After giving up the rubber business, it would have focused on its core activity of tea.

At the same time, it was also decided that Ceat's investment portfolio would be demerged and transferred to Meteoric Industrial Finance Company Ltd (MIFL), which is one of Ceat's non-banking financial subsidiaries.

Subsequent to this restructuring, MIFL would have ceased to be a subsidiary of Ceat. The RPG Group had planned to list this investment company at the Bombay Stock Exchange. The matter was duly forwarded to the Kerala High Court.

When queried about the reason behind the move to drop the scheme of arrangement, a senior official at Ceat said that the restructuring scheme has lost its relevance in the current scenario.

"In view of the considerable delay, the benefits that were to accrue to the companies and their shareholders, have lost their relevance and therefore the board of directors of HML, Ceat and MIFL have decided to withdraw the scheme", the company official stated.

The approximate turnover of HML's rubber division is Rs 50 crore from a crop output of about 10,000 tonnes. Ceat's current natural rubber consumption is approximately 50,000 tonnes.

According to the demerger plan of HML, Ceat was supposed to issue 95.03 lakh equity shares of Rs 10 each to HML and 36.91 lakh equity shares of Rs 10 each to the shareholders of HML in the ratio of one share for every five equity shares held by a shareholder.

HML's fully paid up equity was supposed to have been reduced to Rs 9.23 crore from Rs 18.45 crore by reducing the paid up value of the equity shares from Rs 10 each to Rs 5 each.

MIFL was supposed to issue 3.52 crore equity shares to shareholders of Ceat in the ratio of one share of MIFL of Re 1 each for every equity share of Ceat of Rs 10 each.

SBI Capital Markets and KPMG were the valuers of the scheme and Lodha & Co was the advisor.

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