The Hindu Business Line : Vardhman Spinning to demerge textile biz

THE SP Oswal-promoted Vardhman Group has decided to transfer the entire textile business of Vardhman Spinning and General Mills Ltd (VSGML) to its subsidiary Mahavir Spinning Mills Ltd (MSML).

The decision to demerge VSGML's textile businesses and vest it in MSML with effect from April 1, 2004 was taken at the board meetings of the two companies on Thursday.

Under the overall restructuring scheme, VSGML would henceforth operate mainly as an investment company, while retaining its stake in MSML and some nominal assets not related to the textile business.

The board also approved a swap ratio of 0.80 as consideration to the shareholders of VSGML following the demerger of its textile businesses to MSML.

Thus, for every 10 equity shares they hold in VSGML, shareholders will receive eight fully paid equity shares in MSML, while retaining two fully paid up equity shares in VSGML.

The remaining eight shares held by the equity shareholders in VSGML would stand extinguished.

Accordingly, MSML's share capital will go up from Rs 25.75 crore to Rs 38.51 crore alongside a correspondent reduction in VSGML's share capital from Rs 15.96 crore to Rs 3.19 crore.

"The promoter shareholding, including cross holdings, will not increase after the scheme of demerger. Rather there will be a marginal decline. VSGML will continue to hold the same number of shares in MSML although its stake in the latter will go down from almost 40 per cent to about 27 per cent due to enlarged share capital of MSML," according to Vardhman group officials.

While VSGML was set up in 1962, MSML was promoted by it in October 1973. The Rs 674-crore turnover VSGML currently has a total capacity of 1,57,180 spindles and 528 rotors, 264 looms and a fabric processing capacity of 30 million metres per annum at various locations in Punjab and Himachal Pradesh.

More Stories on : Restructuring | Textiles

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