The board of directors of Zylog Systems has decided to take action against ICICI Bank for transferring shares held by it in Zylog’s wholly owned subsidiary Zylog Systems Canada Ltd to Ikya Human Capital.

“The bank transferred shares pledged by the promoters without our concurrence,” said Zylog’s Managing Director and Chief Operating Officer Ramanujam Sesharathnam,

He told BusinessLine that in February 2010, ICICI Bank had funded Zylog to acquire the Canadian firm Brainhunter for C$41 million, later renamed Zylog Systems Canada.

Of this, C$30 million was debt and the balance equity. The company paid C$9.5 million to the bank, and later requested it to restructure the term loan following a financial crisis that hit the parent company due to currency issues.

Last financial year, Zylog lost nearly ₹200 crore due to appreciation of the US dollar versus Indian rupee. This shrunk the working capital limits as the loans were in dollar denomination but the limit was set in Indian rupee. The company could not tie up for the additional sanctioned working capital, creating a deficit of an additional ₹130 crore.

Bone of contention

Zylog had pledged 100 per cent of the shares in Brainhunter with ICICI Bank, which sold the entire 70 lakh shares to Ikya for C$10 million in October. Braninhunter contributed nearly C$90 million in revenue and this was very important for the parent company, he said.

ICICI Bank made the share transfer to Ikya without the consent of the company and the Zylog’s lead lenders Union Bank of India.

Sesharatham said the company is now under provisional liquidation. The Official Liquidator appointed by the Madras High Court has also written to SEBI questioning the share transfer by the bank.

Zylog’s board also approved the plan to revive the company for which it has appointed IDBI Capital Market Services. The company is considering options like corporate debt restructuring. It is also open to bring in an equity investor and is in talk with a consortium of bankers led by Union Bank of India.

Zylog’s board at Friday’s meeting appointed Harishankar Mani & Kumarpal Chopra, Advocates, as legal counsel.

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