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Sundaram-Clayton, an auto component manufacturer and holding company of TVS Motor Company, has proposed a demerger of its auto parts manufacturing business and return of excess cash to its shareholders.
“The excess cash of the company will be distributed to shareholders by issuing fully paid-up listed NCPRS by way of bonus,” the company said in a communique to the stock exchanges. It will issue 116 non-convertible redeemable preference shares (NCRPS) of ₹10 each fully paid-up of the company for every equity share.
Assuming the existing number of equity shares of the company, an amount of ₹2,346.92 crore will be utilised from general reserves/retained earnings for issuance of bonus NCRPS, under the scheme after the approval of the National Company Law Tribunal (NCLT), it said.
The date of maturity will be February 2, 2024, or 12 months from the date of allotment, whichever is later.
The company said it has built up substantial surplus reserves, from its retained profits. The surplus reserves are well above the company’s current and likely future business needs. Overall reserves position is expected to improve further even after considering cash requirements for company’s capex programme and working capital requirements.
Accordingly, the company is of the view that these excess funds can be optimally utilised to reward its shareholders in such difficult and unprecedented times. However, in keeping with the company’s tradition of conventional cash management and being mindful of the challenging business environment, the company is of the view that it would be prudent to retain liquidity as well. Hence, the company has proposed the issuance of NCPRS.
To be listed on BSE, NSE
The NCRPS will be listed on the BSE and the National Stock Exchange.
Sundaram-Clayton has proposed to reorganise and segregate the businesses of manufacturing non-ferrous gravity and pressure die castings from its other businesses as it will enable an enhanced focus on each of the businesses and will further unlock value for the shareholders.
As part of the overall restructuring exercise, it is also proposed to consolidate promoter holding entities with the company by way of merger.
The proposed rearrangement scheme involves the amalgamation of TVS Holdings Ltd and VS Investments Pvt Ltd with Sundaram-Clayton Ltd.
Also, the entire business of manufacturing non-ferrous gravity and pressure die castings of Sundaram-Clayton and its related assets and liabilities are proposed to be demerged to Sundaram-Clayton DCD Pvt Ltd. The turnover of the manufacturing business was ₹1177 crore as of March 31, 2021.
The equity shares to be issued by Sundaram-Clayton DCD shall be listed on the BSE and the NSE.
From April 1, 2022, Venu Srinivasan, would continue to be the Managing Director of the Company designated as Chairman Emeritus. R Gopalan, Non-Executive Independent Director, was appointed as Chairman of the Board. Gopalan, a former IAS officer, has rich experience in the economic and financial administration of the country with long stints in the Ministry of Commerce and Finance, and the manufacturing and service sectors.
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