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Shares of Sharda Motor Industries (SMIL) jumped 20 per cent to ₹1,473 on the NSE in intraday deals on Monday, as its board of directors approved a proposal for demerger of its automobile seats business through a scheme of arrangement.
The stock closed at ₹1,397.85, up 13.85 per cent, over the previous day’s close.
Earlier, the company received a proposal from its promoter(s)/director(s) about the memorandum of family settlement (MoFS). Under the terms of the MoFS, SMIL will demerge the seating business units of the company into a new wholly-owned subsidiary of the company.
The purpose of the MoFS is to settle all present and future disputes among the parties, i.e., Ajay Relan Family Group, Rohit Relan Family Group and Sharda Relan (promoter group) and to focus on core business segments of automotive exhaust system and other automotive components, the company said on Saturday.
Transfer via gift
Accordingly, the company’s shareholding in Bharat Seats, Toyota Boshoku Relan India Pvt Ltd and Toyo Sharda India Pvt Ltd would be transferred to the new wholly-owned subsidiary.
Besides, the entire shareholding of Rohit Relan Family Group, i.e., 25.19 per cent of the present paid-up capital, will be transferred, by way of gift or otherwise, to the Ajay Relan Family Group; while the Rohit Relan Family Group will operationally control the automobile seating business units, the Ajay Relan Family Group will control and manage SMIL.
Upon execution of the entire MoFS, Rohit Relan will resign from the directorship of the company.
The company had reported a profit of ₹78.61 crore in FY17-18 on revenues of ₹1,204.26 crore.
Currently, promoters hold 73.2 per cent stake in Sharda Motor and the remaining rests with the public. Among the public shareholders, FPIs hold 0.52 per cent stake and small investors 14.51 per cent.
Delegation of powers
The board has delegated the powers to Ajay Relan (Managing Director), Vivek Bhatia (Chief Financial Officer) and Nitin Vishnoi (Company Secretary) of the company to take requisite actions for executing the MoFS.
The company has also entered into a joint venture agreement with Eberspaecher Exhaust Technology International GmbH (EET) for business development of BS VI norms in the commercial vehicle segment in India.
The board authorised Ajay Relan to negotiate and sign the joint venture agreement with EET.
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