Kinetic Motors to merge into Kinetic Engineering

After merger, stake of promoters in Kinetic Engineering would stand at 53% from current 57%

Pune-based Kinetic Motors (KMCL) has completed the process of its merger with its auto component producing sister concern Kinetic Engineering (KEL).

The Bombay High Court in its final hearing approved the merger of KMCL with KEL and final order will be received within 15 days, the two companies, which is promoted by Firodia family, said.

"The amalgamation intends to consolidate synergies including enhanced financial strength and flexibility leading to strengthening and alignment of various stakeholders’ interest, reduction of cost and value creation for the stake holders", stated the company.

As a result of the merger, the stake of the promoters in Kinetic Engineering would stand at 53% from a current stake of 57%. The balance of shares will be held by public and financial institutions.  

Since the sale of its two-wheeler assets to a new company majority owned by Mahindra & Mahindra in 2008 Kinetic Motors was reduced to a shell company. From its earlier stake of 20% Kinetic Motors' stake in Mahindra 2 Wheelers (M2WL) presently stand at 12%.

This 12% stake translates to 61,200,000 shares of Rs 10 each valuing it at Rs 61 crore. M&M holds 88% stake in M2WL.

The merger culminates the restructuring activity undertaken by the Kinetic group to streamline its manufacturing and engineering entities towards a focused player in the automotive systems and components business with powertrain systems as its focal point.

Sulajja Firodia Motwani, Vice Chairperson, Kinetic Engineering, said, "The holding in Mahindra 2 Wheelers remain a strategic investment for us. We hope it gives us a good value as and when we decide to monetise it. Mahindra has just launched a motorcycle and in time with increased launches we hope that our holding will create more value".

KEL also announced the extension of its conversion /redemption of $18 million foreign currency convertible bonds (FCCB) till February 2014 which received Reserve Bank of India (RBI) approval within a YTM of 5.83% set as per Mid Swap ratio benchmark.

KEL had approached its bondholders, who also consented to the restructuring by extending the tenure of the FCCBs. Restructuring envisages extension of the tenure for conversion/redemption by an year and without the change in conversion price as was fixed at Rs 156 per share at the time of issue of FCCBs.

KEL stock on the Bombay Stock Exchange however was locked in the lower circuit with a fall of 4.99% at Rs 109.5 per share as compared to its previous day's close.