Electrolux Will Provide Exit Option To Public

Electrolux Kelvinator Ltd (EKL) has told the Securities and Exchange Board of India (Sebi) that it will provide a "suitable exit opportunity to public shareholders" in the event of the promoter shareholding in EKL crossing 90 per cent following the proposed Rs 250 crore rights issue.

This implies that the subsidiary of the Swedish white goods major AB Electrolux is open to delisting from the stock exchanges, though in its letter to Sebi, the company has also said that it would also consider divesting the promoter shareholding above 90 per cent in keeping with the mechanism prescribed in Regulation 21 (3) of the Sebi (Substantial Acquisition of Shares and Takeovers) Regulation, 1997, to ensure compliance and non-applicability of 40A of the listing agreement.

Company officials had earlier denied it had any intentions of delisting, contrary to the view expressed in the letter to the regulator.

Sebi has recently asked the Foreign Investment Promotion Board (FIPB) to reject the company's proposal for a Rs 250 crore rights issue on the ground that it would increase the promoter's shareholding above 90 per cent, giving it an opportunity to delist.

The FIPB is yet to take a decision. But the company has written to the board asking it to keep its decision on hold till Sebi responds to its letter.

Sebi's response to Electrolux's plea could not be ascertained. Promoters own 85.6 per cent (approximately Rs 149 crore) of the existing equity capital of the Rs 174 crore of Electrolux Kelvinator, split between foreign promoters (75.96 per cent) and Indian promoters (9.64 per cent). The public shareholding is 14.4 per cent.

The company has posted losses resulting in its book value depleting to Rs 0.25 per share as on December 31, 2001. The company also faces becoming a sick company under the Sick Industries Companies Act, 1982.

Electrolux Kelvinator told Sebi that it required an immediate infusion of Rs 250 crore to fund operating losses and to ensure it does not become a sick company.

"The potential referral to BIFR is likely to adversely affect the large number of public shareholders of the company, as also the banking system since the loans advanced by commercial banks will need to be reclassified as non-performing assets," the company wrote in its letter to Sebi.