Blue Star To Reduce Equity By 25%, Spin Off It Arm
The Rs 550-crore Blue Star Ltd is reducing its equity capital by 25 per cent and, as part of the same exercise, spinning off its information technology division as a separate company with effect from October 1, 1998.
The shareholders of Blue Star -- India's leading central air-conditioning company -- will be required to submit their shares back to the company. Subsequently, for every four shares held, they will be issued three shares of Blue Star and one share of Blue Star Infotech, the new company.
The implementation of the scheme is however subject clearance of the high court, before which the company has already made an application.
At the end of the exercise, the equity capital of Blue Star, Rs 27.09 crore at present, will come down to about Rs 20.31 crore.
Blue Star Infotech will have an equity capital of Rs 10 crore, of which 68 per cent will be given to Blue Star shareholders, 29 per cent to the parent company, and 3 per cent will be put in a trust, to be issued through an employee stock option programme.
Blue Star president and vice-chairman Suneel M Advani said at a press conference in New Delhi yesterday that the equity restructuring does away with the need to go in for buy-back of own shares, which had been the company's intention, without having to pay the market price of about Rs 53-54 each for the shares.
"The intention was to reduce the equity capital to enhance shareholder value, which is happening as part of the scheme," he said. Approvals of the government and the high court may take some time, in which case Blue Star Infotech will come into existence as a separate company with retrospective effect from October 1. Its shares may be listed at stock exchanges in January-February 1999, after all requisite approvals have been received.
Advani, his immediate family and the directors of the company hold about 40 per cent equity in Blue Star, government-sponsored financial institutions hold 10.6 per cent, foreign holding is 1.4 per cent and other resident shareholders hold 48.5 per cent. Of its total business, air-conditioning and refrigeration accounts for 68 per cent, electronics and software for 12 per cent, industrial equipment and projects for 11 per cent and commercial equipment for 9 per cent. Of its total revenue, projects and construction contribute 50 per cent, manufacturing 27 per cent, imported equipment marketing 10 per cent and service 13 per cent.
Blue Star is also into joint venture talks with US-based York International Corporation for manufacture of industrial refrigeration products. It already has a 15-year-old technical tie-up with York International. The company has also tied up with Climatrol of Italy for manufacturing double skin air handling units, with Kolpak of the US for manufacturing cold rooms and with Bohn for making refrigerating units for cold rooms.