I-Sec To Work Out Vnel-Videocon Merger Ratio
Videocon Narmada Electronics Ltd (VNEL) has decided entrust the task of evaluating the various financial aspects of the proposed merger with Videocon International with I-Sec, the merchant banking arm of Industrial Credit and Investment Corporation of India (ICICI).
The formal instructions to I-Sec will be given by the company next week, after which it will prepare a viable merger proposal.
The share swap ratio may be anywhere between 10:1 and 15:1, analysts said. The exact figure is, however, yet to be worked out.
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Videocon Narmada, the Gujarat-based manufacturer of colour glass shells, is expected to merge into colour television maker Videocon International Ltd, the flagship company of the Dhoot-promoted Videocon group soon.
The merger, the details of which are to be thrashed out over the next few months, will give the Gujarat government, a joint venture partner in Videocon Narmada, a stake in Videocon International. The merger is slated to be complete by September 30, 1997, the end of the 1996-97 financial year for Videocon Narmada, which has a October-to-September accounting year.
Loss-making Videocon Narmada, which has yet to pay any dividend to its shareholders since it started operations in 1994, has a market capitalisation below par at around Rs 60 crore on an equity capital base of about Rs 170 crore. Currently, the total dues outstanding in Videocon Narmada is estimated to be around Rs 30 crore, while the company is grossing a revenue of only Rs 12 crore per month. Videocon International, in contrast, is a dividend-paying, profit making company, with a total turnover of Rs 1600 crore and profit of Rs 100 crore last year.
The company currently has an equity capital base of Rs 52 crore which is expected to rise, post-merger, to between Rs 64 crore and Rs 67 crore depending on the ratio in which one of its equity share is traded for those of Videocon Narmada.
The television manufacturer will get to enjoy tax benefits as a result of the merger because of the huge losses piled up in the glass shell company.
According to sources, Videocon Narmada ran into financial trouble due to non-receipt of outstanding credit dues from customers, primarily the two leading domestic picture tube makers, JCT Electronics and Samtel.The tube manufacturers in turn cite the outstanding credit position with Videocon International as the reason for inability to pay these dues.