Modi Group Keen To Buy Out Fi Holding In Mrl
The BK Modi group is eager to buy out the equity holding of domestic financial institutions in Modi Rubber Ltd (MRL) and pay off their loans, but the FIs have yet to respond to this offer made way back in June 1996, says Bhupendra Kumar Modi, chairman and president of holding company ModiCorp.
The FIs have not yet responded to our offer. We are willing to pay the price determined by the market and make the public offer as required under Sebi guidelines. We have enough resources to repay the loans and buy the stake, Modi told Business Standard, dismissing recent reports that the FIs were setting a deadline after which they would auction their holding if the Modis did not buy it.
MRL is open to forming a joint venture with any of the foreign tyre majors, not necessarily Continental AG of Germany with which it has a technical tie-up.
FIs hold 43.7 per cent equity in MRL, acquired mainly through conversion of loans, brothers BK Modi and VK Modi together hold 25 per cent, while the rest is with the public. FI loan component is worth Rs 40 cr and carries an interest rate of 19 per cent.
At the end of the last financial year, the issued share capital of the company was 2,25,00,000 equity shares of Rs 10 each, amounting to Rs 22.5 crore. At the prevailing market price of around Rs 34, the FI stake will cost about Rs 33.43 crore. The total amount including the repayment of loan that the Modis will have to shell out would be about Rs 73.43 crore.
The largest holding is with Life Insurance Corporation and Unit Trust of India, with Industrial Finance Corporation of India and Industrial Credit & Investment Corporation of India holding relatively smaller stakes.
Modi says that one must be the single-largest shareholder in whichever company one manages. It becomes difficult when somebody else has a greater commitment to the company on the ground that he holds a larger stake.
Modi says that it is difficult to run a company in which the government holds such a large stake.
Modi hopes to resolve the tangle as soon as a new government takes charge at the Centre. He plans to revamp the MRL board as soon as the FIs are out and he becomes the single-largest shareholder. This is designed to turn around MRL, which reported losses of Rs 18.55 crore on a turnover of over Rs 1,100 crore during the accounting year ended Sept 1997.
The goal is to become number one in tyre business. We are open to pacts with any reputed foreign tyre company. We need a foreign tie-up to flourish, says Modi.