Three Krishna Firms Set To Merge

Two Krishna group companies, Shree Krishna Polyester (SKP) and Shree Krishna Petro Yarns (SKPY) would be merged into Krishna Texport Industries (KTI) soon. The board of directors of these three companies have called separate board meetings on October 16, to consider the amalgamation.

Post merger, Pravin Kumar Tayal, the chairman of all three companies, will lead the Rs 1100-crore corporate entity. The proposed merger will achieve synergy in finance, production and marketing benefits as all three companies have an identical manufacturing facilities, Tayal said.

Prior to the proposal for amalgamation, the three group companies had also put a resolution in the annual general meeting on September 24 to increase authorised share capital. The group flagship, SKP, proposed to increase share capital to Rs 200 crore from Rs 85 crore, SKPY to Rs 200 crore from Rs 45 crore and KTI Rs 130 crore from Rs 11.50 crore.

The three companies, during the year ended March 1998, aggregated a sales turnover of Rs 1172 crore and net profits of Rs 158 crore.

Total assets aggregated at Rs 1360 crore while gross block is placed at Rs 354 crore.

The current share price value, which is favouring KTI, would lead to substantial reduction of equity capital _ to Rs 22.41 crore from the present aggregate level of Rs 88.68 crore. Considering aggregate reserves and surplus of Rs 919 crore, the book-value of KTI would be at around Rs 420.12.

The equity capital and book-value of the merged company is based on the assumption that equity-swap ratio for SKPY would be one share for every 5, and, for SKP, it would be at one share for every eight. The current share value of KTI is placed at Rs 114, SKPY at Rs 23 and SKP at Rs 14.25.

The assumption is also based on the fact that the current book value of KTI is at Rs 154.02, SKP Rs 106.83 and SKPY Rs 110.63 favouring KTI. Earning per share (EPS) for the year ended March also favours KTI. EPS for KTI for 1998-98 works out to Rs 20.02, SKPY to Rs 20.53 and SKP to Rs 15.79.

After the proposed merger, the promoters' share _ presently at 91.13 per cent in KTI (52.38 per cent body corporate and 38.75 per cent directors and relatives) _ will be reduced to 67.11 per cent.