Usha Beltron Plans Big Pre-Merger Changes

The B K Jhawar-controlled cables major Usha Beltron Ltd, with which Jhawar group company Usha Martin Industries Ltd (UMIL) is to be merged, has proposed a slew of changes to prepare for the merger.

Usha Beltron is set to substantially hike its boards borrowing limit to Rs 1,500 crore, expand the board strength and its authorised capital base ahead of the formal amalgamation.

The merger of the two Jhawar group majors is one of the biggest corporate restructuring moves in recent days and would give rise to a much larger and diversified jelly-filled telecom cables-to-wire ropes conglomerate.

The changes are to be placed before the shareholders of UBL for their approval on February 20.

With Usha Martin being merged with Usha Beltron, the shareholders of Usha Martin would be issued one share of Usha Beltron for every three shares of Usha Martin held by them, according to the scheme of amalgamation.

The first major change being proposed by Usha Beltron is a steep hike in the borrowing powers of its board from the current Rs 400 crore to a hefty Rs 1,500 crore.

Consequent upon the proposed merger of UMIL with Usha Beltron, the existing borrowing limits of UMIL would be transferred to UBL.

Over and above this, the size of the company would increase manifold, which would require additional working capital funds.

Such additional funds would also be required to meet the companys capital expenditure and other strategic business plans. The current Rs 400 crore borrowing level is therefore being seen as insufficient.

Owing to the increase in the size and scale of operations following the merger, the Jhawar group also proposes to increase the size of the board beyond the present level of 12 by the induction of persons specialising in different professions and with business acumen, so that the board can easily shoulder additional responsibilities following the merger.

The maximum number of directors is being increased to 18.

The authorised capital of UBL is also proposed to be hiked from the present Rs 25 crore to Rs 75 crore, broken up into five crore equity shares of Rs 10 each and 25 lakh cumulative redeemable preference shares of Rs 100 each.

The increase in the authorised capital is to enable the company to issue equity shares and preference shares to the shareholders of UMIL under the proposed scheme of amalgamation and also to take care of future requirements for increase in capital arising out of expanded business activities in the coming days.

Together with this, the company is also proposing to increase the powers of the board to make loans to other corporates whether or not under the same management and to give any guarantee or provide any security to other bodies corporate.

These limits, currently at Rs 100 crore for loans and Rs 75 crore for guarantees are proposed to be hiked substantially to Rs 300 crore and Rs 200 crore, respectively.

The company will also seek shareholders approval to hike the overall limit for investments by non-resident Indians and foreign institutional investors from the present 24 per cent of paid up capital to 30 per cent.