1:12 Swap For Merger Of Videocon Companies

The boards of Videocon International Ltd and Videocon Narmada Electronics Ltd have approved a share swap ratio of 1:12 (one share of Videocon International for every 12 shares of Videocon Narmada) for the merger of the two companies.

The share swap ratio, which has been worked out by I-Sec, the merchant banking arm of Industrial Credit and Investment Corporation of India (ICICI), was approved at the board meetings of the two companies held on Monday, April 21, 1997.

With the merger of Videocon Narmada, which has a capital base of Rs 172 crore, into Videocon International, the equity capital base of the latter will increase from Rs 56 crore to Rs 70 crore.

 

The two companies will now approach the Mumbai and the Ahmedabad high courts for their approval to the merger which will take retrospective effect from March 31, 1996.

Thereafter the companies will obtain their shareholders' approval in an extra-ordinary general meeting.

The merger will give the state -government owned GNFC, which has a 7 per cent stake in Videocon Narmada, a minority equity stake of about 1.7 per cent in Videocon International. The total (both direct and indirect) equity stake of the Dhoots in Videocon International post-merger will be about 32 per cent, with their direct holding rising from about 19 per cent to 24 per cent in the company.

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. The company achieved a turnover of Rs 80 crore in the year ended September 30, 1997, with a token profit of Rs 30 lakh. Currently, the total dues outstanding in Videocon Narmada at any point of time is estimated to be around Rs 30 crore.

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 combined balance sheet of the two companies post merger will thus aid Videocon raise credit for funding the proposed expansion of its glass shell facility from the existing annual manufacturing capacity of 1.7 million to 6 million.

The group has already lined up a total investment of Rs 350 crore for its glass shells division in the next 3 years.