Drw Gives Dunlop Assurance On Rights Issue Subscription

The M R Chhabria-controlled beleaguered tyre major, Dunlop India, yesterday got an assurance from its major shareholder, Dunlop Rims & Wheels (DRW) to fully subscribe the proposed rights issue.

According to a release, DRW, with 39 per cent holding in Dunlop, has also assured the company it is willing to additionally subscribe to the otherwise unsubscribed portion of the rights issue, if any. Managing director P J Rao's efforts to mobilise funds for the cash-starved tyre major seems to have ultimately met with some form of success.

Rao has expressed confidence in turning the company around in 18 months, provided all the stakeholders participate in the revival effort.

 

The board of directors of Dunlop had earlier approved an issue of equity shares of Rs 10 each at a premium of Rs 25 per share totalling Rs 66 crore.

The company had to drastically cut down production in the recent past due to acute shortage of working capital. Dunlop is also exploring various avenues including sale of non-productive assets and an external commercial borrowing (ECB) besides the rights issue.

The company is currently discussing its ECB with international financial institutions and bankers and expects to complete the exercise as well as the rights issue by June 30, this year.

Dunlop management recently retrieved property documents held by one of the bankers.

The company issued an advertisement in respect of the sale of some of its real estate, and has apparently attracted encouraging response.

The Mumbai property alone is worth Rs 100 crore.

A company spokesman told Business Standard that a number of Indian corporates and multinationals have expressed their interest in purchasing the property. "There will not be any distress sale. The evaluation of the land has been done by professionals," said the spokesman.

The management feels that the long term solution for Dunlop lies in optimising operational costs by rationalising manpower and upgrading manufacturing technology. The release stated the company has a 7,700 strong workforce whereas the size and scale of operations requires just about 4,000 people.

Dunlop requires nearly Rs 120 crore as working capital and has only Rs 38 crore disbursed by the banks despite an in-principle agreement for a substantial upward revision.