Fichtel To Pick Up 51% In Sirmour Sudburg

The world's largest manufacturer of shock absorbers, Fichtel and Sachs AG (F&S) of Germany, is picking up a majority stake in Sirmour Sudburg Auto Ltd (SSAL) as part of the revised draft rehabilitation scheme of Board for Industrial and Financial Reconstruction (BIFR).

Under the Rs 21-crore revival package, the company will bring in Rs 16.06 crore by buying equity shares of SSAL at a premium of Rs 35 per share and have a stake of 51.1 per cent in the company.

The preferential allotment would result in the company being converted into a joint venture and the name of the company would be changed to Sachs Sirmour Ltd.

 

According to the scheme, SSAL would incur a capital expenditure of Rs 7.4 crore for upgrading the existing facilities as well as setting up new facilities to manufacture shock absorbers for four wheelers.

The capital expenditure would help in increasing its existing capacity from 2.4 million per annum to five million per annum for two wheelers and five million for four wheelers by March 1999.

The commercial banks have agreed to release the working capital to the tune of Rs 2.2 crore and the company will mobilise Rs 1.35 crore from internal accruals.

SSAL would be exempted from the Securities and Exchange Board of India (Sebi) guidelines for the proposed preferential placement subject to the condition that public holding shall not fall below 20.9 per cent in the company.

The company would also be exempted from listing guideline limits of minimum public holdings as required by regulations of stock exchanges, where the company's shares are listed.

The valuation of shares works out to Rs 12.7 per share as per the valuation report prepared by KPMG Peat Marwick India Pvt Ltd.

After implementation of the package, the paid-up capital of the company would increase from the present level of Rs 2.43 crore to Rs 6.98 crore and the holdings of the existing promoters will decline to 13.6 per cent from 27.6 per cent.

The public holdings would be diluted from 60 per cent to 20.9 per cent, the BIFR bench comprising M M Srivastava, chairman and Ashim Chatterji, member said at its recent hearing.

After the new equity structure, Fichtel and Sachs will have a majority of directors on the company's board and the day-to-day management would be entrusted with the vice chairman and chief executive officer.

Fichtel and Sachs would give the company the right to use its know-how for manufacturing contract products in India and allow it to use its trademarks free of cost.

SSAL's shockers are being supplied to original equipment manufacturers (OEMs) such as Telco, Bajaj Auto, LML, TVS Suzuki. Its shockers have also made inroads into railways and defence.

It was reported that Arjun tanks had been fitted with Sudburg shockers. About 60 per cent of Bajaj's and 80 per cent of LML's requirements are being met by SSAL.

The company's net worth is expected to exceed its accumulated losses in the year 1996-97.

It is expected to service its liabilities with an average debt service capital ratio of 1.51 taking into account Rs 16.06 crore envisaged from the preferential allotment favouring F&S and its accumulated losses would be wiped out fully during the year ended March 31, 2000.

Fichtel and Sachs will also provide corporate guarantee for the entire liabilities of the company to financial institutions and banks replacing the present individual guarantees of the current guarantors of the existing promoters' group, the BIFR order said.

BIFR has directed the monitoring authority Industrial Development Bank of India (IDBI) to conduct annual review of the implementation of the scheme within one month of the end of each year and submit a report on the progress thereof to the bench.