India Foils Ltd and Light Metal Industries, both belonging to the B M Khaitan-owned Williamson Magor group, yesterday announced merger plans, following a decision taken at the meetings of the boards of the two companies.
Under the proposed merger, India Foils Ltd (IFL) will issue fresh equity shares to the existing shareholders of Light Metal Industries (LMI) in the ratio of 2 IFL shares for every 5 shares held in LMI, based on the recommendations of auditors Price Waterhouse.
The proposed scheme of mergers would be subject to the normal procedures and approvals of the shareholders, banks, concerned financial institutions, government bodies and the Calcutta High Court.
Henceforth, LMI will cease to exist as an entity, and the merged entity will function under the name India Foils Ltd.
Post merger, in the slightly enhanced equity of Rs 17 crore, the Williamson Magor equity stake will fall to 60 per cent, and West Bengal Industrial Development Corporation will hold 2.5 per cent. The financial institutions will hold around 15 per cent of the equity. Before the merger, Williamson Magor held 66 per cent in India Foils and the balance was held by financial institutions and the public. Pre-merger, in Light Metal Industries, the group stake was about 48 per cent, the West Bengal Industrial Development Corporation held 5.5 per cent, while the balance was held by the public.
Before the merger, the total equity of Light Metal Industries was Rs 15.35 crore and IFL was Rs 11 crore. The group has chalked out a long term 5-point strategy for the merged entity:
Backward integration through secondary route and produce part requirement of aluminium ingots.
To enter into the sheet market and modernise sheet rolling capacity similar to foil.
To widen foil usage with domestic (kitchen foil) and industrial applications.
To widen the export territory, including the advanced countries.
To add further converting facilities for the value-added products.
According to P Bajaj, managing director, India Foils Ltd, the decision to merge these two companies was taken keeping in view, the changing business scenario.in domestic and international markets owing to substantial increase in the rolling capacity, the opening of the Indian market, and the changes in the import duty structure. The amalgamated company would also be able to undertake combined research and development programmes for the development of new alloys and commercial grade of aluminium sheets.
Changes in the last budget had badly hit the aluminium sheet and foil manufacturers, as there was increase in basic import duty on aluminium ingots by a 100 per cent from 10 per cent to 20 per cent without any corresponding correction in value-added products. In fact, basic import duty on sheets and foil was progressively reduced from 40 to 20 per cent.
This, coupled with the fact that primary producers of aluminium hiked the prices of ingot by over Rs 10,000/tonne, whereas sheet and foil manufacturers have not been able to pass on the increase fully to their customers because of threat of imports from neighbouring countries.
Baja also said that the group will look into the possibility for further backward integration at least from the secondary route of producing aluminium ingots, thereby bringing down the basic raw material costs.
The company has drawn up specific plans to launch its own brand of kitchen foils possibly in January, Bajaj told Business Standard.
With the programme of backward integration on hand, the company is negotiating with a few foreign companies for forward integration for the manufacture of special kinds of foil laminates for use in insulation and building industries.
The company has plans to expand on the export front. It aims to forge links with at least 10 new countries by the turn of this fiscal, where its product samples would be approved. Long term plans include selling off 10 tonnes per year to around 20 countries as this would thin out the risk factor owing to political and economic instability of the countries in question.
