Modis Seek To Buy Out Fis From Mrl

The Modis have offered a price of Rs 25-27 per share to financial institutions for buying out their 44 per cent equity holding in tyre major Modi Rubber Ltd (MRL).

"We will buy out the institutional holding. We have offered a Rs 25-27 per share. We expect the deal to go through by the end of this month," Modi Rubber managing director Bhupendra Kumar Modi told Business Standard. On Monday, the MRL scrip closed at Rs 25 at Bombay Stock Exchange.

The Modis, however, have indicated that they would be willing to raise their offer price depending on the price the financial institutions are looking for.

 

Once the deal is through, the Modis are planning to restructure the capital of the company by offloading equity in favour of a foreign partner.

Negotiations for a equity partnership with Continental AG of Germany _ with which Modi Rubber has a technology tie-up and whose brandname it now uses _ have been stalled since Continental AG is said to be taking a fresh look at India in the wake of the nuclear tests, sanctions and political instability.

Modi revealed that some Japanese and Korean companies have approached him for an equity partnership.

Meanwhile, according to Modi, the company has already completed half of its radial car tyre project. Rs 30 crore _ of the total planned investment of Rs 70 crore _ has already been invested and the first licence amount has already been paid.

The progress in the dialogue between the promoters and the FIs and other government institutions marks a thawing of relations between the two sides.

Industrial Finance Corporation of India (which holds 5.88 per cent equity in the company), Industrial Development Bank of India (0.26 per cent), Life Insurance Corporation (10.79 per cent), Generation Insurance Corporation (10.48 per cent), Unit Trust of India (16.87 per cent) and nationalised banks (0.44 per cent) together hold about Rs 1.12 crore shares in Modi Rubber, mainly through conversion of loans.

At the offered price, the government institutional holding will cost brothers B K Modi and vice-chairman and managing director Vinay Kumar Modi (who together hold 19.62 per cent equity) Rs 28 crore. According to B K Modi, this sum can be mobilised internally.

The Modis are now concentrating on turning around Modi Rubber, which had reported losses of Rs 18.55 crore on a turnover of over Rs 1,100 crore during the accounting year ended September 1997.

However, the scenario has brightened for the company in recent times. Modi Rubber recorded a net profit of Rs 2.78 crore in the first quarter of the current fiscal_following up on Rs 2.42 crore in the corresponding quarter of 1997-98.