The Nagpur-based Neco group has finalised a three-way merger of Nagpur Alloy Castings and Jayaswals Neco into Nagpur Engineering at a ratio of 7:10.
As per the swap ratio, the shareholders of Nagpur Alloy Castings and Jayaswals Neco will be offered seven shares each of Nagpur Engineering for every 10 shares held in the respective companies. The shareholders of the three companies approved the merger at an extraordinary general meeting on February 28 in Nagpur.
The proposed merger will be effective from April 1,1996, and after the merger the companys equity will be Rs 20 crore. Post-merger, the promoters holding in Nagpur Engineering will decline to 52.05 per cent from the present 72.29 per cent. Financial Institutions will hold 9.76 per cent (1.56 per cent) and public and others 38.19 per cent as against 26.15 per cent earlier.
Post-merger, the companys turnover is likely to be over Rs 450 crore in the current year with the pig iron plant alone contributing nearly Rs 210 crore. The combined net worth of the merged company will be over Rs 170 crore. The book-value per share is likely to be nearly Rs 90 while debt equity ratio would be around 1:1. The assets size of the company will be over Rs 387 crore. The casting capacity of the merged company would be nearly 2.15 lakh tonnes a year. The decline in debt equity ratio is likely to smoothen various financial ratios.
The proposed merger will be beneficial for the three companies on many counts, said M M Vyas, director. First, all the three companies are in similar line of business with identical manufacturing facilities.
Because of this, the merged company can take up orders for any range of castings supplied by the three companies earlier. Besides, the proposed merger will help the group take up bigger projects in the coming years, Vyas said.
However, the financial performance of three group companies during the nine months period ended December 1996 was far from impressive. On an annualised basis, sales turnover of group companies increased marginally by 4.4 per cent to Rs 197.58 crore compared with the performance during the 12 months to March 1996. Gross profits at Rs 27.50 crore grew by 5.4 per cent. Because of non-provision to MAT, net profit at Rs 24.53 crore increased by 4.6 per cent on an annualised basis.
Nagpur Engineering, the flagship of the Neco group, is involved in the manufacture of cast iron products with a capacity of 1.08 lakh tonnes a year. Besides, it makes soya oil and de-oiled cakes with a crushing capacity of 500 tonnes per day. During the year ended March 1996, the company earned a net profit of Rs 9.16 crore on a sales of Rs 119.10 crore. As against the book-value of Rs 74.19, the share is now traded at Rs 27.50. The subscribers to the companys public issue, who bought shares at Rs 80, have found their investments heavily discounted.
Nagpur Alloy Castings manufacture iron and steel castings at a capacity of 25,000 tpa and 3.75 lakh tpa of sponge iron form the new project which started commercial production in November 1996. As against the book-value of Rs 61.78, the current share price hover around Rs 17. The company had come out with a rights issue at Rs 60 in 1990-91 and at Rs 90 in 1994-95.
Jayaswals Neco manufacture cast iron castings with a capacity of 52,000 tonnes per annum (tpa) and has an automobile castings capacity of 30,000 tpa.
