Siemens To Issue Rs 150cr Preference Shares

Siemens India, which suffered a Rs 84.5 crore loss in the 12 months ending March 31, 1997, is seeking to increase its capital base and re-align its debt-equity ratio through a Rs 150-crore preference share issue.

Consisting of 15 crore cumulative redeemable preference shares at par, the issue will be placed privately with its parent Siemens AG, banks, financial institutions, FIIs and other investors. Company officials say dividend on preference shares will be at market rate and the entire transaction will be completed in the next 12 to 18 months.

After taking into account the loss of Rs 84.5 crore, the networth at the end of March 31, 1997 stood at Rs 202 crore. Siemens' total borrowings were nearly Rs 500 crore.

 

The Rs 150-crore issue will increase networth to Rs 352 crore and take the debt-equity ratio to 1.42:1 from the current ratio of 2.5:1. However, Siemens has explained the issue will not just supplement the existing capital base to cover current losses, but also future ones, until the restructuring measures being initiated results in a turnaround.

Siemens shareholders will vote on the preference share issue on August 2 in Mumbai. They will also vote on another resolution to hike the company's authorised capital to Rs 200 crore from Rs 50 crore. Due to high operating and fixed costs, plus losses from the telecom division, Siemens posted a Rs 84.5 crore loss in March 31, 1997. The company had extended its annual year to September 1997.

At a press conference in Mumbai on June 13, senior Siemens officials had announced a cost-reduction programme that would seek to cut interest costs, employee costs and lower the overall borrowings.

Heinz-Joachim Neubu-erger, Siemens executive director, finance, had said the company plans to retire debt and bring down the level of borrowings from Rs 500 crore to at least Rs 250 crore. Since then, the company has announced a voluntary retirement scheme (VRS) that seeks to cut workforce by nearly 1,400.

Though it will result in an outgo of Rs 7.5 crore, Siemens will save on annual wage bills of approximately around Rs two lakh per employee.

"The issue of preference shares to parent is a good move and it signals that the parent is backing the company. The performance this year will be bad but next year things should improve following equity infusion and cost cutting," said a power sector analyst at an FII.