Usha Martin, Beltron To Be Merged

Equity base of merged entity Rs 23 crore Jhawar holdings to stand at 44% One UBL share to be swapped for three UMIL shares Merger to be effective October 1, 1997

The B K Jhawar group yesterday announced the merger of wire and wire ropes maker Usha Martin Industries Ltd (UMIL) with jelly-filled telecom cables company Usha Beltron Ltd (UBL).

The merged company would be called Usha Martin Industries Ltd to capitalise on the Usha Martin brand name. The merger will be effective October 1, 1997, after getting the necessary approvals.

The merger was approved by the boards of the respective companies yesterday. The boards agreed that one share of UBL will be issued for three shares of UMIL. B K Jhawar, group chairman, said the ratio of the merger was worked out on the basis of joint valuation done by two independent firms, N M Raiji and Co and Dalal and Shah.

 

The simple aggregate of the equity of merging the two companies would have been Rs 53 crore (Rs 12 crore of UBL and Rs 41 crore of UMIL). But this has actually worked out to Rs 23 crore, given the cross holding pattern and the swap ratio. The merged assets stand at Rs 614 crore.

The promoters currently have 47.5 per cent stake in UMIL and 52.5 per cent stake in UBL. After the merger, their stake in the merged entity will stand at 44 per cent. The public and GDR holdings will account for 25 per cent stake and the remaining will be held by the financial institutions and foreign institutional investors.

As a result of the synergy and cost saving, the profits of the merged company is expected to be higher than the aggregate profits of the two companies. We hope to double our turnover by the turn of the century, Jhawar said. The group plans to pump in $100 million into the companys expansions over the next three years.

UBL vice-chairman, Prashant Jhawar, said the merger will help in building a stronger and more broad based company not dependent on any one business. The company will focus on expanding its wire rope and jelly filled cable business through greenfield projects and acquisitions.

In software, the company will enter into designing new software operating systems for communications and hardware sector and work with international service providers to offer end-to-end connectivity solutions for the telecom industry. In telecom, it is planning to bid for fresh circles through joint ventures. The company, however, has no immediate plans to move in manufacturing of optic fibre cables.

UMIL first half gross sales & operational income rose to Rs 314 cr from the previous years corresponding earnings of Rs 268.04 crore. While gross profit rose to Rs 46.20 cr from last years Rs 25.66 crore, net profit slumped to Rs 9.25 cr from last years correspond period figure of Rs 14.57 cr.

UBL gross sales for the first half of the fiscal fell to Rs 85 crore against last years Rs 113.5 cr.

Net profit increased to Rs 14 crore from Rs 10.4 crore in first half 1996.