Hinduja Foundries to merge with Ashok Leyland
Commercial vehicle manufacturer Ashok Leyland has decided to merge loss-making Hinduja Foundries Ltd. (HFL) with it, subject to regulatory approvals and approvals from shareholders of both the companies.
The appointed date of merger has been kept as October 1, 2016. Ashok Leyland management expects the process to be completed by March/April 2017.
As per the proposal, 100 equity shares of Rs.10 each fully paid of Hinduja Foundries will get 40 equity shares of Re.1 each fully paid of Ashok Leyland; 1,000 (2008 series) GDRs of Hinduja Foundries will get 133 equity shares of Re.1 each fully paid of Ashok Leyland, 1 (2016 series) GDRs of Hinduja Foundries will get 4,800 equity shares of Re.1 each fully paid of Ashok Leyland.
Briefing reporters, Gopal Mahadevan, Ashok Leyland Chief Financial Officer said: “HFL has been a critical supplier of castings to Ashok Leyland and 36 per cent of HFL revenues come from Ashok Leyland. After considering several options, we have come to a conclusion to merge it with us. It will benefit all the stakeholders. In the short term, the losses will be subsumed into Ashok Leyland books, we will get tax benefits and there will be improvement in operation performance of HFL itself.”
For the 18-month period ended March 31, 2016, HFL had a loss of Rs.394 crore, including exceptional losses of Rs.136 crore. The company has an accumulated loss of about Rs.1,100 crore and debt of Rs.512 crore.
Ashok Leyland has invested Rs.321 crore in HFL by way of preferential shares and has an equity stake of 2.64 per cent. After the merger, Ashok Leyland expects to get tax benefit of 32 per cent to 34 per cent of HFL losses. The promoters stake will increase by one per cent to 51.40 per cent.
“In the last two months, HFL reported EBITDA positive. And in the next two to three years, it can be turned positive. After the merger, HFL will be a division of Ashok Leyland. It will be run independently and have its own management and governance board,” he said.
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