Taking a U-turn from a previous plan to divest its 50 per cent shareholding in Escorts Mahle Ltd, a joint venture with Mahle Gmbh, Escorts Ltd has now decided to continue as a 50 per cent partner in the venture by subscribing to a fresh allotment of equity.
Escorts Mahle manufactures auto components such as piston assemblies, pistons and pins. According to sources, in August 1999, the joint venture had taken a DM 6 million loan from Mahle Gmbh.
Last month, however, Mahle decided to convert this outstanding loan into equity by subscribing to an issuance of 1,42,58,908 shares of Rs 10 each (Rs 14.26 crore), at par. There was also a proposal to convert the joint venture into a wholly owned subsidiary of the German firm.
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However, both the companies have decided not to disturb the shareholding pattern in the venture and continue as 50:50 partners. Hence, a similar quantum of shares will be issued to Escorts Ltd so that its shareholding is maintained at 50 per cent. Mahle holds the remaining 50 per cent.
The foreign investment promotion board (FIPB) had cleared the scheme of capital restructuring recently, government sources added. The sources had told Business Standard that the company had earlier filed a proposal to convert the joint venture into a wholly owned subsidiary of Mahle.
However, Escorts chief Rajan Nanda had then denied having taken any such decision. "We are still negotiating with Mahle for selling our stake. Talks are still on and we have not made any application to the FIPB," he had said.
Today, however, executives at Escorts Ltd were not available for comment. The sources in industry ministry also declined to comment on whether the application was changed at a later date. All he was willing to share was that the proposal has been cleared by the minister of commerce and industry and the company has been informed about the decision.