McNally Bharat Engineering to declassify EMC as promoter shareholder

EMC is the company with which McNally Bharat Engineering had previously vied for a merger

McNally Bharat Engineering, the engineering entity of the Williamson Magor Group (WMG) is in the process of declassifying EMC from a promoter shareholder to a public shareholder.

Sources in McNally Bharat Engineering (MBEL) said that the company is in the process of taking certificates from concerned auditors and other necessary clearances post which it will notify the country’s bourses to declassify EMC as a promoter shareholder. EMC is currently undergoing insolvency resolution proceedings in the NCLT

EMC stake in MBEL, on the other hand, has been on a steady decline. Manoj Toshniwal, director at EMC said, “The shares of EMC were pledged and the lenders are invoking their pledge. That is how EMC’s shareholding in MBEL has been falling”.

He said that the shares were pledged to raise capital for infusion into MBEL.

EMC is the very company with which McNally Bharat Engineering (MBEL) had previously vied for a merger which finally didn’t work out. After EMC entered MBEL as a strategic investor in 2015 with a 19.77 per cent stake, WMG first mooted the idea to build east India’s largest engineering company with revenues over Rs. 7,000 crore and an order book exceeding Rs. 10,000 crore by merging the engineering entities of WMG – MBEL and McNally Sayaji Engineering Ltd – and EMC, with Kilburn Engineering Ltd (KEL).  

KEL is another WMG controlled entity.

As the proposal gained momentum with the Khaitan family of WMG and the Toshniwal family of EMC, Toshniwal came on board of MBEL as additional director in October 2016 and he furthered the stake to 26.66 per cent by the end of December 2016. However, negotiations fell through in December of the same year owing to non-conducive business environment and cultural differences, Toshniwal resigned from the MBEL board and EMC’s stakeholding started declining.

By December 2017, it had fallen to 24.89 per cent and by the end of December 2018, it stood at 6.80 per cent.

On the other hand, WMG and its group entities had infused around Rs. 1,000 crore into MBEL during 2016-2018.

By November 2018, the Kolkata bench of NCLT had admitted EMC for insolvency resolution after the company defaulted on payments of around Rs. 6,500 crore to banks and other creditors.

Sources close to EMC said that the overall business sentiment in engineering, procurement and construction business had been muted in the country over the past few years which affected EMC’s fortunes.

“Delayed payments and the muted overall business sentiment had impacted the working capital position of EMC as well as its ability to pay back to the lenders and other creditors”, a person familiar with the insolvency proceedings against EMC said.

On the other hand, other WMG entities like McLeod Russel have been selling their tea estates to pare debts while the Group's flagship firm Eveready Industries is on the lookout for a strategic partnership with global battery majors or PE firms. Sources said Eveready might also consider a sellout of the batteries business while retain control over flashlights, appliances, FMCG, packet tea and other businesses.

McNally Bharat Engineering (MBEL) to declassify EMC as promoter company

EMC currently has a 6.80% stake in MBEL

EMC was roped in as a strategic investor in 2016 and MBEL had once vied for merger with EMC

Manoj Toshniwal, director at EMC resigned as additional director in MBEL in 2016