Infrastructure major Sadbhav Group is merging two of its listed entities to create a simplified corporate structure and better utilisation of resources.
Sadbhav Engineering Ltd is the flagship engineering, procurement and construction (EPC) services business while Sadbhav Infrastructure Projects Ltd builds and owns roads.
"The amalgamation will enable consolidation of the businesses into one combined entity, facilitating simplified corporate structure, productive utilisation of combined resources, operational and administrative efficiencies, economies of scale, reduction in overheads and other expenses, reduced inter-company transactions and reduction in the multiplicity of legal and regulatory compliances," the group said in regulatory filings at stock exchanges.
Shareholders of Sadbhav Infrastructure will get one share each in Sadbhav Engineering for three shares that they hold. In August, the board of Sadbhav Infrastructure had given in-principle approval to consider a merger with its parent and to appoint intermediaries to advise in the same.
Sadbhav Infrastructure went public in September 2015, selling its shares at Rs 103 apiece to investors in Rs 425 crore initial public offering. Sadbhav Infrastructure's market capitalisation is Rs 1,552 crore while Sadbhav Engineering has a market cap of Rs 2,390 crore.
"The group also feels that the merger will significantly enhance the competitive position of Sadbhav Engineering as the combined entity will have expanded business pre-qualifications, increased networth to enable bid for larger and more complex infrastructure projects, improved credit rating due to better combined financial position, and better access to funds for growth opportunities," it said.
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"Further, the amalgamation will result in direct shareholding by all the shareholders in the combined business leading to larger and diversified shareholder base, better trading and liquidity position in the equity shares, and relatively higher market capitalisation," it added.
The proposed merger follows Sadbhav Infrastructure deal to sell nine road assets owned by it to the infrastructure investment trust owned by Larsen & Toubro and Canada Pension Plan Investment Board (CPPIB) for about Rs 6,610 crore in July.
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