Essar group chairman, Sashi Ruia, announced that the proposed merger of the South India Shipping Corporation (Sisco) with Essar Shipping has been approved in principle at a board meeting of the two companies held in the city yesterday.
The merged company will have the advantage of bringing in synergy of operations of the two companies, besides providing better leverage for any further acquisition, Ruia said while addressing newspersons here today.
More important, accessing funds for the larger company will be far easier. While earlier the shipping industry had access to funds from the Shipping Development Fund and the SCICI, these sources are no longer available. "We in the shipping business have to compete with other industries for funds from banks and financial institutions," Ruia pointed out.
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The swap ratio will be decided soon by a panel of valuers and advisors consisting of N M Raiji & Co, Fraser & Ross and J/M Financial and Investment Services Ltd. Market analysts believe the swap ratio will be two shares of Essar Shipping for every one share of Sisco. Currently, the market rates of the two scrips are Rs 14 and Rs 31 respectively.
For the year ended March 31, 1997, Sisco posted a total income of Rs 183.58 crore (Rs 163.84 crore), while that for Essar Shipping is Rs 335.70 crore (Rs 379.58 crore).
With the merger pending, the accounting period has been extended from March 31, 1997 to September 1997.
In Essar Shipping the equity holding pattern is as follows: promoters 55%, financial institutions 13% and public 32%. In Sisco, the Essar group companies Essar Shipping and Essar Investments respectively hold 30% and 33% respectively. Institutions hold about 19% while the rest is with the public.
Sisco in all owns seven bulk carriers and two crude carriers, while Essar Shipping has a fleet of two bulkers, four crude carriers, one oil bulk ore, four product tankers and five off-shore supply vessels.
No bank plans, Page 10