Universal Steel & Alloys Ltd (USAL), which has been declared a sick company by the Board for Industrial & Financial Reconstruction, will soon be merged with Bharat Gears Ltd. Both the companies are promoted by Raunaq Singh.
Bharat Gears also proposes to raise foreign currency loan and/or rupee loan of up to Rs 100 crore from banks, financial institutions, investment institutions, etc., to part finance its expansion plans.
In order to secure the loan, the company intends to mortgage its movable and/or immovable assets at its factories in India.
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Bharat Gears, whose primary activity is manufacture of auto ancillaries, will seek the approval of its shareholders for these proposals at its extra-ordinary general meeting scheduled for June 24, 1998.
Under the proposed share swap ratio for the merger of USAL with Bharat Gears, one equity share of Rs 10 of Bharat Gears will be issued for every 20 equity shares of Rs 10 each held in USAL.
This merger will thus raise the paid-up equity share capital of Bharat Gears by about Rs 2.87 lakh. The exchange ratio has been derived on the basis of valuation of the equity shares of USAL undertaken by Ratan S Mama & Company, an independent firm of chartered accountants. The ratio however has to be approved by the BIFR.
Bharat Gears has been planning implementation of its expansion programme by establishing new manufacturing facilities to meet the increased demand of its products.
USAL has sufficient land, building and structures with utility connections like power and water at its factory located in the heart of the industrial township of Faridabad.
Apart from getting hold of the USAL properties, the merger will also make Bharat Gears eligible for tax benefits under Section 72A of the Income Tax Act, 1961, as USAL has a large amount of carry-forward losses.
According to the draft scheme for the merger, the transfer date for the merger is April 1, 1998.
At the EGM, shareholders' approval will also be sought for a proposed change in the designation of managing director Surinder P Kanwar to vice-chairman and managing director with effect from October 1, 1997.
Kanwar was appointed as managing director for five years with effect from October 1, 1990. The appointment was renewed on October 1, 1995, for another five years.
The board of directors has re-designate him as vice-chairman and managing director with effect from October 1, 1997.
The promoters _ Raunaq Singh & Co and Bharat Steel & Tubes _ hold 16.47 per cent equity in Bharat Gears, while 35.72 per cent is with institutions and other government agencies, 17.28 per cent is with the public and 28.6 per cent is foreign holding.