Indian Charge Chrome to merge with parent firm

Indian Charge Chrome Ltd (ICCL) will shortly merge itself with parent company Indian Metals and Ferro Alloys (IMFA) making the merged entity a ferrochrome behemoth in the country.

The two companies together have four furnaces with a combined capacity of 130 mva, which in tonnage terms is 1,90,000 tonne of ferrochrome per annum. The turnover of the merged entity is estimated at about Rs 600 crore.

This apart, an associate company of ICCL is slated to go onstream shortly with additional capacity of 35,000 tonne of ferro chrome per annum.

The boards of both IMFA and ICCL have approved the merger plan recently. The merger is in line with the debt restructuring proposal approved for ICCL by term lenders led by IDBI.

Meanwhile, KPMG India and N M Raiji & Co which were appointed to conduct the independent valuation exercise of IMFA and ICCL in order to arrive at a share swap ratio, have submitted a joint report fixing the ratio as 1 share of IMFA for every 14 shares of ICCL. While IMFA was a closely held company, ICCL is a listed company.

"After the merger, shares of IMFA will be listed on the stock exchanges," said Subhrakant Panda, managing director, ICCL.

He said the merger will bring in a lot of synergy in operation as the dominant activity of both the companies was producing ferro chrome. He pointed out that the merger issue will soon be put before the Orissa High Court for approval.

While approving the debt restructuring plan for ICCL, the term lenders had suggested derating of existing equity of ICCL by 95 per cent, conversion of Rs 52.61 crore debt by lenders into ICCL equity and conversion of interest free advance of Rs 55.65 crore by promoters into ICCL equity.

But in a bid to protect the interests of the minority shareholders in the merged company some changes have been made in these conditions.

This included reducing the extent of derating of existing equity from 95 per cent to 50 per cent with the caveat that only minority shareholders will benefit from this concession.

Accordingly, promoters will pay the term lenders the notional gain pertaining to their shareholding arising out of the reduced derating.

Besides, while interest free advance of Rs 55.65 crore from IMFA to ICCL will be cancelled instead of converting it into equity, shareholding in the merged entity arising out of IMFA's present equity holding in ICCL will be transferred to an independent trust instead of being held by promoters.

The trust will hold approximately 4 per cent of the post-merger equity of IMFA which will be available for distribution to only minority shareholders at a minimum discount of 50 per cent to the market price.

"This is the first time that a scheme of arrangement envisaging such clear cut and specific steps for the protection and benefit of minority shareholders is being devised," Panda said.