Ricoh's stake in subsidiary likely to drop

The stake of Ricoh, the Japanese transnational office automation giant, is likely to come down in its Indian subsidiary following the merger of Gestetner with Ricoh India. Ricoh Japan holds around 76 per cent in the subsidiary.

To stem the stake dilution, Ricoh is planning to convert a part of the 10 per cent redeemable preference shares into equity. It holds Rs 20 crore preference shares in Ricoh India. Ricoh's stake will, however, come down by 3-4 per cent even after the conversion of preference shares.

Ricoh India earlier decided to extend the timeframe of preference shares by five years, which was due for redemption in December 2003. Ricoh holds 63 per cent in Gestetner by itself and a UK subsidiary NRG group Plc.

The swap ratio proposed for the merger is six shares of Ricoh India for each share of Gestetner. Ricoh India's share is now hovering at around Rs 22-23 level after reaching its 52-week high in November 2004. Incidentally, Ricoh group have 376 subsidiaries all over the world including the two in India.

Top sources in Ricoh group informed that the merger of Gestetner with Ricoh India has gained momentum following the Kolkata High Court order in December 20 that has dispensed with the creditors meeting for the merger.

"Gestetner does not require to conduct creditors meeting following the verdict. It is convening an EGM on February 4 to take shareholders nod for the merger," said an official.

He expressed that the merger of Gestetner with Ricoh India is likely to be completed by June 2005. According to the official, the partial conversion of redeemable preference shares is a win- win situation for both Ricoh India and its parent.

He pointed out that the company is undertaking a capital restructuring program after the merger as Ricoh India has an accumulated loss of Rs 26 crore.

"Our parent has waved Rs 10 crore dividend to be paid to them on account of preference shares. It will be adjusted against the accumulated losses. The accumulated losses were generated before 1998, when it was not a subsidiary of Ricoh," he added.

The official said that Rs 7.5 crore preference shares will be converted into equity. Of the rest Rs 12.5 crore, Rs 7.5 crore will be redeemed and Rs 5 crore will continue as preference shares with a reduced coupon rate.

"This is good for us as we do not have to pay 10 per cent interest on Rs 20 crore preference shares," said the official.

Besides, the preference share conversion, the group is considering to utilise the share premium account and a part of the reserve of Gestetner to completely wipe out the accumulated loss. "We will have a clean balance sheet after the merger," added the official.