Ceat has acquired an eight per cent stake in Phillips Carbon Black (PCBL), and another 1.5 per cent stake in CESC by purchasing shares from other promoter companies. Through its wholly-owned subsidiary, Ceat Holdings, Ceat bought 11.5 lakh shares of PCBL and eight lakh shares of CESC in 1996-97. PCBL shares were bought for Rs 7.49 crore while CESCs purchase cost the company Rs 7.63 crore.
Senior Ceat sources said the shares were bought from other promoter companies and do not represent any stake hike by promoters. Ceat Holdings also purchased large stocks of other RPG group companies like Asian Cables, KEC International and RPG Telecom.
The investments were made through funds obtained from a preference share issue made to Ceat Ltd. Despite its financial troubles, Ceat found Rs 27 crore to invest in Ceat Holdings for the sole purpose of purchasing shares in other group companies.
Ceat Holdings just managed to claw its way back to profitability in 1996-97 from a loss of Rs 5.17 lakh last year. The company posted a small profit of Rs 5.95 lakh but has accumulated losses of Rs 41 lakh.
Ceat Holdings investment portfolio swelled from Rs 12.97 crore to Rs 39.57 crore in 1996-97 thanks to these investments. Apart from these, Ceat Holdings has also bought 8.94 lakh shares of Asian Cables and Industries, 1.38 lakh shares of KEC International, 9.59 lakh shares of RPG Telecom and 2.37 lakh shares in Spencer & Co.
The Rs 27-crore investment by Ceat comes when its own profitability and margins are under pressure. The company's turnover last year fell to Rs 1,203.42 crore from Rs 1,639.72 crore. Profits fell to Rs 6.60 crore from Rs 17.71 crore.
The company had to sell investments in subsidiaries to boost its profits, and auditors have said the company's profits are inflated by Rs 9 crore due to change in accounting methods.
