Fag Precision Again Plans To Hike German Partner'S Stake

After being rebuffed once, FAG Precision Bearings (FAGPB) is once again considering a preferential allotment to its German collaborator, FAG Kugelfischer AG. This is aimed at taking the foreign partner's stake in FAG Precision from 39.99 per cent to 51 per cent.

The board of FAG Precision Bearings will meet here on October 10 to discuss the issue.

At an extraordinary general meeting in October last year, financial institutions (FIs) had thwarted FAG Precision's move to allot 3.46 lakh shares with a par value of Rs 10 at a price of Rs 77 each to its German partner on a preferential basis.

 

FIs hold a 32 per cent stake in FAG Precision. The Indian promoters hold 12 per cent, foreign institutional investors around 2 per cent, with the public holding the remaining 14 per cent.

According to Jal R Patel, vice-chairman and managing director of FAG Precision, the company has moved the resolution again and is expecting the FIs to clear the proposal. After the FIs had voted against the resolution, the case was taken to the Central government, Patel added.

FAG Kugelfischer provides technical support to FAG Precision and markets its products in overseas markets.

The proceeds from the earlier preferential allotment were to be used for financing FAG Precision's 100 per cent export-oriented unit in Baroda. The company eventually raised a foreign currency loan from Commerzbank to finance the unit, which commenced operations last year. FAG Precision now plans to double the capacity of this unit.

According to market sources, the current preferential offer may not be at a high premium since the share price of FAG Precision has fallen steeply on the bourses, in-line with other bearing companies. If the company follows the Sebi formula, the preferential price may work out to less than Rs 50 per share, they added.

In the current fiscal, FAG Precision has also planned to set up a production line to produce double row angular contact ball bearings for use by leading car manufacturers, including Maruti. This production line is expected to become operational by early-1999.