MUMBAI: The Government today cleared conversion of Bank of Baroda's Rs 29.91 crore loan to Andrew Yule & Co into equity shares, paving the way for disinvestment of the Kolkata-based PSU in the next three months.
The conversion of loan to equity would help bring down the cost of servicing of debt, resulting in improved profitability and liquidity of Andrew Yule in coming years, an official statement said.
"The Cabinet Committee on Economic Affairs has given its approval for conversion of Working Capital Term Loan amounting to Rs 29.91 crore from Bank of Baroda (BoB) into equity by issuing requisite number of equity shares of Andrew Yule & Co (AYCL)," it said.
This is expected to increase growth and profitability of AYCL and in turn is likely to translate into better share price of AYCL at the time of further disinvestment of government shares of AYCL. Government holds 87.98 percent in the company.
"This will be implemented within a period of three months," said the statement issued after the meeting of CCEA, chaired by Prime Minister Narendra Modi.
Shares of AYCL closed at Rs 24.50, up 12.90 percent over previous close on the BSE.
The conversion of debt to equity will help provide an opportunity to finance working capital needs of existing and new businesses.
"This along with substantial amount of Securities Premium will form part of net worth of Company and will enhance the strength of its balance sheet," it added.
AYCL, which was incorporated as a PSU in 1979, is presently engaged in manufacturing industrial ventilation equipment, switchgears and circuit breakers, besides production of bulk tea.
The paid up capital of the company is Rs 66.73 crore.
AYCL was referred to Board of Industrial and Financial Reconstruction (BIFR) in September, 2004 and subsequently, Cabinet approved a restructuring scheme in 2007. Following this, AYCL has been earning from 2007-08 onwards and it came out of purview of BIFR in July 2015.
As a part of implementation of financial restructuring scheme, Bank of Baroda extended a loan of Rs 52.49 crore to AYCL in 2009, out of which Rs 29.91 crore was Working Capital Term Loan. JD ANU
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