Nirma on track to acquire Shree Rama Multi-Tech

Nirma on track to acquire Shree Rama Multi-Tech

Monday, 17 March 2008, 07:00 Hrs
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Ahmedabad: Detergent maker Nirma is on track to gain control of the city-based packing industry major Shree Rama Multi Tech (SRMTL), said officials. Nirma has already acquired a stake of 24 percent in the packaging company.

Full takeover of the company by Nirma has become a distinct possibility following two crucial decisions taken by SRMTL's board March 15.

In the board meeting, the firm agreed to work out a fresh scheme of arrangement to get over 3.5 billion ($86.5 million) debt. To facilitate it, the company also decided to withdraw a compromise scheme from the Gujarat High Court, submitted in 2005. Both decisions have already been filed with the Bombay Stock Exchange (BSE).

"The acquisition by Nirma will, however, need a nod from SRMTL's lenders and shareholders," said Mahendrabhai Patel, who is looking after legal matters of SRMTL.

SRMTL got mired in financial difficulties since 2002 and later submitted a financial debt-restructuring scheme for approval by its lenders. It has also submitted an application under relevant provisions of the Companies Act before the Gujarat High Court, seeking its approval for the scheme.

The scheme approved in 2005 envisaged a total payment of 4.87 billion to the lenders to be paid between 2005 and 2014.

When contacted, Sharad Jhariwala, whole time director of SRMTL, said the new scheme would be sewed up in about four weeks time.

Asked whether the scheme envisaged less payout than in the 2005 scheme, he said: "I cannot divulge details now but it will be certainly better than the 2005 scheme".

However, he refused to say anything clearly on whether the new scheme would pave the way for Nirma to take over SRMTL. "Everything is depended on how the new scheme gets worked out," he said.

According to Patel, SRMTL owed a sum of 3.5 billion to lenders and it had approached the financial instructions for restructuring the past loans. The major lenders are ICICI Bank, LIC, UTI and the IDBI.

According to industry sources, the latest development would certainly lead to Nirma's acquisition of SRMTL.

The shareholding pattern shown on the company's website says private corporate bodies including Nirma hold 39.5 percent equity while public holding is 51.98 percent. The promoters' stake is only 5.26 percent.

Paresh Sheth, company secretary of Nirma, said the firm had acquired 24 percent stake and under the Securities Exchange Board of India (SEBI) takeover guide, it has to make an open offer to the public. But this has not happened since an appeal challenging an order of SEBI against SRMTL was still pending before the Securities Appellate Tribunal (SAT).

With a total investment of 4.45 billion SRMTL has two manufacturing facilities at Motibhoyan and Kadi in Mehsana district.
Source: IANS
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