By IANS
Chennai : The Chennai-based Rane Group, which manufactures safety critical auto components, Monday approved the de-merger of the manufacturing operations of two of its group companies, which would be listed in the bourses.
The boards of Rane Brake Linings Limited and Rane Engine Valves Limited – both listed in NSE and BSE – approved the de-merger. The non-manufacturing activities – mainly investments and cross holdings in Rane Group outfits – will be merged with Rane Holdings Limited.
As per the scheme, for every 100 shares held in Rane Brake Linings and Rane Engine Valves, shareholders will be allotted an equal number of shares in the respective manufacturing companies to be incorporated.
In addition, the shareholders of Rane Brake Linings and Rane Engine Valves would get 75 and 56 shares respectively in Rane Holdings. This got the sanction of the respective company’s boards.
The restructure will have to get the respective company shareholder’s sanction in their general meeting and also the Madras High Court’s sanction.
Announcing the development to the media here on Monday, L. Ganesh, chairman, Rane group, said: “The restructuring will facilitate value creation for the shareholders. It is an important milestone in the annals of the companies. It will also unleash tremendous opportunities for growth and avenues for greater collaboration.”
The latest rejig announcement is part of an overall group restructuring process that started in 2004. “We were advised to remove cross holdings and move them to a holding company so as to unlock shareholder value,” said Ganesh.
In the first phase, Rane Holdings was created through de-merger of Rane (Madras) Limited thereby removing the cross holdings in the latter. The promoters moved all their investments in other group companies except in Rane (Madras) to the group holding company, said S. Venkataraman, vice president corporate services.
According to Ganesh, the promoters didn’t go for whole restructuring then as it involved high outgo in the form of capital gains tax.
In March 2007, the promoters moved their holdings in Rane (Madras) to Rane Holdings thereby making it a subsidiary.
According to Ganesh, after the completion of latest rejig activity the equity base of Rane Holdings will go up to Rs.145 million from Rs.98 million. “The promoter holdings will also get diluted to 50 percent from the present 70 percent,” he added.
Meanwhile, with the slowdown in the commercial vehicles, two wheeler and tractor segments, the Rane group has scaled down its Rs.2,500 million investment plans. But the two new plants of Rane Brake Linings and Rane Engine Valves are coming up as planned, Ganesh added.