Aborted Amalgamation

Aborted Amalgamation Hansavivek RAYMOND WOOLLEN MILLS has terminated the agreement for amalgamation with J K Iron and Steel (JKIS), as its programme for revival of the latter company's sick unit has not been successful in spite of the best efforts and an expenditure of Rs 102.40 crore incurred therefor. The main constraint has been the erratic power supply and load shedding which has been a regular feature in UP. The company had drawn the attention ot government as far back as in February 1980 to the situation pointing out that all efforts put in will go in vain and that it will be forced to discontinue its support by way of financial and technical assistance. Moreover, there had been inordinate delay in the grant of necessary consents and approvals of the Central government. The scheme of amalgamation was evolved in 1978 with the main objective of developing manufacture of file steel in the plant of JKIS in order to have an assured supply of indigenously manufactured file steel to meet the increasing requirements of J K Engineers' Files division of the company, which is an export-oriented unit, about 60 per cent of its output being exported to some 30 countries of the world. Applications to the appropriate authorities for approval of the proposed scheme under section 72-A of the Income-tax Act as well as under the provisions of the MRTP Act were made as far back as May/ June 1978. Although several formal hearings were held before the appropriate authorities and all information required by government from time to time was furnished there had been no indication of when orders under the relevant statutory provisions would be passed, or whether or not the matters were being considered favourably. Raymond has fared well during 1980-81 even though the Jalgaon unit of its woollen division was on a partial strike for about five months and there was also labour unrest in the Thane and Ratnagiri units of J K Engineers' Files division. Sales have expanded from the previous year's Rs 39.71 crore to Rs 48.19 crore, but gross profit has increased from Rs 4.45 crore to Rs 4.91 crore reflecting pressure ;n margins. Net profit is Rs 2.70 crore (Rs 2.42 crore) and the unchanged 15 per cent distribution is covered 3.88 times as against 4 times previously. In addition, the directors have recommended issue of bonus shares on a three-for-five basis, subject to the consent of the Controller of Capital issues. Construction work on the cement project has been in progress. The entire project is expected to be completed by March 1982. In Decem- ber last, the company made a public- issue of secured debentures with right attached to subscribe for equity shares. This issue, of the aggregate face value of Rs 4.80 crore was subscribed 7.8 times. Upto end of March 1981, the September 19, 1981 company raised external funds aggregating Rs 11.75 crore for the cement project. The company's subsidiaries and joint ventures continued to show satisfactory progress.