RBI issues norms for private banks/NBFC mergers

12th May 2005: The Reserve Bank of India today released the guidelines for merger/amalgamation of private sector banks or a private sector bank taking over a Non-Banking Finance Company (NBFC). According to the guidelines issued by the Reserve Bank of India, two situations are covered - an amalgamation of two banking companies, and amalgamation of a non-banking finance company (NBFC) with a banking company. The following details are to be kept in mind when two banking companies wish to come together:

 

• The values at which the assets, liabilities and the reserves of the amalgamated company are proposed to be incorporated into the books of the amalgamating banking company, and whether such incorporation will result in a revaluation of assets upwards or credit being taken for unrealized gains;
• Whether due diligence exercise has been undertaken in respect of the amalgamated company;
• The nature of the consideration, which, the amalgamating banking company will pay to the shareholders of the amalgamated company;
• Whether the swap ratio has been determined by independent valuers having required competence and experience and whether in the opinion of the board such swap ratio is fair and proper;
• The shareholding pattern in the two banking companies and whether as a result of the amalgamation and the swap ratio the shareholding of any individual, entity or group in the amalgamating banking company will be violative of the Reserve Bank guidelines or require its specific approval
• The impact of the amalgamation on the profitability and the capital adequacy ratio of the amalgamating banking company;
• The changes which are proposed to be made in the composition of the board of directors of the amalgamating banking company, consequent upon the amalgamation and whether the resultant composition of the Board will be in conformity with the Reserve Bank guidelines in that behalf.

The NBFC is required to get the approval of the RBI after the Boards of both the banks approve of it but before it is passed to the high court.

United Phosphorus (UPL) probably to buy SWC's agrochemical arm

11th May 2005: UPL, Chemical and agrochemical firm is in talks with the Chhabria family-controlled Shaw Wallace (SWC) to acquire the latter’s agrochemical arm, SWAL Corporation (formerly Shaw Wallace Agrochemical). Sources close to the development said that both the companies have completed initial negotiations and are currently talking on price-related issues. When contacted, UPL’s finance director, Arun Ashar, declined to comment. However UPL sources said, “We are looking at all possible opportunities for growth. We are getting various offers from different parties. It is difficult to comment on specific deals.” SWC’s move follows the company’s plans to sell its liquor business to the UB group. The Chhabria family-controlled Jumbo Group, promoters of SWC, had recently divested its 70% stake in Hindustan Dorr-Oliver to IVRCL Infrastructure & Projects.

The Rs 75-crore SWAL Corporation has three major brands Starthene, MIIT and Sterameal. The company had turned around in ‘03-04 with a net profit of Rs 1.6 crore, after incurring losses for several years. It has a presence in fungicide and herbicide segments and plans to add new products in these segments. Sources said though SWAL Corporation commanded a small share of the domestic agrochemical market, its strength lay in its lower cost of operations. Production of agrochemical in the country is around 70,000 tonnes per annum. The domestic agrochemical market is estimated at over Rs 3,000 crore, with exports at around Rs 1,500 crore.

Indo Asian Fusegear Ltd (IAFL) will merge with Indo Kopp Ltd

10th May 2005: Punjab & Haryana High Court approved the proposal of merger of Indo Asian Fusegear with Indo Kopp. The Board of Directors of Indo Asian Fusegear Limited had put into motion a proposal to merge the Company with Indo Kopp Ltd, with a view to deriving the combined benefits and strengths of the two companies in a single corporate entity. Indo Asian Fusegear Limited is the India's largest manufacturer of circuit protection equipment and the country's only integrated manufacturer of compact fluorescent lamps while Indo Kopp Ltd is a leader in the domestic miniature circuit breakers (MCB) business.

Under the merger scheme drawn up shareholders of Indo-Asian Fusegear would be issued the same number of equity shares in Indo Kopp Limited. The transfer date has been fixed at 1st April, 2005. The new company would redeem all warrants issued by IAFL as well at the same terms and conditions. "The rights and entitlements of the shareholders will not be affected in any way as the shares after merger would be listed on the stock exchanges where IAFL is currently and traded" said Mr. V.P.Mahendru, Chairman and Managing Director of Indo Asian Fusegear Limited.

The merger proposal is also aimed at strengthening the group's export initiatives in Europe. Indo Asian Fusegear has made significant inroads into the UK and other European markets one year for manufacture and supply of Circuit Protection Equipment and compact fluorescent lamps. The company is confident with most of products having gained global certifications; the merger of the two group companies will bring in greater high technology, synergy and cost advantages to complete in the global markets.