Market experts believe that the merger will incur heavy losses to Ashok Leyland as HFL is a loss making company and has been on a consistent downfall in the last five years.
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Ashok Leyland has got its board’s approval for its proposal of amalgamating Hinduja Foundries Limited, a Hinduja Group company, with Ashok Leyland Limited, subject to various regulatory approvals and approval of shareholders of both the companies.
“One Thousand 2008 series GDRs of Hinduja Foundries Ltd will get 133 equity shares of Rs one each fully paid of Ashok Leyland”, it said.
“I would say it (the move to merge) as a pragmatic (move) than being optimistic”, Ashok Leyland Chief Financial Officer Gopal Mahadevan told reporters here.
“We are confident that the roll out of the best practices of Ashok Leyland will benefit Hinduja Foundries Ltd”. And 1 2016 series GDR of HFL will get 4,800 fully paid equity shares of 1 of Ashok Leyland.The appointed date for the proposed amalgamation is October 1, 2016.
Noting that the governance body in Hinduja Foundries would continue to maintain the independence of HFL, he said, “in addition to the new team (management at Hinduja Foundries Ltd) they will have access to larger pool of talent, capability including supply chain”. The company will benefit significantly from synergies once Hinduja Foundries comes under Ashok Leyland, he added.
The BSE group “A” stock of face value Rs. 1 has touched a 52 week high of Rs. 112.8 on 13-Apr-2016 and a 52 week low of Rs. 78.05 on 11-Feb-2016.
Hinduja Foundries has two manufacturing facilities at Ennore and Sriperumbudur operating at 65 per cent capacity. The deal is being struck at a significant discount to the closing price of Hinduja Foundries on Wednesday, which led to the fall in its stock price in trade on Thursday.
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