Chennai-based Shriram group will pump in around Rs 600 crore into Shriram EPC and its listed subsidiary, Orient Green Power Ltd. This was decided at a board meeting today, with the aim of restructuring the two companies.
When this exercise is completed, Shriram EPC will get back the loans it gave OGPL and a clutch of other, smaller subsidiaries. It will also receive cash for the transfer of its stake in the subsidiaries to its (Shriram EPC’s) parent company, Shriram Industrial Holdings Ltd.
Shriram Industrial Holdings will also invest Rs 150 crore in the preference capital of OGPL. This will enable OGPL, a leading renewable energy company that owns wind and biomass power plants, to complete its ongoing 300 MW wind farm project.
Funds to repay loans
Shriram EPC has a bunch of subsidiaries that include OGPL, wind turbine manufacturer Leitner Shriram and Sree Jayajyoti Cements. The cement company is not a part of this deal. Shriram Industrial Holdings will purchase Shriram EPC’s stake in these subsidiaries “at a price not less than their fair value.” This will fetch Shriram EPC around Rs 250 crore, including capital gains of about Rs 50 crore, company officials told
In addition, Shriram Industrial Holdings will lend to these subsidiaries which, in turn, will use the funds to repay Shriram EPC’s loans to them. In this way, Shriram EPC will get about Rs 200 crore.
Open offer for OGPL
In the case of Shriram Industrial Holdings’ purchase of shares in OGPL, a quirk of the complex holding structure triggers an open offer. The holding company will make an open offer to buy 26 per cent stake in OGPL at Rs 15 a share. This could mean investment of a further Rs 225 crore.
At the end of this exercise, Shriram EPC will turn into a pure-play EPC company and OGPL will get funds to complete its wind farm project, the Managing Director and CEO of Shriram EPC, Thyagarajan Shivaraman, told Business Line today. Shriram EPC has orders on hand worth Rs 4,600 crore, he said.
Meanwhile, it is learnt the Shriram group is looking to raise private equity of about $200 million.
For the financial year ended March 31, 2012, Shriram EPC achieved a turnover of Rs 1,382 crore and made a net profit of Rs 25 crore. For the first nine months of the current year, its turnover was Rs 1,179 crore and net profit, Rs 9.6 crore.
On the BSE today, the Shriram EPC share closed at Rs 75.05.
OGPL achieved a turnover of Rs 30.48 crore and a net loss of Rs 5.37 crore for 2011-12. The OGPL share closed at Rs 13.05 on the NSE today.