The board of TTK Healthcare has approved a scheme of amalgamation of TTK Protective Devices, formerly known as TTK-LIG, an unlisted public company, and TSL Techno Services (TSL), a wholly-owned subsidiary of TTK Protective Devices, with itself.
TTK Protective Devices is a contraceptive (condom-making) company with a capacity of two billion condoms.
The shareholders of TTK Protective Devices (TTKPD) are to get nine equity shares of Rs 10 each fully paid up of TTK Healthcare, for every two shares of Rs 10 each fully paid up held by them in TTKPD, thus leading to an equity dilution of 82 per cent.
The company has said no allotment will be made to the shareholders of TSL, which owns five acres of land, with it being the wholly-owned subsidiary of TTKPD.
TTK Healthcare was in the business of distribution of condoms, purchased from TTK-LIG, notably contraceptive brands like Durex, Kohinoor and Fiesta.
TTK-LIG was a joint venture between the TTK group and Reckitt Benckiser. In November 2012, the TTK group bought a 49.9 per cent stake in TTK-LIG from Reckitt Benckiser at a valuation of Rs 300 crore.
However, analysts tracking the company said, the company’s profit of Rs 25 crore in FY11 was scaled down to a loss of Rs 23 crore in FY2012, due to disputes and differences between New Bridge Holding, BV, which is a subsidiary of Reckitt Benkiser and the TTK group, which impacted the exports revenue. The dispute was resolved in October 2012.
Subsequently, Reckitt Benkiser retained its Durex and Kohinoor brands after TTK acquired stake in TTK-LIG.
Meanwhile, Shareen Batatawala, from broking agency, Angel Broking said, “TTKPD stopped supplies to Reckitt Benkiser and its subsidiary, and launched the Skore brand in November 2012, which captured 4 per cent market share. The company’s management expects market share to increase to 10 per cent in next 12 months.”
In an analyst report, Batatawala added, TTK Healthcare’s networth is expected to more than double post the merger, considering the Rs 160 crore of networth of TTKPD. Post the scheme of merger, the promoter shareholding will increase from 65 per cent to 81 per cent.
According to SEBI guidelines, all listed companies should have a minimum public shareholding of 25 per cent, failing which the company might have to go for delisting.
The broking firm has noted that the company may go for a stake-sale to get its promoter shareholding to 75 per cent. If the merger goes through, TTK Healthcare will utilise funds from TTKPD for its current expansion plans rather than raising debt, thus maintaining its debt free status, added the analyst.