Titagarh Wagons launches open offer to buy up to 25% in Cimmco
Kolkata – Kolkata-based railway wagons manufacturer Titagarh Wagons (TWL) on Wednesday launched a mandatory open offer to buy up to 25.08% equity stake in Cimmco Ltd from the public.
The open offer got triggered following an indirect acquisition of majority stake of 75% in Cimmco by TWL. A company release issued on Wednesday stated Titagarh Wagons’ holding in Cimmco Equity Holdings (P) Ltd (CEHPL), the holding company of Cimmco Ltd, increased to 99% following the conversion of optionally fully convertible debenture (OFCD) amounting to Rs 64 crore.
The move triggered a mandatory open offer, as per Sebi’s takeover norms, for acquisition of another 25.08% of Cimmco shares by Titagarh Wagons at Rs 15.50 per share. If fully subscribed, the company will have to shell out around Rs 7.83 crore.
Shares of Cimmco last traded at Rs 17.64 a unit, up 5% and hitting the upper circuit for the day on the BSE in a weak Mumbai market on Wednesday.
“Titagarh Wagons will have to delist Cimmco if fully subscribed. Since the offer price is less than the current market price, the offer may become void,” said an analyst.
PE-backed Titagarh Wagons had got inducted as a co-promoter in debt-laden Cimmco Ltd sometime in 2010 through capital infusion and an agreement with the SK Birla group to provide management support, after the Board for Industrial & Financial Reconstruction (BIFR) approved the rehabilitation scheme for the sick company.
Titagarh Wagons held 50% in the special purpose vehicle CEHPL, which in turn owned 74.76% equity holding in Cimmco Ltd. The wagon maker also held some 64,000,000 OFCD in CEHPL, which got converted into 64,000,000 equity shares, the filings at BSE indicated.
Post-conversion, Titagarh Wagons’ holding in CEHPL increased to 99.23 % stake making it an indirect owner of over 74% of Cimmco Ltd. Meanwhile, the boards of Titagarh Wagons and Cimmco also approved issuance of 8% noncumulative redeemable preference shares aggregating to Rs 50 crore by Cimmco Ltd to Titagarh Wagons on a private placement basis.
Titagarh Group vice chairman & managing director Umesh Chowdhary said: “The issue proceeds will be used to de-risk the business by diversifying into related areas for which the plant at Bharatpur is fully equipped as well as to reduce high cost debt of Cimmco.”