The board of Kalindee Rail on Thursday approved their merger with Texmaco Rail.
Texmaco was all along looking for some synergy in a company, which could have added to our portfolio from product to project. Kalindee was an ideal fit.
AK Vijay
Sr VP & CFO
Texmaco
The board of Kalindee Rail on Thursday approved their merger with Texmaco Rail . The merger will be effective from April 1, 2014.
Texmaco Rail is the flagship company of the Adventz Group. It manufactures diverse range of products like railway freight cars, hydro-mechanical equipment & industrial structurals.
Texmaco Rail has been the leading wagon builder for the past many decades. The current capacity is close to 10,000 wagons, subject to availability of order, said CFO AK Vijay.
Speaking to CNBC-TV18's Latha Venkatesh and Sonia Shenoy, Vijay said the purpose of the merger was to integrate the operations of both companies. Texmaco already holds 49.07 percent stake in Kalindee Rail.
We expect a substantial growth in revenues of both companies going ahead, he said.
Below is the transcript of AK Vijay's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Sonia: Could you tell us how this merger will supplement the wagon-making expertise that Texmaco Rail has?
A: We have been advising the market all along that Texmaco is engineering and manufacturing company and the products range are the wagons primarily in the rail segment but we also operate in the segment of steel casting for industrial application as well as for hydro mechanical equipment for hydro power stations. But the main focus of the company is in the rail sector.
We are the leading wagon builder for the last four-five decades. Texmaco was all along looking for some synergy in the area of organising some companies, which can be add to its portfolio from product to project. Kalindee was an ideal fit and when Kalindee's going was not so good the market was feeling a hit because the company was not doing so well.
Texmaco sourced an opportunity and the promoters of the company at that point in time were finding it difficult to run the company and they requested Texmaco to step in to avoid any hostile takeover by other groups. Texmaco did oblige the Kalindee management at that point in time, stepped in by subscribing for 24.9 percent equity in the company which brings in some relief to them in form of cash as well as the from the threat of takeover.
Post that there was an open offer, where both the companies were competing – Texmaco and the one which tried a hostile takeover of Kalindee. Fortunately, Texmaco got an overwhelming response of the investors and virtually the entire lot of the market was offered to Texmaco only, nothing went to the competing party. So, with that in strength Texmaco increases its strength in the company and holding to 49.07 percent with acquisition of the balanced shares of the promoters. So, with that situation the market happening - Texmaco was in a position to either pump in more money into the organisation or merge the company so that the company can derive the strength of Texmaco; the financial, the balance sheet strength and also the strength from the company's organisation abilities. Therefore, with this all factor in view Texmaco appointed an agency, ICICI Securities to study and let us know the ways and means by which Kalindee can be restructured.
Kalindee Rail stock price
On May 23, 2014, at 11:09 hrs Kalindee Rail Nirman (Engineers) was quoting at Rs 116.10, down Rs 6.1, or 4.99 percent. The 52-week high of the share was Rs 135.75 and the 52-week low was Rs 50.05.
The latest book value of the company is Rs 83.77 per share. At current value, the price-to-book value of the company was 1.39.
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