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C.R. Sukumar

HYDERABAD, March 18

ELECTROSTEEL Castings Ltd, the Kolkata-based cast iron and ductile iron major, is set to infuse funds to the tune of Rs 22 crore into the equity of Lanco Industries Ltd (LIL), the Tirupati-based ailing pig iron manufacturer.ECL had entered into an alliance with the Lanco group during the first week of March to acquire control over two of the Lanco group companies - Lanco Kalahasthi Castings Ltd (LKCL), a Rs 100-crore closely held company, and LIL, a Rs 98-crore listed company.

This enables the Electrosteel-Lanco combine to emerge as the largest player in the cast iron and ductile iron spun pipes market with captive pig iron plant.

The move is largely aimed at reviving the operations of LIL, currently facing severe financial crunch after incurring losses in the recent years.

The added benefit of the alliance would be the ability to take on competition from the two large players in the cast iron and ductile iron spun pipes market.

Under the terms of the agreement, Electrosteel would acquire 1.76 crore equity shares of LKCL, allowing the Kolkata major to acquire around 49 per cent holding.

To enable Electrosteel to attain the controlling stake of 51 per cent in LIL, the latter's board recently approved a resolution to issue 2.2 crore equity shares of Rs 10 each at par, aggregating Rs 22 crore, on a preferential offer basis.

According to LIL Director, Mr G. Bhaskara Rao, Electrosteel currently holds about 3.34 per cent stake in LIL. The promoters of LIL have agreed to arrange or sell a further 11.56 per cent shares in favour of Electrosteel.

In a notice to the shareholders for convening an extraordinary general meeting on March 30 to obtain their consent for the proposed strategic alliance with Electrosteel, Mr Rao said the holding of LIL's existing promoters would get reduced to 15.12 per cent on the expanded equity base of Rs 51.91 crore from the current level of 37.87 per cent on the paid-up equity of Rs 29.91 crore.

The Electrosteel group, which currently holds 3.34 per cent in LIL, would end up with a majority holding of 51 per cent. On the expanded equity base, the holdings of financial institutions and banks would get reduced to 14.98 per cent from 25.99 per cent and of others to 18.9 per cent from 32.8 per cent.

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Strategic alliance with Electrosteel -- Lanco convenes EGM on March 30

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