The Hindu Business Line : Raymond exiting steel — To sell holding in EBG India to German partner

RAYMOND Ltd is exiting the steel sector. It is selling off its 16.4 per cent stake in electrical and mild steel products manufacturing company, EBG India Pvt Ltd (EIPL), to its German partners, ThyssenKrupp Electrical Steel EBG GmbH (TKES).

EBG India was incorporated as a joint venture between TKES and Raymond, which took over Raymond's steel division. TKES held a 74 per cent stake in the company while Raymond held the remaining 26 per cent. Following a rights issue in July 2002, TKES's stake went up to 83.6 per cent while Raymond's stake went down to 16.4 per cent as the company did not subscribe to the rights issue.

According to sources, the shareholder's agreement between Raymond and TKES provides for a call option to the German partner, which can buy out the remaining stake in the joint venture steel company by exercising the option. TKES is now exercising this option and Raymond is selling its stake.

EPIL is in the process of expanding its activities and requires funds. So, the company is also planning another rights issue. Sources said that the rights issue size would be approximately Rs 168 crore but declined to disclose the valuation of Raymond's 16.4 per cent holding in the company. Raymond's 16.4 per cent holding accounts for 2,54,00,020 equity shares of Rs 10 each amounting to Rs 25.4 crore.

EBG India already has an external commercial borrowing (ECB) of $60 million given by the German parent company. According to the company's plans, this ECB money will be utilised for subscribing to fresh equities through the rights issue and also for buying out the Indian shareholding.

As per existing rules, ECBs received in convertible foreign currency are sometimes allowed to be converted into equity shares but in case of deemed ECBs, such conversion is not allowed. In this case, since the ECB is in convertible foreign currency, such conversion will be possible.

As a result there would not be any fresh foreign direct investment inflow as a result of this buy-out, sources said.

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