It would be safe to assume, that we have used product from this company listed in 1994 but started almost 40 years ago. Linc Pen and Plastics Ltd. (LPPL) is listed company is engaged in the manufacturing and distribution of Pens and related products for domestic as well across 50 countries. They also have exclusive tie-ups with Mitsubishi Pencil Co., Japan for their Uni-ball brand.

Linc Writing Aids Pvt. Ltd. (LWAPL) is an unlisted company, incorporated in June 1984,  engaged in the trading and business of stationary and crockery.  LWAPL also holds 10.78% equity stake in LLPL & 19.31% equity stake in LRL.

Revised Structure benefits the promoters the ease to sell shares or invite investors for either LPPL or LRL in future.

LWAPL having two Business undertaking

  1. Showroom Business
  2. Other Business

The Showroom Business includes stock in trade, stake in LRL and the other business mainly include stake in LLPL and some Land & Buildings.

Linc Retail Limited (LRL) is engaged in retail trading business of stationary.

The Transaction

The board of directors of the company decided to merge “Showroom Business Undertaking” into LRL and to merge the remaining business into LPPL. The appointed date for both the transaction will be 1st April 2018.

Linc-Pens-Retail-Merger-1

Consideration

  • LRL will issue 46 equity shares of Rs. 10 each for every 1 equity share of LWPL.
  • LPPL will issue its 34 equity shares for every 1 equity share of LWPL.

As it is an internal restructuring, there is no cash consideration involved.

Net worth of Linc Retail increases while the net worth of Linc Pens & Plastics decreases post transaction.

Shareholding Pattern

Currently, Promoters stake in LPPL (including LWAPL) is around 59.43%. Post- Transaction, the promoters stake in LPPL will decrease fractionally. While in LRL the promoter’s stake will increase significantly.

Linc-Pens-Retail-Merger-2
Linc-Pens-Retail-Merger-3

Financial

Table 1: Segment-Wise Financials of LWAPL – FY 17-18 (All figs in INR Lacs)

Particulars Remaining Showroom Total
Equity share capital 0.00 49.26 49.26
Reserves and surplus 480.04 229.33 709.36
Long term borrowing 200.74 0.00 200.74
Long Term Provisions 5.43 0.00 5.43
Trade Payables 117.59 181.77 299.36
Other current liabilities 71.77 0.67 72.43
Short term provisions 0.32 0.00 0.32
Total 875.89 461.02 1,336.91
Property Plant and Equipment 24.63 7.37 32.00
Intangible Assets 0.67 0.00 0.67
DTA 5.64 0.00 5.64
Non-Current investment 669.17 51.39 720.56
Loans and advances 74.38 12.90 87.28
Inventories 59.56 185.86 245.42
Trade receivable 22.82 198.95 221.78
Cash and cash equivalent 4.14 4.29 8.43
Short Term loans and advances 14.87 0.25 15.12
Total 875.89 461.02 1,336.91

Valuation

As per the Swap Ratio Report, the valuation of LWAPL comes around ~₹61 crores.

Table 2: All figs in INR Lac

Particulars Amount
Showroom Business 227
Remaining Business:
Value of LPPL Stake 5,369
Other Assets 515
Total Value 5,884

It looks that the Showroom Business has been valued lessor than its net worth. Other Assets in Remaining Business mainly includes Land & Building as is. As per net worth certificate net worth of LRL increases while the net worth of LPPL decreases post transaction.   

Conclusion

Currently, all three entities have internal transaction, i.e. LRL & LWAPL purchase most of the goods from LPPL for manufacturing products to sell. The main intension apart from segregation of manufacturing and the trading business, looks like to give shareholding directly in the hands of promoters instead holding through the company. The revised structure is more straightforward. They are likely to be benefited from such structure if they want to sell shares or invite investors for either LPPL or LRL in future. As far as LPPL is concern, the proposed re-structuring is unlikely to create any significant value addition. Further, the part of the re-structuring cost will be borne by the LPPL. All in all, there is nothing great for various stakeholders in the proposed scheme.

Please feel free to share/retweet the article and as always you can write down in the comment box below for anything related to the article. We would love to answer.
print