Salzer approved the merger of Salzer Magnet Wires Limited into Salzer Electronics in the year 2016.

Salzer Electronics Limited (SEL), which is the Transferee Company, is listed both on BSE and NSE having business in electrical installation products such as CAM operated rotary switches, switchgear products, and allied products all over the country and abroad.

Salzer Magnet Wires Limited (SMWL), which is the Transferor Company is ISO certified and closely held company with the same class of business that of Salzer Electronics such as production of cam switches, Load Break Switches, Wiring ducts, Toroidal transformers, Modular Switches etc.

Rationale for the merger

As both the companies are engaged in the similar and synergistical line of business i.e. manufacturing electrical installation products to provide solutions for electrical applications, it has been decided to merge these two companies.

The merger of SMWL with SEL will add another variant of products viz. enamel coated wires in its product’s list which will help to serve customers both in domestic and international markets.

This merger will provide stronger operational structure and also provide size economy in its infrastructure utility in cost efficient manner and will lead to more and more customer satisfaction.

Transaction

Appointed date is 1st April 2016. SMWL merged with SEL.

SEL will issue 1 equity share of Rs 10/each of SEL to the shareholders of SMWL for every 16 shares of Rs10 held by them in SMWL. In respect of fractions, cash will be paid in lieu thereof on proportionate basis.

Outstanding convertible securities in Transferee company. As on 1st April 2016, following convertible securities were outstanding in the books of SEL. Under ESOP, 729550 stock options out of 1028000 and 580,000 share warrants out of 10,00,000 warrants issued to the promoters and their bodies corporate are outstanding for which a similar number of shares will be issued by SEL.

The shares being so allotted will carry 2 years lock in period.

ParticularsPre-MergerPost-Merger
No of Shares%No of Shares%
Promoter & Promoter Group369810926.62396795626.94
Public1019157873.381075914473.06
Total1388968710014727100100

After issuance of ESOP and share warrants, total share capital will be of Rs16 crore with the increase in both promoter’s shareholding and public shareholding of the company.

Financials

Table 1: Financials for Salzer Electronics Ltd. (All Figures in INR Crores)

Particulars30-09-2016FY 2015-16FY 2014-15FY 2013-14
Equity Paid-up Capital13.8913.6410.2810.28
Reserves & Surplus190.36177.6296.7986.42
Carry Forward losses0000
Net Worth204.24191.26107.0796.70
Secured Loan105.3494.3896.6074.33
Unsecured Loan1515.250.258.40
Fixed Assets115.94110.3683.3768.38
Income from operations181.18361.13283.30244.53
Total Income183.28363.93284.30245.45
Total Expenditure170.65339.70267.33233.77
Profit Before Tax12.6324.2416.9711.69
Profit After Tax9.5517.0511.988.44
EPS8.3213.5411.658.21
Book Value147.05140.19104.1294.04

Loan amount is on increasing mode since FY 13-14. There is change in equity due to issue of ESOP and Share Warrants in the year 2015.

Table 2: Financials for Salzer Magnet Wires Ltd. (All figures in INR Crores)

Particulars30-09-2016FY 2015-16FY 2014-15FY 2013-14
Equity Paid-up Capital13.4013.4013.2812.80
Reserves & Surplus3.302.972.072.08
Carry Forward losses0000
Net Worth16.7016.3715.3514.88
Secured Loan15.6311.8611.9612.79
Unsecured Loan03.874.023.35
Fixed Assets99.4410.1410.79
Income from operations26.0847.8848.3144.24
Total Income26.2848.4748.7444.42
Total Expenditure25.8644.5544.7940.40
Profit Before Tax0.421.111.100.90
Profit After Tax0.330.870.801.33
EPS0.240.650.601.04
Book Value12.4612.2211.5611.63

Conclusion

SMWL, though have paid up capital almost equal to that of SEL, by its operations are less than 5%. Merger is EPS dilutive though there is marginal increase in book value. So unless there are synergy benefits, this merger benefits mainly shareholders of SMWL by providing liquidity and the increasing possibility of dividend and appreciation of present business of SEL.

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