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Ashok Leyland absorbs sick group firm Hind Foundries

Hinduja flagship Ashok Leyland Limited has decided to amalgamate loss-making another group company Hinduja Foundries Limited (HFL) with itself.

By: | Chennai | Published: September 16, 2016 6:33 AM
Ashok leyland shares Boards of both the companies unanimously approved the proposal of amalgamating HFL (who are in the business of grey iron castings and supply of automotive components) with Ashok Leyland, subject to various regulatory approval and approval of shareholders of both the companies. (Reuters)

Hinduja flagship Ashok Leyland Limited has decided to amalgamate loss-making another group company Hinduja Foundries Limited (HFL) with itself. A sick company, HFL reported a loss of R394 crore (including exceptional loss of R136 crore) for the 18-month period ended March 31, 2016 and with a cumulative tax loss of around R1,100 crore. As of March 31, 2016, HFL reported a turnover of R945 crore.

Boards of both the companies unanimously approved the proposal of amalgamating HFL (who are in the business of grey iron castings and supply of automotive components) with Ashok Leyland, subject to various regulatory approval and approval of shareholders of both the companies. The proposed amalgamation is effective October 1, 2016, the company informed the stock exchanges on Thursday.

Elaborating on the financials, the company said that 100 shares of R10 each of Hinduja Foundries will get 40 shares of R1 each fully paid of Ashok Leyland. There is no cash transaction. The share exchange ratio is based on the valuation report done by Haribhakti & Co, LLP and Fairness opinion of SBI Capital Markets Limited.

It may be recalled that due to non-productive investments, rising interest costs and poor market conditions three years ago, Hinduja Foundries, a producer and supplier of cylinder blocks and heads for automotive sector, started reporting loss quarter-after quarter and at one point of time saw erosion of its net worth. Later it went to BIFR (now came out) and became a sick company. For HBL, Ashok Leyland is the single largest truck and main customer with 33% of its production consumed by the latter. There are number of non-truck customers, including manufacturers of passenger car, earth movers.

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