Centre restricts EKL royalty to AB Electrolux only for new models

...clears expansion of product range, issue of preference shares

Sanjay Sardana & Ashu Kumar

New Delhi, Aug 28: THE government has restricted payment of five per cent royalty by Electrolux Kelvinator Ltd (EKL) to its parent company AB Electrolux of Sweden only on new products and new models of existing product line.

The company had, however sought permission for royalty payment on total sales, which would have benefitted the parent company.
EKL, post-merger with Intron Ltd and Kelvinator India, is expected to have a turnover of around Rs 1700 crore and is targeting a revenue of Rs 3000 crore by 2003.

Electrolux Kelvinator just managed to break even last year with a small profit of Rs 3.05 crore for the 15-month period ended December 2000. EKL’s official declined to comment.

The merger of the three companies will result in the stake of AB Electrolux going up from 55.96 per cent to 74.2 per cent.

The Commerce and Industry Ministry has cleared EKL’s proposal seeking payment of royalty only partially. However, the merger of three entities, issue of preference and equity shares to AB Electrolux and extension of product range has been cleared. EKL, the merged entity, will issue 10 per cent cumulative redeemable non-convertible preference shares amounting to Rs 50 crore in lieu of Kelvinator Electrolux’s preference shareholding in Electrolux India Limited before amalgamation. The preference shares will be of seven year maturity with a put and call option at the end of 3rd, 4th, 5th and 6th years.

EKL had sought manufacturing, sourcing, marketing and distribution of cooking range, dish-washers, deep/chest medical freezers, air-conditioners, microwaves, water purifiers aprt from its existing product range of refrigerators and washing machines.

AB Electrolux, in view of competition in the white goods appliances industry, is consolidating its Indian operations and is merging the three entities, which will be effective from January 2001. The merger has been approved by the boards of three companies and is pending approval of the Delhi High Court. Post-merger, while AB Electrolux will hold around 74.2 per cent stake in EKL amounting to Rs 95.84 crore in the revised equity capital of 129.17 crore, Harish Kumar-promoted Maharaja Appliances will hold around 14 per cent and the balance 11 per cent will be held by public.