Ashok Leyland Ltd to sell casting unit to Ennore Foundries Ltd

Chennai, Jan 26 | Updated: Jan 22 2014, 18:06pm hrs
Hindujas promoted commercial vehicle major Ashok Leyland Ltd (ALL) is planning to sell its casting unit to one of the group subsidiary Ennore Foundries Ltd (EFL). The move comes in the wake of the Ennore Foundries' business recast to help it enhance capacity and focus more on export market.

Quote: Hinduja Foundries Ltd

EFL is planning to set up another foundry unit in Chennai to enhance its capacity to meet the growing export demand. It is also planning to reduce the share of ALL in its total sales. Ennore Foundries is reportedly scouting for a mid-sized casting unit for a possible acquisition.

According to information available with FE, Ashok Leyland has reportedly called for a meeting of its board of directors on Saturday to consider the sales proposal. According to the proposal, ALL would sell its Ductron Castings Unit (DCU) in Hyderabad to Ennore Foundries Ltd. Once the company gets necessary approvals from its board of directors and shareholders, Ashok Leyland would go ahead with the sale of the unit to EFL. Though the company has not yet valued the business of the casting unit, analysts feel that it would be anywhere between Rs 40 crore to Rs 50 crore.

The Ductron Casting Unit in Hyderabad is Ashok Leylands in-house, captive supplier of grey and spheroidal graphite iron castings. Formerly known as Ductron Castings Ltd, this unit was taken over by Ashok Leyland in 1990 to augment the foundry capacity of the Group.

Ennore Foundries is in the process of setting up a new greenfield foundry unit as per its expansion plans. The companys new foundry unit is estimated to cost somewhere between Rs 100 crore and Rs 120 crore. The board of directors of the company on Tuesday has approved the issue of 95,05,860 rights shares of Rs 10 each, at a premium of Rs 50 per share, aggregating Rs 57.04 crore. The issue would be in the ratio of 1.4 shares for every 1 share held by the shareholders.

The fund to be raised will be used to part finance the modernisation of current facilities, expansion and acquisition of allied business.