The Cabinet Committee on Economic Affairs, chaired by the Prime Minister Shri Narendra Modi, has given its approval for conversion of Working Capital Term Loan (WCTL) amounting to ₹ 29.91 crore from Bank of Baroda (BoB) into equity by issuing requisite number of equity shares of Andrew Yule & Co. Ltd. (AYCL) as preferential issues to BoB as Qualified Institutional Buyer. The price will be based on market price determined as per Securities and Exchange Board of India (SEBI) Guidelines on the date of acquiring of shares by BoB with face value of ₹ 2/- per share.

Conversion of WCTL into equity will:

(i) Bring down the cost of debt servicing by AYCL by ₹ 2.86 crore per annum, resulting in improved profitability and liquidity of AYCL in coming years and thereby providing an opportunity to finance working capital needs of existing and new businesses.

(ii) Result in improved Debt Equity ratio for AYCL. This along with substantial amount of Securities Premium will form part of net worth of Company and will enhance the strength of its balance sheet.

This is expected to increase growth and profitability of AYCL and in turn is likely to translate into better share price of AYCL at the time of further disinvestment of GoI shares of AYCL as per SEBI Guidelines. This will be implemented within a period of three months.

Background:

AYCL, established in 1863, became a Public Sector Enterprise in 1979 and is presently engaged in manufacturing of Industrial Fans, Ventilation Equipment, Air Pollution Control Equipment & Systems, Effluent Treatment Plants, Power & Distribution Transformers, High Tension and Low Tension, Switchgears and Circuit Breakers, Auto Voltage Regulators and allied equipment and production of Bulk Tea. Paid up capital of the Company is ₹ 66.73 crore in which GoI holding is 87.98%. AYCL shares (Face value of ₹ 2/- each) are listed in Mumbai Stock Exchange.

AYCL was referred to Board of Industrial and Financial Reconstruction (BIFR) in September, 2004. Subsequently, the Board for Reconstruction of Public Sector Enterprises (BRPSE) recommended a Restructuring Scheme for AYCL which was approved by Cabinet in February, 2007 and by BIFR in October, 2007. With implementation of Restructuring Scheme, AYCL has been continuously earning from 2007-08 onwards. AYCL has come out of purview of BIFR on 8.7.2015.

As a part of implementation of Financial Restructuring Scheme, Bank of Baroda extended a loan of ₹ 52.49 crore to AYCL in 2009, out of which ₹ 29.91 crore was Working Capital Term Loan. With the approval of its Board of Company, AYCL has proposed for conversion of WCTL of ₹ 29.91 crore it has taken from BoB into Equity. The conversion should take place at the price determined by SEBI guidelines on the date of acquiring of shares by BoB. This proposition has been agreed to by BoB.

Conversion of debt into equity strengthens company balance sheet under SEBI pricing, reducing debt servicing and enhancing net worth. Approval was given to convert a Working Capital Term Loan into equity by issuing preferential shares of Andrew Yule & Co. Ltd. to Bank of Baroda as a Qualified Institutional Buyer, with the issue price fixed under SEBI guidelines on the date of acquisition and face value of Rs. 2 per share. The conversion is intended to lower debt servicing, improve profitability, liquidity and the debt equity ratio, increase net worth through paid up capital and securities premium, and strengthen the balance sheet prior to further disinvestment.