SMOOTH SWERVE Networth of Dunlop was Rs 151.82 cr at the end of 2006-07 against a negative Rs 261.15 cr in the previous year Some of Dunlop’s non-core assets were transferred to associate companies The associate companies issued shares of equal worth to the tyre make Value of these shares has been taken as 'other income' in Dunlop's balance sheet

Calcutta, April 22: Tyre maker Dunlop India is set to come out of the BIFR after an asset recast exercise saw the company report a positive networth for 2006-07.

Confirming the development, Dunlop chairman Pawan K. Ruia said the company would soon move the BIFR in this regard. The networth of Dunlop, was Rs 151.82 crore at the end of 2006-07 against a negative Rs 261.15 crore in the previous year. The company has commenced tyre production at its plants in Sahagunj, Bengal, and Ambattur, Tamil Nadu.

The recast was done by transferring some of the non-core assets of Dunlop to associate companies, which helped it book Rs 320.37 crore as ‘other income’ during the fourth quarter of 2006-07.

As reported by The Telegraph, international real estate firm Jones Lang LaSalle (JLL) has valued the company’s real estate assets at over Rs 900 crore. Dunlop’s prized assets include the Bombay House in Worli, Mumbai and a plot at Ambattur.

The associate companies of Dunlop to which some of the properties were transferred issued shares of equal worth to the company instead of paying in cash. The value of these shares has been taken as ‘other income’ in Dunlop’s balance sheet.

This method was followed because the BIFR would not have accepted a simple asset revaluation exercise. Such an approach would also have turned the firm’s networth positive.

The exercise has yielded a profit after tax of Rs 447.37 crore last fiscal, including a gain of Rs 120 crore as exceptional item. The company was also able to wipe out its accumulated losses of Rs 410.8 crore in 2005-06.

The move to take the company out of the BIFR augurs well for Dunlop as it is keen on raising cash to strengthen its operations.

The sick tag of the BIFR came in the way of the new management that took charge after Ruia bought out the Chhabria family’s shares in December 2005.

Dunlop plans to raise Rs 400 crore through debt and equity. It also plans to make a private placement to a clutch of foreign banks. The company is in the midst of a rights issue and is trying to get its shares re-listed on the bourses.

The company has come up with a Rs 27-crore rights issue. Six shares of Dunlop are being offered at Rs 10 on a par for every 10 shares held. After the issue, the paid-up capital of the company will go up to Rs 72 crore from Rs 45 crore. Dunlop has also extended the closing date of the issue to April 24 from April 19 to accommodate small shareholders.

The only worrying sign for Ruia is Dunlop’s failure to book profit from operations in 2006-07, despite commencing production at Ambattur and Sahagunj.