New Delhi, Oct. 20: The Union cabinet is slated to discuss a financial restructuring package for Calcutta-based tea, engineering and electricals giant Andrew Yule which involves a debt-equity swap, a new bond issue to retire old, high-cost loans, ploughing back earnings from divestment in subsidiaries — Tide Water Oil and Hooghly Printing Works — and sale of investments in other companies.
Officials said these measures, which are expected to yield about Rs 300 crore, are being taken to bring the firm back to good health.
The 140-year-old company’s disinvestment, which was on the cards, can only be taken up after the imbroglio over the Supreme Court judgement, which bars the government from divesting control in PSUs taken over through Acts of Parliament, is solved.
The government debt of about Rs 47 crore will be swapped for equity at par value. The firm will be allowed to go ahead with a Rs 30-crore bond issue to repay earlier costly loans.
This will take Andrew Yule’s equity base to Rs 98 crore and improve its debt-equity ratio which is at a current 1.70. The government holds about 93.26 per cent in the company, while financial institutions hold about 1.6 per cent and the balance 5.14 per cent is held by public bodies.
Besides owning and running Hooghly Printing and Tide Water Oil, Andrew Yule has substantial stakes in a number of other companies and the sale of all these holdings is expected to yield over Rs 200 crore.
The disinvestment ministry had earlier sought to sell off Andrew Yule as a single unit, a move that the finance ministry objected to.
Instead, the ministry’s expenditure department had floated a proposal that Yule should be broken up into three separate firms handling electricals, engineering and tea and each of them dealt with separately.
The logic was that few top corporate entities would be interested in a diversified firm Andrew Yule. It said that as much of what the electrical division produces — switchgear, transformers, voltage regulators, digital microwave radio, fibre optic — is produced by many other firms at far more competitive costs, it makes sense to shut down the divisions handling these works.
The engineering division, which makes machinery for tea processing, industrial fans, air pollution equipment among other things, may be merged with another PSU which specialises in engineering products but does not have facilities in these areas.
The proposal said its tea division should be eventually sold off piecemeal to get the best possible price.