The Telegraph
Thursday , April 17 , 2014
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Cimmco move to cut debt

Chowdhary: Big plans

Calcutta, April 16: Railway wagon maker Cimmco Ltd plans to trim its debt and diversify to improve its balance sheet in 2014-15.

“For Cimmco, we have a three-pronged strategy. The first was to increase our ownership,” Umesh Chowdhary, vice-chairman and managing director of the Titagarh group, which owns a majority stake in Cimmco, today told The Telegraph.

Titagarh Wagons Ltd (TWL) has recently increased its shareholding to 99 per cent from 50 per cent in a special purpose vehicle — Cimmco Equity Holding Private Ltd (CEHPL) — which was floated jointly with the original promoters SK Birla Group in 2010. CEHPL holds 74.66 per cent in Cimmco.

This indirect acquisition by TWL has triggered a mandatory open offer to public shareholders for the remaining 25.08 per cent at Rs 15.50 per share.

Company sources said if CEHPL’s stake after the offer was more than the maximum permissible limit of 75 per cent, it would get 12 months to reduce the shareholding. The management, however, is not in favour of taking recourse to the other option of delisting Cimmco.

“Secondly, we plan to cut down Cimmco’s debt. We are expecting the company to be a debt-free by the end of this fiscal (2014-15),” Chowdhary said.

Cimmco had a long-term debt of around Rs 30 crore at the end of December 2013. TWL has planned to infuse Rs 50 crore by subscribing to non-cumulative preference shares, which has been approved by the board of both the companies. “This infusion would partly help to retire existing debts.”

The final strategy was to increase Cimmco’s business scope through diversification. Titagarh Wagons plans to utilise Cimmco’s plant at Bharatpur, Rajasthan, to start manufacturing tractors by the end of this year.

“We want to fully sweat our assets. There is a synergy in the two businesses and there is growth potential in tractor manufacturing. The location of the plant also offers an advantage in terms of the demand for such products,” Chowdhary said.

Cimmco had reported a net loss of 12.44 crore for the April-December period of 2013-14 on account of delayed wagon orders.