There
are certain reports published in the newspapers on the proposed scheme of
merger, which do not reflect the facts in right perspective. This press release
is intended to clear the air on the misgivings, which have been created due to
the misleading news reports.
Jindal
Vijayanagar Steel Ltd. (JVSL) and Jindal Iron & Steel Co. Ltd. (JISCO) have
shown exemplary performance for the financial year ended 31st March
2004 and quarter ended 30th June 2004.
The
merger of steel business of JISCO with JVSL is expected to create an entity
with strong financials, which is capable of reaping the benefits of synergies
in the integrated operations. The merged entity will be one of the top 20
companies in India in terms of turnover, assets and profitability. These
companies have proposed a scheme of Arrangement and Amalgamation (Scheme) after
following the due process of law as illustrated hereunder:
(a)
the Board of Directors of respective companies met on 22nd
October, 2003 to consider the scheme and accordingly appointed reputed
consultants and valuers to formulate a scheme, to value the businesses and to
suggest appropriate swap ratio.
(b)
On submission of the scheme by the consultants and
valuation report by Valuers, the Board of Directors once again met on 13th
November 2003 and approved the scheme and swap ratio.
(c)
The scheme has been filed with the Stock Exchanges as per
the provisions of listing agreements.
(d)
The Honourable High Courts of Bombay and Karnataka have
been approached for requisite approvals.
(e)
As per the Court directives with due notice to the
concerned parties, Court convened meetings of Equity shareholders, Preference
shareholders, Debenture holders and Secured Creditors of JVSL were held on 29th
January, 2004.The Court convened meeting of Equity shareholders of JISCO was
also held on 27th January, 2004. The Minutes of these meetings
approving the proposed scheme were filed in Court.
(f)
Public notice was also given in the leading newspapers
about the scheme.
(g)
All the procedures laid down U/s.391 to 394 of the
Companies Act 1956 have been followed strictly.
The
above facts demonstrate the company’s intention to follow the law and adhere to
good corporate governance practices.
The
secured lenders of both the companies after thorough due diligence and pursuant
to scrutiny of valuation reports prepared by reputed valuers have accorded
their consent to the scheme. JVSL is no longer a loss making company,Infact
JVSL on stand-alone basis showed a gross turnover of Rs.3596 crores and a net
profit of Rs.528.68 crores for year ended 31st March, 2004. This
company has reduced its debt level from Rs.5254 crores as on 31st
March, 2003 to Rs.4313 crores as on 31st March, 2004. As
the consolidation is the order of the day in the international arena to make
the operations resilient during the downturn particularly in cyclical
industries, the scheme is proposed based on business driven considerations, in
the interest of all stakeholders.
In the
meantime, a foreign party claiming to be a creditor of JISCO has intervened in
the Court proceedings and raised objections for the scheme. The Objecting party
is yet to prove its claim in a Court of law. An intervention application has
been filed in the Court proceedings for the scheme. Keeping in view the
interest of the stakeholders and the benefits those will accrue to the merged
entity, JISCO has offered a Bank Guarantee from a leading nationalised bank
securing him fully until the claim is proved in the Court of law which once
again reflects the bonafide intention of JISCO. The company preferred to offer Bank Guarantee to
expedite the process of approval for the scheme instead of spending further
time on the debate about the merits of the report submitted by the Court
appointed CA. The sanction of Bank Guarantee by a leading nationalised bank is
a testimony of the merged entity’s financial strength.
The
other Objecting party i.e. Income Tax Dept.
has also intervened objecting the scheme . The company is strongly
contesting this case not only on merits but also on locus.
JVSL has
given additional information as part of the published financial results for the
year ended 31st March 2004 and also for the quarter ended 30th
June, 2004, the financial results for the merged entity. The merged entity’s
net profit was Rs.802 crores and Rs.108 crores for the year ended 31st
March, 2004 and 30th June 2004 respectively. The merged entity’s
cash profits were Rs.1011 crores as on 31st March, 2004.
These numbers prove that the merged entity will have enough financial strength to satisfy the claims of the objecting parties, if proved to be payable.