Hindustan Motors has stopped producing the iconic Ambassador car for sometime and its Mitsubishi car assembly plant has been divested. Yet, a handful of financial institutions are picking up stakes in the company afresh.
A clutch of banks and FIs would now be burdened with 11.42% stake or 2.38 crore shares valued at Rs 22.54 crore and Rs 20.53 crore worth of debentures on account of fresh issue of shares and debentures to the FIs following a decision of the Corporate Debt Restructuring (CDR) cell to recompense interest on loans. ICICI Bank and IDBI Bank are being saddled with more than 5% and 2% equity stakes, respectively in Hindustan Motors following conversion of unpaid interest on loans.
Recompense of interest is compensating banks for interest on loans forgone during a period when a firm is under CDR. As per CDR guidelines, the total amount of recompense of interest as on March 2014 worked out to Rs 90.21 crore including the effect of compounding over 10 years over deference in interest rates for respective years, the company has said in its annual report.
Out of this amount, the CDR empowered group waived 25% and approved in June-end payment of recompense amount of Rs 67.66 crore by a combination of cash, secured debentures and equity shares.
Following that decision, nine financial institutions including ICICI Bank, IDBI Bank IFCI, LIC, Uco Bank, Bank of India, United Bank of India State Bank of India and Bank of Baroda are now being issued 2.38 crore shares, the company has disclosed.
Of these, ICICI Bank and IDBI Bank got the most, 5.15% and 2.13% respectively while issuance to others range from 1.63% to IFCI to 0.16% to State Bank of India.
Among the institutions, only LIC has been holding some stake, 3.25%, which will rise to 3.56% following issue of another 14.27 lakh shares. With this, these FIs taken together would be holding an aggregate 14.33% stake in Hindustan Motors, the disclosure said.
Following these allocations of fresh equity, stake of the promoter CK Birla group would drop from 36.52% to 32.34%. The FIs demanded recompense of interest after Hindustan Motors earned profit from sale of its property at Halol in Gujarat for Rs 47.63 crore treating it as a windfall gain.
Hindustan Motors, however, protested, and demanded significant waiver of the recompense saying the company never earned any profit from operations during the period under CDR. The company said lifting of suspension of work at its Ambassador plant at Uttarpara in West Bengal depends upon "extensive restructuring of its Uttarpara facility and tie-up with prospective investors".
Apart from the fresh Rs 67.66 crore of recompense liability, Hindustan Motors is currently facing a claim of Rs 194.47 crore from West Bengal government, which demanded that the company earned this excess amount from disposing 314 acres of land at its Uttarpara plant for real estate development and hence should be refunded with interest, the report disclosed.
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