Ashok Leyland to merge Hinduja Foundries

The board of automobile component firm Hinduja Foundries Ltd has given its nod for merger of the company with heavy commercial vehicle maker Ashok Leyland subject to regulatory and shareholders approval of both the companies.

In a conference call today, the Ashok Leyland management said the merger will not be a drag on the automaker's profit and loss statement, instead Hinduja Foundries will add to the company's bottomline in two to three years, it added.

"At the meeting held today, the Board of Directors of the company unanimously approved the proposal of amalgamating Hinduja Foundries Ltd, a Hinduja Group company with Ashok Leyland subject to various regulatory and shareholders approval of both the companies," a company statement said.

The board also approved the exchange ratio on the amalgamation in which 100 equity shares of Rs10 each of Hinduja Foundries Ltd will get 40 shares at Re1 each of fully-paid shares of Ashok Leyland Ltd.

"One thousand 2008 series GDRs of Hinduja Foundries Ltd will get 133 equity shares of R1 each fully-paid of Ashok Leyland," it said.

"One 2016 series GDRs of Hinduja Foundries Ltd will get 4,800 equity shares of Re1 each fully paid of Ashok Leyland Ltd," it said.

The proposed date of amalgamation is 1 October 2016.

"We welcome Hinduja Foundries into the fold of Ashok Leyland Ltd. The amalgamation will result in operational efficiencies and help realise significant cost synergies," Hinduja Group company and heavy commercial vehicle maker, Ashok Leyland Ltd, chief executive officer and managing director Vinod K Dasari said.

"We are confident that the roll out of the best practices of Ashok Leyland will benefit Hinduja Foundries Ltd. While it is a critical supplier to Ashok Leyland Ltd, it will continue its focus to grow its relationships with other customers," he said.

"In fact the new arrangement will help in providing a wider range of solutions to them. There is so much more Hinduja Foundries can do under the new arrangement," Dasari said in the statement.

Gopal Mahadevan, chief financial officer at Ashok Leyland said Hinduja Foundries is critical to Ashok Leyland and 36 per cent of Hinduja Foundries' revenue comes from Ashok Leyland. The company will benefit significantly from synergies once Hinduja Foundries comes under Ashok Leyland, he added.

There is an opportunity to improve financials of Hinduja Foundries and hence the decision to merge it with Ashok Leyland, he said.