ABG Shipyard is likely to pick up a 40 per cent stake in Western India Shipyard for Rs 225 crore. According to sources, the board of directors of ABG Shipyard in its Wednesday's meeting approved the merger proposal.
ABG bought the shares held by institutional investors ICICI, IDBI, Bank of India, State Bank of India and UTI.
The original promoters of Western India Shipyard, Western Paques India, Western India Industries and Gadgil Western Corp now hold over 8 per cent stake in the company while retail investors hold the remaining.
The institutional investor's holding of over 15 per cent in the company was subsequently increased to 40 per cent after a capital restructuring procedure.
“The acquisition is more or less a distress asset sale. The consortium of banks, which are hold majority stakes in the company wanted to exit, as the company was continuously making losses,” a Mumbai-based analyst, who did not wish to be identified, said.
The company has a total debt of over Rs 280 crore. During the first quarter of the current fiscal, Western India reported a loss of Rs 2.85 crore.
Western India handles composite ship and rig repair facility. ABG Shipyard is involved in shipbuilding and ship repair business. “Companies are not interested to make a huge investments for separate shipyard and repair facilities. Instead of making an additional investment, ABG will get access to existing facilities of Western India as well as the order books, if they win the bid,” Amit Adesara, analyst with the Emkay Stock broking, said .
Western India’s clients include Reliance Industries, GE Shipping, Shipping Corporation of India and Bharati Shipyard.
The Western India shares reached the upper circuit limit of Rs 18, up 4.96 per cent from the Tuesday’s close of Rs 17.15. The stock went up 10.43 per cent over the last one week.