Mumbai: Dunlop India Ltd is transferring its rights to around 100-odd trademarks— including Dunlop, Falcon and Monotona—to Ruia Sons Pvt. Ltd, the flagship holding company of Pawan Kumar Ruia, an entrepreneur who controls the beleaguered tyre maker.
Ruia acquired Dunlop in 2005 from Manohar Rajaram Chhabria’s Jumbo Group for an undisclosed amount in a hedge fund-backed deal. The hedge fund, Spinnaker Capital Group, was repaid with a $120 million (Rs590 crore today) loan from an “overseas branch of an Indian bank”, Ruia said in an interview two years ago.
“An agreement has been concluded to transfer Dunlop’s trademarks to Ruia Sons,” said an official at the tyre maker, who did not want to be named. “We are soon going to file an application with the trademark office for the transfer of the trademarks to Ruia Sons.”
Dunlop’s right to these trademarks are restricted to India alone.
A spokesperson for the Ruia Group declined to comment.
Under Indian trademark laws, the authorities have to issue public notifications calling for objections to the proposed transfer of the trademarks. According to the Dunlop official, the company’s key concern is that its lenders could oppose the move.
Almost all of Dunlop’s fixed assets and 87.98% of the Ruia Group’s shares in the firm are mortgaged. The promoters held a 74.25% stake in the company as of June. Even its Sahaganj factory in West Bengal has been pledged with lenders, according to the firm’s balance sheet. Last week, Dunlop suspended operations at its Sahaganj factory, intensifying a standoff between it and the state government.
Though the state’s commerce and industries minister Partha Chatterjee is pushing Dunlop to restart operations at Sahaganj, this is unlikely to happen immediately because West Bengal State Electricity Distribution Co. Ltd has stopped supplying power to the factory.
It did so because Dunlop was unable to pay for electricity. “Dunlop has been run to the ground,” said a state government official from the commerce and industries department, who did not want to be named. “It has been reported to us that Ruia has been removing machines from the factory. Now it appears he is trying to transfer out of Dunlop even its intangible assets.” Mint couldn’t independently verify the claim regarding machinery.
Dunlop said in a statement dated 7 October that it was forced to suspend operations at Sahaganj because of theft of property. It said repeated complaints to the administration did not result in any “meaningful assistance” in securing property from workers abetting the theft.
Workers at Sahaganj, however, have a different view. They said, speaking on condition of anonymity, that Dunlop’s management was moving out assets such as machinery and the flashpoint was the workers’ collective resistance to the movement of trucks into and out of the Sahaganj factory.
For years Dunlop has been losing key people, including chief executive officers and directors. Even Ruia stepped down as Dunlop’s chairman in January and later as a director in August.
The official reason was that he wanted to focus on the Ruia Group’s overseas acquisitions, but Dunlop’s employees say Ruia has been distancing himself from the company as its financial stress intensified.
“He has bought three companies in Germany and two in the UK,” said Dipak Rudra, a former independent director of Dunlop who resigned last month. “I can’t figure out why he couldn’t raise funds to bring Dunlop back on track.”
Since 2008, the Ruia Group has acquired at least six auto component makers in Germany, France, the UK and Turkey. These firms are either tyre makers or manufacturers of automotive components. Its first major overseas acquisition was that of Schlegel Automotive Europe Ltd, a British manufacturer of automotive sealant, in July 2008. In May, it announced the acquisition of a German and a Turkish company, both of which make rubber sealing systems for cars.
In most of these cases, the cost of acquisition was not disclosed.
Rudra, a former chairman of UCO Bank, stepped down from Dunlop’s board after the company’s directors were asked to clear a circular resolution to invest “a few thousand dollars” in a Mauritius firm. “The rationale behind this investment wasn’t ever explained,” said Rudra.
“Ruia couldn’t attend the AGM (annual general meeting of Dunlop), but on the same day he expected us to pass this circular resolution,” he said. “The board members were never taken into consideration.”
Rudra added he wasn’t aware of Dunlop’s decision to transfer its trademarks to Ruia Sons, though according to the company official cited above, the move has been in the works for around two months.
Dunlop managed to get out of the purview of the Board for Industrial and Financial Reconstruction, an agency for recasting sick firms, by revaluing its fixed assets. Ruia fought hard to achieve this by the end of 2007. Following this, he carved out Dunlop’s real estate assets across India. These assets were later mortgaged to secure loans.
“It looks as if Ruia has lost interest in Dunlop,” said the state government official. “He doesn’t seem to be interested in dealing with the difficulties in running the company.” Dunlop’s key problems are its huge workforce and ageing machinery, besides indebtedness.
However, the Dunlop statement cited earlier said the “strenuous efforts” had been made by the firm’s present management, “including generation of resources from outside by way of loans and several other economic measures”.
The statement added that “criminal activities” on the part of “recalcitrant workers” had paralysed the atmosphere in the factory premises and there was no chance of production or productivity.
Dunlop shares on Wednesday rose 2.44% to close at Rs.15.96 on BSE. The Sensex gained 2.55%.