Kolkata: The Khaitans of the Williamson Magor group are set to bring in a third major investor in McNally Bharat Engineering Co. Ltd, which will sell shares to acquire a majority stake in a 100-acre project under development at Neemrana, Rajasthan.
Late on Friday, McNally Bharat said in a regulatory filing that it would acquire 60% in Vedica Sanjeevani Projects Pvt. Ltd, which is developing a resort and residential complexes at Neemrana, by issuing 41.62 million convertible preference shares valued at Rs275 crore.
The preference shares are to be issued at a price of Rs66 each, inclusive of a premium of Rs56 per share, and on conversion into equity shares on maturity in 18 months, will give the owners of Vedica Sanjeevani Projects—the Kolkata-based Pasari family—a sizeable stake of about 30% in McNally Bharat.
Currently, the Khaitans and Toshniwals own 36% each in McNally Bharat. The Toshniwals came in as a strategic investor two years ago when their firm EMC Ltd, a leading infrastructure developer in the power sector, agreed to buy shares worth Rs50 crore in McNally Bharat. Slowly, they ramped up their holding to 36%.
Alongside, McNally Bharat has also decided it will convert unsecured loans given by the Williamson Magor group into shares. McNally Bharat will issue 41.66 million shares to Williamson Magor and Co. Ltd, Williamson Financial Services Ltd and Babcock Borsig Ltd at Rs66 each to raise its equity base by an additional Rs275 crore.
The conversion of loans made by Williamson Magor group into equity is part of the McNally Bharat’s plan to raise its equity base by up to Rs675 crore, a key official said, asking not to be named. The aim is to strengthen the engineering company’s financials to seize emerging opportunities in the infrastructure sector.
That apart, McNally Bharat will be raising Rs124 crore through a preferential allotment of 18.8 million shares to four investors, including a privately owned firm of the Pasari family.
On expansion of McNally Bharat’s equity base, the ownership of the Toshniwals of EMC will get diluted to around 12%—a third of their current stake—while the Khaitans and Pasaris will jointly own around 70%. The Khaitans will have around 40% stake, and the Pasaris, around 30%.
The Toshniwals are currently shown as co-promoters of McNally Bharat, along with the Khaitans. It is not immediately known whether the Pasaris are also going to be treated as co-promoters on conversion of their preference shares into equity shares—in which case, the company will fall foul of the minimum free float norm. Under Indian securities market regulations, every listed company has to have a minimum free float, or public shareholding, of 25%. Currently, public shareholding in McNally Bharat is at 27.89%.
The Toshniwals and Pasaris were not immediately available for comments.
This marks a clear shift in the strategy that was previously adopted to turn McNally Bharat around. Earlier, the company was looking to hunt together with EMC, and had even explored the possibility of merging itself with EMC, but in December decided to abandon the plan.
The aim of the proposed consolidation was to create a company with multiple capabilities and a strong balancesheet, but on close examination, it was found the merger would not have achieved its purpose, Aditya Khaitan, a non-executive director at McNally Bharat and the vice-chairman of the Williamson Magor group, said in December.
McNally Bharat is now led by its managing director Srinivash Singh, who had earlier quit the company following differences with the Khaitans.
Singh, who was earlier credited with the turnaround of the company, joined in December. He is expected to soon present to the board a strategic plan for reviving McNally Bharat for the second time.