Kolkata: Srei Infrastructure Finance Ltd, a non-banking finance company (NBFC), is merging itself with Quippo Infrastructure Equipment Ltd—an unlisted firm founded by it in 2002 that is now India’s biggest infrastructure equipment rental firm.
The merger will result in the promoters’ ownership in Srei going up from 30% to 46%, and create treasury stocks that can be sold later. After the merger, about 9.5% of Srei’s equity capital will be held by a trust as treasury stocks, or shares owned by a firm in itself.
Based on valuation reports prepared by consulting firms BDO Haribhakti Consulting Pvt. Ltd and KPMG India Pvt. Ltd, the swap ratio for the merger is fixed at three shares of Srei for every two held in Quippo.
The Kanoria family, which founded both firms, owns around 57% in Quippo; Srei owns 17%. The rest, around 26%, is owned by venture capital funds and close associates of the Kanoria family.
Srei, which has a consolidated asset base of around Rs12,100 crore, also said on Thursday that after the merger it would allot four bonus shares for every five held.
The aim is to expand Srei’s capital base so it can borrow more, the firm’s director Sunil Kanoria said. At the end of December, Srei’s debts at around Rs3,000 crore was a shade under four times its net worth of Rs775 crore. Srei has a paid up equity of Rs116.14 crore.
The announcement was made shortly after the markets closed. Srei’s shares gained around 4% to close at Rs77.55 apiece on the Bombay Stock Exchange on Thursday.
“With the unprecedented growth that we are witnessing in the infrastructure sector, we feel that this step to integrate the businesses of Srei and Quippo would enable us to grow faster,” Srei chairman and managing director Hemant Kanoria said in a statement.
After the merger, Srei would have some 20 subsidiaries offering products and services such as project finance, equipment rental, insurance broking and venture capital.
Quippo was founded by Srei jointly with international lenders such as International Finance Corp. and FMO of the Netherlands, which together held 40% initially.
They sold their stake in 2006 to the Kanoria family, according to Sunil Kanoria.
Srei said on Thursday its consolidated revenue in the December quarter had grown 46% over the same period a year ago to Rs257.19 crore. Its net profit for the third quarter at Rs44.20 crore was five times the net profit in the same quarter last year.