BackPunj Lloyd transfers defence to subsidiary
Punj Lloyd has transferred the business to Punj Lloyd Industries Ltd on a slump sale basis via a preference share issue for Rs180 crore
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Mumbai: As a way to ringfence its defence business from troubles of the parent company, engineering and construction company Punj Lloyd Ltd has transferred all of its defence manufacturing operations to a subsidiary company for ₹ 180 crore.
Punj Lloyd has transferred the business to Punj Lloyd Industries Ltd on a slump sale basis via a preference share issue, the company said in a filing to BSE on Friday.
The businesses of Punj Lloyd that were transferred include manufacturing of defence products, aviation, aerospace, energy and shipping equipment, including missile artillery systems and related equipment for field application, air defence artillery and associated systems used for defence, internal security and border security.
A person close to the development explained that Punj Lloyd, which is facing stress in terms of cash flows, is trying to separate the booming defence business from the parent company.
“It will help the company to carve out defence as a separate business with lot more focus," he added.
Earlier this month, Punj Lloyd had received shareholders’ approval for taking term loans up to ₹ 1,500 crore with the condition that the lenders can get the debt converted into equity shares in case of a default.
As on 31 March, Punj Lloyd had debt of ₹ 6,113.69 crore.
On Friday, shares of Punj Lloyd ended at ₹ 28.80 on the BSE, up 8.7% from the previous close. India’s benchmark BSE Sensex rose 0.06% to close at 28,463.31 points.
On Friday, The Economic Times reported that Punj Lloyd and Bharat Electronics Ltd (BEL) had been shortlisted by the Indian Army for a project involving upgradation of its Zu 23 2B air defence guns. The contract could be worth $100 million, said the report.
In response, Punj Lloyd said that it keeps evaluating various business opportunities.
“In this regard, the company had submitted its proposal for upgrade of Zu 23 air defence gun to ministry of defence (MoD) as per the request for proposal issued to us. MoD has vide its letter dated 30 June 2015, qualified our solution to upgrade Zu 23 air defence gun, after field evaluation. MoD has yet to open the commercial bids to decide on the party to be awarded the contract," Punj Lloyd said in a clarification issued to the exchanges.
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