MUMBAI, June 23: In a bid to infuse fresh life into its ailing group companies, Kirloskar Oil Engines Ltd (KOEL) plans to acquire seven million equity shares of Rs 10 each in pig iron and castings manufacturer, Kirloskar Ferrous Industries Ltd (KFIL), from its subsidiary, Shivaji Works Ltd.

The acquisition will result in an increase in KOEL's holding in KFIL from 25.64 per cent to 37.6 per cent.KOEL manufactures diesel engines and recently decided to part ways with its US partner, Cummins Engine Company bringing an end to a 35-year old association.

KOEL will also invest about Rs 45 crore in the proposed preferential offer of KFIL to improve its financial health. KFIL plans to issue 12 per cent cumulative fully/partly convertible preference shares of Rs 10 each at par.

The KFIL board will determine the proportion and terms of the proposed offer.Shivaji Works, in which KOEL holds a 48.52 per cent stake, is a major supplier of castings to its parent company. Shivaji Works had embarked on an expansion-cum-modernisation programme in 1994-95 but suffered a setback during the course of implementation.

However, KOEL is dependent on Shivaji Works for its castings supply and hence is keen to ensure uninterrpted supplies. The restructuring effort is aimed at augmenting Shivaji Work's funds position.

The shares would be bought at a price of: (a) either the average of the weekly high and low of the closing prices of the shares of KFIL quoted on the Bombay Stock Exchange (BSE) during the six months preceding May 20, 1997 or (b) the average of the weekly high and low of the closing prices of the shares of KFIL quoted on the BSE during the two weeks preceding May 20, whichever is higher.

The board of Shivaji Works had on May 20 passed the resolution offering seven million equity shares of KFIL to KOEL. KFIL manufactures pig iron and castings at its unit at Bevinahalli near Hospet in Karnataka. KFIL's operations had been hit due to adverse market conditions in the pig iron industry and cost overruns.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.