New Delhi, Aug 20: The Escorts group plans to increase its stake in Escorts Finance to over 65 per cent from 48 per cent. The proposed hike will be through a preferential allotment to the promoters, who will hold nearly two-thirds of the revised capital.Escorts Finance has proposed to issue additional shares, which will take up the equity to about Rs 30 crore, from Rs 20 crore. The company has dropped its plans to go in for a rights issue in the ratio of 1:1.
Though the price at which the preferential allotment will be made is yet to be decided as per the Sebi formula, it would be Rs 13-14 per share, sources said.
The Escorts Finance scrip closed at Rs 9.60 on Thursday. At present, Escorts holds 18 per cent in the finance company's Rs 20-crore paid-up equity, while the other group companies hold 30 per cent. "It was pointless to go for a rights issue considering the poor market conditions so we decided for a preferential allotment", sources added. After the recent amendments in the guidelines pertaining to the functioning of non-banking finance companies by the Reserve Bank, Escorts Finance plans to strengthen its net-owned funds through this route. The Escorts group is keen to invest in the company as it feels that the financial services sector is likely to play an important role in the economy. The decision is yet to be ratified by the Escorts board.
Meanwhile, Escorts has decided to increase its authorised share capital from Rs 300 crore to Rs 410 crore.
The company plans to restructure the authorised share capital by cancelling the unissued preference shares of Rs 3 crore and equity shares of Rs 220 crore, and creation of 3.70 crore 12 per cent cumulative redeemable preference shares of Rs 90 each aggregating Rs 333 crore.
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