Asahi plans to reduce preference share capital

Japan-based Asahi Glass will take a Rs 143.5-crore hit with its subsidiary Floatglass India planning to “reduce” its preference share capital by this amount to partly offset the accumulated losses.
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Japan-based Asahi Glass will take a Rs 143.5-crore hit with its subsidiary Floatglass India planning to “reduce” its preference share capital by this amount to partly offset the accumulated losses. Floatglass India had raised preferential capital amounting to Rs 149 crore through a preferential issue which was fully subscribed by Asahi Glass. The total accumulated losses of Floatglass is over Rs 280 crore. Asahi Glass has also agreed to extend a fresh loan to Floatglass India to finance the repayment of the latter“s existing high-cost foreign currency loans. As of March 2001, total loans of Floatglass stood at Rs 279.14 crore, of which foreign currency loan was Rs 224.38 crore. Fresh loans from AGC will be for 10 years and will be interest-free for the first eight years. This is a part of the restructuring proposal cleared by the board of Floatglass India and its majority shareholder Asahi Glass. Besides, AGC will transfer its 75% stake in Floatglass to another Asahi India Safety Glass, where AGC holds 24% of the equity. This follows AGC“s decision to consolidate its Indian operations under AISG. Floatglass India has been incurring losses ever since its inception and in March 2001 the accumulated losses were Rs 280.9 crore. The shareholders funds amounts to Rs 311.57 crore, which includes redeemable preference shares of Rs 149.50 crore fully held by AGC. The board of Floatglass India has decided to reduce the preference capital of Rs 143.5 crore from the existing Rs 149.5 crore. The preferential capital is represented by redeemable preference shares by 1.43 crore shares worth Rs 100 each. While seeking shareholder approval to the proposal, the company has said this would “reduce the accumulated losses and enable the company to pay dividends a lot earlier in future”. An extraordinary general meeting has been called on 5 November for shareholders consent. Significantly, AGC has also agreed to write off the entire amount of cumulative dividend that is due since the issue of redeemable preference shares and has not been paid till date. It is also decided that the remaining preference shares of Rs 6 crore will carry a nominal dividend of 0.01% on a non-cumulative basis and will be redeemable in 2007-2008. Floatglass India has told the shareholders that AGC has in past extended guarantees against its borrowings. “Because of this fund infusion (through preference capital) done by AGC over the years, Floatglass was able to keep the operations of the company afloat and maintain its networth,” said the company notice to the shareholders. The shareholders funds of Rs 311.57 crore consist in share capital of Rs 227.52 crore and reserves and surplus of Rs 84 crore. The share capital comprises Rs 78 crore of equity share capital and Rs 149.5 crore preference shares.