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Sekurit Saint Gobain India plans rights issue

Sekurit Saint Gobain India Limited (SSGIL) – formerly Maharashtra Glass and Agro Limited – is planning a rights issue of 3.25 crore equity shares of Rs 10 each for cash at par aggregating Rs 32.53 cro…

Sekurit Saint Gobain India Limited (SSGIL) – formerly Maharashtra Glass and Agro Limited – is planning a rights issue of 3.25 crore equity shares of Rs 10 each for cash at par aggregating Rs 32.53 crore. The ratio for this issue has been fixed at 1:1. The offer document for this purpose has been filed with the Securities and Exchange Board of India (Sebi). The proposed rights issue is meant to finance a variety of activities. One of the objectives of the issue is to part-finance the upgrading of the company“s existing facilities and also to set up new facilities, specifically for toughened glass. The company is putting up a project at Bhosari. This unit is expected to have a manufacturing capacity of 24 lakh numbers of toughened safety glasses per annum. SSGIL is simultaneously carrying out capital expenditure aimed at improving the manufacturing facilities of the company“s existing units at Bhosari and Chakan. It is also putting up a project to manufacture 6 lakh units of toughened glass. Furthermore, additional infrastructure is planned to be created at its facility in Chakan. The changing requirements of the Indian automobile industry, particularly the cars segment, is leading the company to make these investments. The company also intends to fund its cash losses from the proceeds of the proposed issue. In the past, a mismatch of rising cost of raw materials, power and competitive selling prices had resulted in the company experiencing a squeeze on its margins. The company had in the process incurred some losses. The process is likely to be completed by 2001. SSGIL was incorporated in 1973 as a private limited company. It was then called Maharashtra Safety Glass Works Private Ltd. The company was promoted by A.C. Gulati and B.R. Dougall. It was converted into a public limited company in December 1988. SSGIL manufactures flat and curved toughened glasses and laminated safety glasses, which are used by the automobile industry. Toughened safety glasses find applications in other industries too, such as solar equipment, furniture, as well as building and construction. In a major diversification move, SSGIL started a solvent extraction plant. This plant was commissioned in September 1992. In 1995, SSGIL entered into a technical and financial collaboration with Sekurit Saint Gobain (SSG). A consequence of this collaboration agreement was the hiving off of the company“s oil division in 1995-96. Under an amendment made to the Motor Vehicles Act in 1995, it was required of every new vehicle to have a laminated windscreen. To capitalize on this opportunity, SSGIL put up a plant to manufacture 4,00,000 units of laminated safety glasses per annum at its Chakan plant in Maharashtra. The plant commenced production on June 1, 1996. Consequent to an increase in SSG“s holdings from 26% to 51%, it took over the day-to-day management of SSGIL with effect from December 26, 1997. This increase in SSG“s holdings was done through a preferential allotment of shares. After the allotment of shares in the previous rights issue made on April 10, 1999, the holding of SSG had increased from 51% to 75.11%. On March 31, 1999, the accumulated losses of SSGIL exceeded 50% of the peak net worth of the company during the immediately preceding four financial years. This made the company a “potentially sick industrial company” according to the provisions laid down in Section 23 of the Sick Industrial Companies (Special Provisions) Act (SICA), 1985. Subsequently, SSGIL filed the requisite form with the Board for Industrial and Financial Reconstruction (BIFR). SSGIL is a supplier to original equipment manufacturers (OEMs) such as Telco, Mahindra Nissan, Bajaj Auto, Bajaj Tempo, Ashok Leyland, Eicher Motors, Kerala Automobiles, Ind Auto, Piaggio Greaves and others. SSGIL manufactures the Atultuf and Atulsafe brands of toughened and laminated safety glasses. Currently, these two trademarks are being used by SSGIL as well as Atul Glass Industries Ltd. (AGIL). SSGIL and the erstwhile promoters have agreed that AGIL will allow SSGIL to use these two trademarks freely for a specified period of time. However, SSGIL intends to introduce SSG“s brand names for its products in due course. SSGIL“s competitors include Asahi India Safety Glass Ltd., Hindustan Safety Glass Works Ltd, Chandralaxmi Safety Glass Works Ltd., Atul Glass Industries Ltd., among others. Currently, the company has one subsidiary – Universal Body Builders and Engineers Private Ltd. (UBBL). This company, which was engaged in the business of building bodies for buses, dumpers, tankers, etc. has not been in operation since 1992-93. Since the land on which UBBL is situated lies adjacent to SSGIL“s premises at Bhosari, SSGIL decided to acquire the shares of UBBL in order to gain access to, as well as use, this piece of land.

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