Bajaj Electricals to merge with its vendor Hind Lamps

The Board of Directors of Bajaj Electricals Ltd. (BEL) has its meeting held on 23rd November 2015 decided to merge the Hind Lamps Ltd. (HLL) into BEL. BEL holds 19 per cent equity shares of HLL and the remaining are held by the promoter and promoter group of companies of BEL. Post merger the entire manufacturing business of HLL together with all its assets and liabilities will be transferred to BEL as a going concern. HLL will retain the remaining business which include undertaking and other activities.

HLL amongst others has been a vendor of BEL for the past several years and has been supplying products in BEL's brand name. On one side BEL is one of the leading players in the business of lighting and consumer durables for over 75 years whereas HLL has manufacturing capabilities and required infrastructure. So the merger will help both the companies to achieve and fulfil their objective more efficiently and economically.

Revenue from operations of BEL for year ended March 2015 increased by 55.33 per cent in last 5 years and expenses increased by 69 per cent for the same period. Because of the fast increasing expenses the net profit for the company decreased by 109.70 per cent in the last 5 years. On the other side HLL is a loss making company for many years and from last 2-3 years it is just breaking even.

But the decision of merger will help both companies. After the merger BEL won't have to pay 2 per cent tax on goods purchased from HLL which will be an additional margin available.

HLL also has a large chunk of debt because of year on year losses due to which the suppliers also look at them differently because they can't repay on time. Because of delay in payments to vendors they charge extra which increases overall cost of borrowing for HLL. But once BEL comes into picture borrowing it will become easy for HLL and vendors also will not charge extra which in turn can help in 3-5 per cent cost reduction for HLL.

The stock of BEL was trading at Rs.225.80 an increase of 0.58 per cent from previous close.

Bajaj Electricals Limited (BEL) is an India-based provider of lighting, consumer durables, and engineering and projects products and services. The Company's business segments include: Lighting, which includes lamps, tubes and luminaries; Consumer Durables, which includes appliances and fans; Engineering & Projects which include transmission line towers, telecommunications towers, highmast, poles and special projects, and Others, which includes die-casting and wind energy.

Hind Lamps Ltd (HLL) an unlisted company is engaged in the business of manufacturing of glass bulbs, HID bulbs and aluminium caps. The company has a manufacturing unit at Shikohabad, District Firozabad, Uttar Pradesh and High-intensity discharge Lamps manufacturing unit at Parwanoo, Himachal Pradesh. Established in 1951, HLL has been declared a sick industrial company by the Board of Industrial and Financial Reconstruction. It has been under BIFR from the last 10-12 years.