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Shareholders vote on McDowell merger issue

Our Bureau

CHENNAI, Aug. 10

MCDOWELL and Company Ltd's shareholders voted on the issue of amalgamation of the company with McDowell Spirits Ltd at the Court-ordered Extraordinary General Meeting held here today. The voting results will be known tomorrow.

Addressing shareholders, Mr. Vijay Mallya, Chairman of the UB Group, said that the amalgamation was aimed at creating a single large entity which will have a beneficial impact on turnover and profits, acquire higher capacities, improve operational effici ency and a clean balance sheet to enable overseas listing.

Pending formal approvals, the scheme will take effect from April 1, 2000. McDowell and Company Ltd has three wholly-owned subsidiaries _ Vitari Distilleries at Bhopal, Udaipur Distillery Company Ltd, Udaipur and McDowell Properties Ltd, Bangalore. McDowe ll Spirits Ltd has two subsidiaries _ Mysore Wine Products Ltd with its registered office at Bangalore and Serampore Distillery and Chemical Company Ltd at Calcutta.

Clarifying to shareholders on the need for amalgamation, Mr. Mallya said that through the merger, the turnover will go up by Rs. 70 crores and profit by Rs. 7 crores. McDowell has been operated and managed from Bangalore for the last 17 years, and now th e operations could be streamlined.

With the present merger, the company will in effect be shifted to Bangalore, the centre of operations of the UB group which holds a 42 per cent stake in McDowell. To the shareholders there is no dilution in holding since they would receive a share from t he new and larger entity for every share held in McDowell, he said.

Further, through this scheme, McDowell's balance sheets would be cleaned up, and match that of any multinational FMCG. Over the years, the 100-year-old company's accounts have on occasion been qualified by auditors. These could now be straightened out. T he company plans to adopt the US GAAP and enable it to achieve overseas listing, he said.

`Old wine in new bottle?'

MR. Vijay Mallya assured the shareholders that they need have no fear about the amalgamation since it neither detracts from their ownership in the company nor the heritage of the company. In its latest `avatar' it would be a new company with a 100-year-o ld history.

He was replying to the shareholders' questions on the need for shifting operations of the company from Chennai to Bangalore.

He said that corporate operations cannot be based on sentiment. Further, he implied that the State Government's attitude has not given them any cause to feel welcome here.

While stressing that the Government's policy did not have any bearing on the decision, he said that in the last five years there has been no increase in the price of McDowell's products in Tamil Nadu. But taxes have been hiked repeatedly to ensure revenu e to the exchequer. For McDowell, Tamil Nadu was the least profitable State in the country, and it was costing the company to operate here, he said.