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Kirloskar Oil facing cash crunch -- Can't subscribe to 15 pc stake in Denso tie-up

Ambarish Mukherjee

NEW DELHI, July 20

KIRLOSKAR Oil Engines Ltd (KOEL), the flagship of the Pune-based Atul Kirloskar group of companies, is facing a severe fund crunch which is preventing it from subscribing for the additional 15 per cent stake in Denso Kirloskar Industries Private Ltd (DKI PL), a joint venture with Denso Corporation of Japan. The equity stake was to be picked up after April, 2001.

Fifteen per cent of DKIPL amounts to Rs 4.91 crore as the joint venture company has an equity of Rs 32.76 crore.

The Foreign Investment Promotion Board (FIPB) has been informed that KOEL is not in a position to buy out the 15 per cent stake in the joint venture from the Japanese company. And so, the Kirloskars sought the Government's help to let the Japanese firm r etain its almost 90 per cent stake in the company.

Originally, it had been decided that Denso Corporation would hold 89.01 per cent in the joint venture till April 2001, after which it would be mandatory for the Japanese partner to bring down its holding to the stipulated 74 per cent. The Indian sharehol der would then hold 26 per cent of the equity pegged at Rs 8.52 crore.

Kirloskar Oil had informed the board that it was not in a position to subscribe to an additional 15 per cent equity in the joint venture. On the other hand, Denso Corporation is desirous of maintaining its 89.01 per cent equity in the company.

The company had also pleaded with the FIPB that if Denso was not permitted to retain its existing equity of 89.01 per cent, then Kirloskar Oil would be imposed with a burden of acquiring this additional 15 per cent equity which was beyond its means. The company also pointed out that the proposal was in line with the present Government policy.

DKIPL, the joint venture company between Denso Corporation of Japan and KOEL, was incorporated in 1998. The company has its plant at Visweswarapura near Bangalore. It manufactures radiators and air-conditioners. The company's air-conditioners are exclusi vely for Toyota, Honda and Mitsubishi cars manufactured in India.

For the year ended March 2000, Kirloskar Oil posted a net profit of Rs 19.28 crore on a sale of Rs 745.13 crore. Currently, the company's Rs 10 share is being quoted at around Rs 33 against a book value of Rs 192.10.