The Hindu Business Line : Ruias get Dunlop, Falcon for Rs 200 cr

THE Ruia group led by Mr P.K. Ruia is believed to have acquired a 68-per cent stake in Dunlop India at an effective price of Rs 25 crore, according to sources.

Similarly, the acquisition of roughly 74.5 per cent stake in Falcon Tyre has, however, cost close to Rs 175 crore to seal the `block deal' at a composite value of Rs 200 crore ($43 million). The trading arm, Indian Tyre and Rubber, has for all practical purposes come free with the deal.

Given that Falcon (according to the latest BSE figures) has a total of 56.8 lakh shares of Rs 10 each, the Ruia group has acquired 42 lakh shares at an average price of roughly Rs 416 per share, which is not only higher than the average price but also the highest price quoted in the last one year.

Falcon, which was traded at a little over Rs 20 in November 2004, has witnessed a sharp upswing between June 30 and September 30 in 2005. In a span of three months, the scrip had shot up from Rs 60 plus range to Rs 164 on September 30. It is currently traded at above Rs 130. The average price for the last six months is Rs 110.

As far as Dunlop is concerned, the Ruias have ended up paying Rs 8 per share for the acquisition of 3.05 crore shares (out of 4.49 crore total shares), the company's shares being last traded on the BSE in April 2002 at Rs 6.60 per share.

Liabilities: The acquisition cost has to be seen against the Rs 600-crore book-liability of Dunlop. The liabilities include Rs 130 crore payable to banks and financial institutions. While the liability details of Ambattur facility are not available, according to preliminary assessment, Sahagunj has Rs 35 crore of employees' dues, sales tax dues of Rs 214 crore and Rs 40 crore on electricity.

Sources close to the Ruia group are, however, confident that the actual cost of settling these liabilities, which are around a decade old, will be much lower. The West Bengal Government, it is learnt, has promised the group every support in reviving Dunlop.

Prime properties: Sources say the three companies together hold Rs 250-crore worth of freehold property in major cities across the country. In Mumbai alone, the business has two prime properties including an 80,000-sq.ft. property in Worli.

When contacted, Mr Ruia told Business Line, "These properties are not linked to the facilities of Dunlop and Falcon in West Bengal, Tamil Nadu and Karnataka and can be developed at a later date."

Asked whether he would leverage them to fund investments in Dunlop and Falcon, he said that at the moment his efforts would be directed towards reviving the closed facilities of Dunlop and enhancing the profitability of Falcon. "The aim is to bring Dunlop back into operation as quickly as possible to generate cash flow."

The group has announced an investment of 150 crore to revive Dunlop within a span of around 30 months.