This Article is From Sep 15, 2016

Hinduja Foundries Slumps 20% On Proposed Merger With Ashok Leyland

Hinduja Foundries Slumps 20% On Proposed Merger With Ashok Leyland

Ashok Leyland said the merger will result in operational efficiencies and cost synergies.

Shares of auto component maker Hinduja Foundries were locked down in lower circuit, after falling by their maximum daily limit of 20 per cent on Thursday. The stock came under sharp selloff following Hinduja Foundries' decision to merge with another Hinduja group company Ashok Leyland. 

Traders blamed "unfavourable" exchange ratio for the sharp selloff in Hinduja Foundries today. Shareholders of Hinduja Foundries will get 40 shares of Ashok Leyland for every 100 equity shares of the company. 

As per Wednesday's closing price of Rs 54.95, 100 shares of Hinduja Foundries fetched Rs 5,495, whereas 40 shares of Ashok Leyland (at Wednesday's closing price of Rs 84.40) were valued at just Rs 3,376. 

Ashok Leyland shares also fell as much as 4 per cent as the proposed merger with loss-making Hinduja Foundries will likely to erode the company's financials, traders said. 

Hinduja Foundries had reported a loss of Rs 394 crore during 2015-16 fiscal. For the quarter ended June 30, 2016, the company's loss was Rs 37 crore. 

Ashok Leyland said the merger will result in operational efficiencies and cost synergies. 

"The amalgamation will result in operational efficiencies and help realise significant cost synergies," said Vinod K Dasari, CEO and MD of Ashok Leyland. 

Hinduja Foundries shares closed 20 per cent lower at Rs 44, while Ashok Leyland shares ended 3.32 per cent lower at Rs 81.6. In comparison the Nifty index ended 0.18 per cent higher at 8,724.25.