Orient Refractories — RHI Magnesita Composite Scheme rejected

RHI Magnesita a global leader in refractory operating in India through its various subsidiaries and wants to merge three subsidiaries where two companies are private limited, and one is listed entity. The merger is designed to optimally position RHI Magnesita’s operations in the strategically important Indian market to capture growth opportunities more effectively and efficiently. We had covered the scheme details in our previous article in our October 2018 issue.

The Scheme in brief:

• RHI India Private Limited (Transferor Company-1) a Private Limited Company a subsidiary of Dutch Brasil Holding B.V. which is ultimately held by RHI Magnesita N.V.
• RHI Clasil Private Limited (Transferor Company-2) a private limited Company, a subsidiary of VRD Americas B.V. which is ultimately owned by RHI Magnesita N.V. Netherland.
• Orient Refractories Limited (Transferee Company) listed entity, wherein the majority of shares are held by Dutch U.S. Holding B.V. which is ultimately owned by RHI Magnesita N.V. Netherland. The Shares of the transferee company are listed on BSE and NSE.
• The Companies have filed the scheme before Hon’ble NCLT Mumbai for amalgamation of transferor companies into Transferee Company.
• Post-Merger Orient Refractories will be renamed RHI Magnesita India.
• All three companies primarily engaged in the business of manufacturing, trading, marketing of refractories and allied products.

Objective of the Scheme:

All the companies are into same and allied business activities.

The objectives were:

1. Simplification of corporate structure and consolidation of India business.
2. To establish comprehensive refractory product portfolio

• Realising business efficiencies through optimum utilisation of resources

1. To optimise cash flow this contributes to overall growth prospects of the combined company.
2. Creation of larger asset base and facilitation of access to better financial resources.
3. Enhanced shareholder value pursuant to economies of scale and business efficiencies.

The purpose behind the merger was to consolidate India business of RHIM Group, by which two private limited company will merge into the listed entity Orient Refractories Limited and RHI Magnesita- the Parent Company will have approximately 70% stake in the Orient Refractories which will be renamed RHI Magnesita India.

Swap Ratio

• For every fully paid up 100 (One hundred) equity shares of Rs. 10 (Ten) each of RHI India, Orient will issue 7044 (Seven Thousand Forty-Four) fully paid-up Equity Shares of Rs. 1/- (One) each
• For every fully paid up 1000 (One Thousand) equity shares of Rs. 10 (Ten) each of RHI Clasil, Orient will issue 908 (Nine Hundred and Eight) fully paid-up Equity Shares of Rs. 1/- (One) each.

Accounting Treatment:

As per the Composite scheme, the Transferee Company will give effect to the amalgamation in its books of account as “Business Combinations” in accordance with Indian Accounting Standard (IND AS 103), Business combination and other accounting principles prescribed under the Companies (Indian Accounting Standards) Rules, 2015 (Ind AS) as prescribed under Section 133 of the Companies Act, 2013.

Decision of NCLT:

Continue to read… Orient Refractories — RHI Magnesita Composite Scheme rejected