Ashok Leyland’s stock dropped by 3.43 per cent to Rs 81.65 on Thursday morning after the company announced the amalgamation of Hinduja Foundries Limited (HFL) with itself.
On September 14, the company stock had closed at Rs 84.55 a share, up by 1.26 per cent.
Late Wednesday night, Board of Directors of Ashok Leyland Ltd had announced the amalgamation of HFL with itself with the company.
Market experts believe that the merger will incur heavy losses to Ashok Leyland as HFL is a loss making company and has been on a consistent downfall in the last five years.
In 2015-16, Hinduja Foundries had suffered a loss of Rs 394.25 crore as compared to Rs 262.44 crore, a year ago.
On the contrary, Ashok Leyland, during the same while, had reported profits of Rs 721.78 crore and Rs 334.81 crore respectively.
Moreover, HFL is reeling under the burden of debt of around Rs 460 crore, which will now come in Ashok Leyland’s book as it needs to be serviced.
On the other hand, Ashok Leyland’s CEO and MD Vinod Dasari believes that the amalgamation will result in “operational efficiencies and help realise significant cost synergies”.
The appointed date for the proposed amalgamation is October 1.
The swap ratio approved by the board is that 100 equity shares of Rs.10 each fully paid of Hinduja Foundries will get 40 equity shares of Re.1 each fully paid of Ashok Leyland; a thousand, 2008 series GDRs of Hinduja Foundries will get 133 equity shares of Re.1 each fully paid of Ashok Leyland and one 2016 series GDRs of Hinduja Foundries will get 4,800 equity shares of Re.1 each fully paid of Ashok Leyland.