The board of directors of VIP Industries and Blow Plast have approved the merger of the two companies. The merger is proposed to be effective from April 1, 2006.
The companies have also approved a share exchange ratio of 1:1, that is, one equity share of VIP Industries for every one equity share of Blow Plast.
VIP Industries is Asia's largest luggage manufacturer, while Blow Plast has extensive marketing and distribution reach for luggage products.
The combined entity would be an integrated luggage company with significant presence in all the value chains. The merger would see synergies owing to integration in operations from manufacturing to marketing.
Explaining the rationale behind the merger, Dilip Piramal, chairman, VIP Industries said, that "We would achieve optimum utilisation of various infrastructure and service facilities and integrate our management activities, thus achieving reduction and better control of costs. The merged entity would emerge as a leader in the global luggage industry, leveraging on innovation and a strong marketing strategy."
Post merger, the combined entity's worth would be about Rs 500 crore (Rs 5 billion). VIP Industries reported a total income of Rs 335.12 crore (Rs 3.35 billion) and net profit of Rs 8.78 crore (Rs 87.8 million) for the financial year ended March 31, 2006.
Blow Plast has reported total income of Rs 259.28 crore (Rs 2.59 billion) and net profit of Rs 6.74 crore (Rs 67.4 million) for the year ended March 31, 2006.
Further, the merged entity would have exclusive showrooms and will operate in over 50 countries with manufacturing operations in Uttranchal and Nashik in India. The proposed share exchange ratio has been approved based on a valuation exercise conducted by PriceWaterhouseCoopers.
Sudhir Jatia, managing director, Blow Plast said, "There will be better resource mobilisation and financial consolidation to withstand competition from domestic as well as overseas markets. Also, consequent to launch of commercial production from Uttaranchal factory, profitability of the merged entity will improve on account of exemptions from excise and Income Tax."
Blow Plast has a 60 per cent share in the organised market for luggage in India. It has 8,000 retail outlets across the country.
