History of the merging and merged companies and Scheme of merger
History of Gulf Oil india Ltd, (i.e. Merging company)
Gulf Oil India Ltd. (hereinafter referred to as GOIL) was incorporated as a private limited company on 16th December 1981, and then converted into public Limited Company on 21st February 1982 It was promoted by Hanuman Prasad Mansingka & Pradeep Kumar Mansngka. The company was amalgamated with Pita Ashish Oils and Lubricants and the name of the company was changed to Gulf Oil India Ltd. The company manufacture automotive and industrial lubricants and greases, coolants and allied products in the field of lubricants. The company markets its product under global brand name GULF which has been around the world since more than 100 years GOIL was the first multinational lubricant company to enter India in 1993. The company has a market share of around 6% in lubricants segment. It has two plants: one unit in Silvassa with 75,000 TPA capacity and another one in Calcutta with 10,000 TPA capacity. The Company has the advantage of its good distribution network.
History of Gulf Oil Corporation Ltd, (i.e. Merging company)
Gulf Oil Corporation Ltd, (hereinafter referred to as GOCL) was incorporated on 26th April 1961 by Hinduja group at Hyderabad. It was formerly known as IDL Industries. Its plants are located in Andhra Pradesh, Maharastra, Uttar Pradesh, Jharkhand, and Orissa Sates. It manufactures the products like, Cartridged ANFO and NCN (High Explosive), Detonating Fuse Donators, Exploders, Gypsum Ceiling Boards, Gypsum Wall (partition) Boards, Lubricating Oils, PETN/ Penta Erythritol Tetra Nitrate, Special Gypsum Plaster, Boosters, Car Care Products etc, The Company had five subsidiaries. These are IDL Agro Chemicals Ltd., IDL Finance Ltd, IDL Arom international Ltd, Gulf Carrosserie India Ltd, Gulf Oil Bangladesh Ltd, Pt Gulf Oil Lubricants Indonesia and It has five divisions, vi IDL Division, Lubricants Division, Building Division, Floriculture Division, Wand Mill Division.
Effectiveness of merger and its impact on the shareholders of merging company GOIL
It is noticed in the table, that before the merger, the merging entity, GOIL was profit making except in the year Y-1 (i.e. 2000-1). For the first time, the total sales and profit declined in that year. The net profit margin declined form 5.16% to 0.7% (i.e decline by 86.43%). This was due to sharp increase in the input cost by about 35% over the previous year (as stated in the director’s report). The recessionary trends in the economy, particularly with the slow down in the automobile sector also adversely affected the working of the company.
It also indicates that, the average Pre-merger net profit margin of 3.61% increased to 5.00%, which represents an increase by 38.50%.
The pre-merger RONW also shows increase from 13.50% to 15.87%, representing increase by 17.56%. it indicates that the capital employed in the company has been more effectively utilized during Post-merger period than pre-merger period.
The merging company got the benefit of marginal reduction in the leverage. The company had an average leverage ratio of 0.79 during pre merger period, however, during post-merger period it attained at 0.71 (i.e, 10.13% decrease over the pre-merger Period).
However, the short tem solvency of the company is slightly affected during post-merger period, although it increased in the year of merger. The pre-merger average liquidity ratio of the company was as high as 2.18 but after merger it reduced to 1.83 (i.e. 16.06% decreases)
It is noticed in the table that EPS of merging company was fairly good during pre-merger period except in the first year before merger, where it was declined to Rs. 1.36 from its previous year, Rs. 10.79 After the merger, the EPS continued to rise. The average pre-merger EPS rose from Rs. 7.72 to Rs.13.99 (during post-merger period), which is 81.22% high.
After the merger the DPS continued to rise in each year. The average DPS of the company during the pre-merger period was Rs 3.00. it rose to Rs. 5.83 during the post-merger period.
P/E Ratio of the company before merger was quite satisfactory. However, it still improved in each year after the merger. The average pre-merger P/E ration of the company was just 3.62, after the merger it rose to 16.79 (i.e. increase by 361.81%).
The BVPS also increased during Post-merger Period. The pre-merger average BVPS Rs. 56.94 was increased to Rs. 88.17, representing increase by 54.85% over the pre-merger period.
Effectiveness of merger and its impact on the shareholders of merged company. – GOCL
In the case of GOCL, the average net profit margin and RONW decreased by 61.21% and 43.98% (see in table 6.4) respectively in the post-merger period. it is due to huge non-recurring income made in the year. Y1 (i.e, 2000-01 ). In fact the company has suffered a loss of Rs. 2.45 croes in that year. If such non-recurring income is excluded, the pre-merger result will be negative and post-merger result is seen positive.
Liquidity ratio, when was excessive during pre-merger period, declared considerably during the post-merger period. The average liquidity ratio was decreased from 2.51 (during pre-merger period ) to 1.83 (Post-merger period).
Sales of the company declined in the year of the merger and thereafter it increased gradually. In the year of merger, it declined from Rs. 397. 92 Crores to Rs. 224.88 crores, representing decline by 43.49%. Then it increased continuously. On the whole, the average pre-merger sales declined by 0.34% during post-merger period.
Reserves and surplus witnessed a sharp decline on the year of merger. It declined from Rs. 149.02 crores to Rs. 129.43 Crores and in the first year after merger also it dipped to Rs. 14.54 Crores and thereafter it started increasing. The average pre-merger reserves and surplus witnessed a marginal growth (i.e. Just by 0.45%).
During pre-merger period, EPS was almost the same (ranging from Rs. 6.28 to Rs. 6.35) in all the years except the year Y-1 where it rose as high as Rs. 68.29. Such exceptional increases in EPS is due to increase in non recurring income in that year. If only recurring result is considered (i.e. loss of Rs. 20.45 crores), the EPS in the year would be Rs. 25.56, and average Pre-merger EPS would be Rs. 4.31. however in the post-merger period the average EPS increase to Rs. 13.99 representing 424.59% increase.
During Pre-merger period, the DPS was in the range of Rs. 2.50 to Rs. 5.00 whereas, in the year of merger it fell from Rs. 5.00 to Rs. 3.00. It is because of increase in the number of equity shares due to merger. However, during post-merger period, it rose to an average DPS of Rs. 5.83 as compared to Rs.3.33 per-merger, which represents 75.08% increased over the pre-merger period.
P/E Ratio experienced continuous increase during poet-merger period. During the pre-merger period it was in the range of 5.21 to 6.46 with an average value of 4.11, but during post-merger period, it rose to an average value of 16.79. it increased by more than four times during the post merger (i.e. 308.52%).
The BVPS increased sharply to Rs. 160.34 in the year of merger itself from Rs.111.09 (a year before merger). However, during post merger it fell, but it was more than per-merger value. An average BVPS rose from Rs. 72.88 to Rs. 88.17 during the post-merger period. which represents 20.98% increase.
The average market price during pre-merger period was just Rs.39.34 it raise to Rs. 239.61 (i.e 507.68% increase) during post-merger period. It indicates that the shareholders welcomed the merger proposals.
From the above analysis it is concluded that, since a healthy company is merged with another healthy company, the merger has a favourable impact on both merging and merged companies and also it benefits the shareholders of both the companies.
The merger resulted in a better synergy between the two companies for product development and research, purchasing, marketing and other back-office function and optimum user of resources.
It is also noticed in the Director’s report that due to merger of GOIL with GOCL, brought forward tax losses of Rs. 34.71 crores in the year 2001 (i.e., Y-1) have been considered on computing the merged company’s tax liabilities.
History of Gulf Oil india Ltd, (i.e. Merging company)
Gulf Oil India Ltd. (hereinafter referred to as GOIL) was incorporated as a private limited company on 16th December 1981, and then converted into public Limited Company on 21st February 1982 It was promoted by Hanuman Prasad Mansingka & Pradeep Kumar Mansngka. The company was amalgamated with Pita Ashish Oils and Lubricants and the name of the company was changed to Gulf Oil India Ltd. The company manufacture automotive and industrial lubricants and greases, coolants and allied products in the field of lubricants. The company markets its product under global brand name GULF which has been around the world since more than 100 years GOIL was the first multinational lubricant company to enter India in 1993. The company has a market share of around 6% in lubricants segment. It has two plants: one unit in Silvassa with 75,000 TPA capacity and another one in Calcutta with 10,000 TPA capacity. The Company has the advantage of its good distribution network.
History of Gulf Oil Corporation Ltd, (i.e. Merging company)
Gulf Oil Corporation Ltd, (hereinafter referred to as GOCL) was incorporated on 26th April 1961 by Hinduja group at Hyderabad. It was formerly known as IDL Industries. Its plants are located in Andhra Pradesh, Maharastra, Uttar Pradesh, Jharkhand, and Orissa Sates. It manufactures the products like, Cartridged ANFO and NCN (High Explosive), Detonating Fuse Donators, Exploders, Gypsum Ceiling Boards, Gypsum Wall (partition) Boards, Lubricating Oils, PETN/ Penta Erythritol Tetra Nitrate, Special Gypsum Plaster, Boosters, Car Care Products etc, The Company had five subsidiaries. These are IDL Agro Chemicals Ltd., IDL Finance Ltd, IDL Arom international Ltd, Gulf Carrosserie India Ltd, Gulf Oil Bangladesh Ltd, Pt Gulf Oil Lubricants Indonesia and It has five divisions, vi IDL Division, Lubricants Division, Building Division, Floriculture Division, Wand Mill Division.
Effectiveness of merger and its impact on the shareholders of merging company GOIL
It is noticed in the table, that before the merger, the merging entity, GOIL was profit making except in the year Y-1 (i.e. 2000-1). For the first time, the total sales and profit declined in that year. The net profit margin declined form 5.16% to 0.7% (i.e decline by 86.43%). This was due to sharp increase in the input cost by about 35% over the previous year (as stated in the director’s report). The recessionary trends in the economy, particularly with the slow down in the automobile sector also adversely affected the working of the company.
It also indicates that, the average Pre-merger net profit margin of 3.61% increased to 5.00%, which represents an increase by 38.50%.
The pre-merger RONW also shows increase from 13.50% to 15.87%, representing increase by 17.56%. it indicates that the capital employed in the company has been more effectively utilized during Post-merger period than pre-merger period.
The merging company got the benefit of marginal reduction in the leverage. The company had an average leverage ratio of 0.79 during pre merger period, however, during post-merger period it attained at 0.71 (i.e, 10.13% decrease over the pre-merger Period).
However, the short tem solvency of the company is slightly affected during post-merger period, although it increased in the year of merger. The pre-merger average liquidity ratio of the company was as high as 2.18 but after merger it reduced to 1.83 (i.e. 16.06% decreases)
It is noticed in the table that EPS of merging company was fairly good during pre-merger period except in the first year before merger, where it was declined to Rs. 1.36 from its previous year, Rs. 10.79 After the merger, the EPS continued to rise. The average pre-merger EPS rose from Rs. 7.72 to Rs.13.99 (during post-merger period), which is 81.22% high.
After the merger the DPS continued to rise in each year. The average DPS of the company during the pre-merger period was Rs 3.00. it rose to Rs. 5.83 during the post-merger period.
P/E Ratio of the company before merger was quite satisfactory. However, it still improved in each year after the merger. The average pre-merger P/E ration of the company was just 3.62, after the merger it rose to 16.79 (i.e. increase by 361.81%).
The BVPS also increased during Post-merger Period. The pre-merger average BVPS Rs. 56.94 was increased to Rs. 88.17, representing increase by 54.85% over the pre-merger period.
Effectiveness of merger and its impact on the shareholders of merged company. – GOCL
In the case of GOCL, the average net profit margin and RONW decreased by 61.21% and 43.98% (see in table 6.4) respectively in the post-merger period. it is due to huge non-recurring income made in the year. Y1 (i.e, 2000-01 ). In fact the company has suffered a loss of Rs. 2.45 croes in that year. If such non-recurring income is excluded, the pre-merger result will be negative and post-merger result is seen positive.
Liquidity ratio, when was excessive during pre-merger period, declared considerably during the post-merger period. The average liquidity ratio was decreased from 2.51 (during pre-merger period ) to 1.83 (Post-merger period).
Sales of the company declined in the year of the merger and thereafter it increased gradually. In the year of merger, it declined from Rs. 397. 92 Crores to Rs. 224.88 crores, representing decline by 43.49%. Then it increased continuously. On the whole, the average pre-merger sales declined by 0.34% during post-merger period.
Reserves and surplus witnessed a sharp decline on the year of merger. It declined from Rs. 149.02 crores to Rs. 129.43 Crores and in the first year after merger also it dipped to Rs. 14.54 Crores and thereafter it started increasing. The average pre-merger reserves and surplus witnessed a marginal growth (i.e. Just by 0.45%).
During pre-merger period, EPS was almost the same (ranging from Rs. 6.28 to Rs. 6.35) in all the years except the year Y-1 where it rose as high as Rs. 68.29. Such exceptional increases in EPS is due to increase in non recurring income in that year. If only recurring result is considered (i.e. loss of Rs. 20.45 crores), the EPS in the year would be Rs. 25.56, and average Pre-merger EPS would be Rs. 4.31. however in the post-merger period the average EPS increase to Rs. 13.99 representing 424.59% increase.
During Pre-merger period, the DPS was in the range of Rs. 2.50 to Rs. 5.00 whereas, in the year of merger it fell from Rs. 5.00 to Rs. 3.00. It is because of increase in the number of equity shares due to merger. However, during post-merger period, it rose to an average DPS of Rs. 5.83 as compared to Rs.3.33 per-merger, which represents 75.08% increased over the pre-merger period.
P/E Ratio experienced continuous increase during poet-merger period. During the pre-merger period it was in the range of 5.21 to 6.46 with an average value of 4.11, but during post-merger period, it rose to an average value of 16.79. it increased by more than four times during the post merger (i.e. 308.52%).
The BVPS increased sharply to Rs. 160.34 in the year of merger itself from Rs.111.09 (a year before merger). However, during post merger it fell, but it was more than per-merger value. An average BVPS rose from Rs. 72.88 to Rs. 88.17 during the post-merger period. which represents 20.98% increase.
The average market price during pre-merger period was just Rs.39.34 it raise to Rs. 239.61 (i.e 507.68% increase) during post-merger period. It indicates that the shareholders welcomed the merger proposals.
From the above analysis it is concluded that, since a healthy company is merged with another healthy company, the merger has a favourable impact on both merging and merged companies and also it benefits the shareholders of both the companies.
The merger resulted in a better synergy between the two companies for product development and research, purchasing, marketing and other back-office function and optimum user of resources.
It is also noticed in the Director’s report that due to merger of GOIL with GOCL, brought forward tax losses of Rs. 34.71 crores in the year 2001 (i.e., Y-1) have been considered on computing the merged company’s tax liabilities.
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