BEML Limited (‘BEML’ or ‘the Demerged Company’) was incorporated on May 11, 1964 as Bharat Earth Movers Limited under the provisions of the Companies Act, 1956 with the registrar of companies, Karnataka at Bengaluru, which subsequently was renamed as BEML Limited in 2007. BEML Limited is a listed company bearing CIN L35202KA1964GOI001530. The President of India through the Ministry of Defense holds 54.03% of the equity shares capital of BEML Limited as on date. Accordingly, BEML Limited is a ‘government company’ as defined under section 2(45) of the Companies Act, 2013 and consequently public sector undertaking under section 2(36A) of the Income Tax Act, 1961. The equity shares of BEML is listed on the recognised stock exchanges viz. BSE Limited (‘BSE’) and National Stock Exchange of India Limited (‘NSE’). BEML has 3 divisions viz. (1) Mining & Construction; (2) Defense & Aerospace; and (3) Rail & Metro.
BEML Land Assets Limited (‘BEML Land’ or ‘the Resulting Company’) is an unlisted public company which was incorporated on July 15, 2021 bearing CIN U70109KA2021GOI149486 with the registrar of companies, Bangalore under the provisions of the Companies Act 2013. Entire shareholding of BEML Land is held by BEML and accordingly, BEML Land is also a ‘government company’ as defined under section 2(45) of the Companies Act 2013 and consequently public sector undertaking under section 2(36A) of the Income Tax Act, 1961.
Current structure of the BEML group is as under:
Proposed Restructuring:
As the Government of India (‘GoI’) had ‘in-principle’ decided to disinvest 26% of the equity share capital of BEML Limited through strategic disinvestment along with transfer of management control (‘Strategic disinvestment’).
Further, BEML has land parcels and buildings spread across India, at its various manufacturing facilities, corporate office, marketing and regional offices out of which there are certain land parcels and buildings which can be categorised as surplus / non-core business assets (‘Identified Surplus / Non-Core Assets’).
Management of BEML has agreed to the decision of GoI, to hive-off its Identified Surplus/ Non-Core Assets seperately and exclude it from the process of strategic disinvestment. In order to achieve the said objective, BEML and BEML Land proposes to undertake following corporate restructuring on the agreed terms and conditions as set out below:
- Demerger of Identified Surplus / Non-Core Assets of the Demerged Company into the Resulting Company as a going concern;
- Cancellation of share capital of the Resulting Company.
Proposed Restructuring flow is depicted as under:
Key features of the above transactions:
Key features | Transaction: Demerger |
Appointed Date | Date of filling of certified copy of approving authority being NCLT with ROC |
Effective Date | Date of filling of certified copy of approving authority being NCLT with ROC |
Jurisdictional Authority(ies) | BSE; NSE; The Securities and Exchange Board of India; National Company Law Tribunal, Bengaluru Bench; Registrar of Companies, Karnataka; Regional Director, Karnataka |
Consideration | BEML Land shall issue 1 equity shares to the shareholders of BEML for 1 equity shares held in BEML Further, existing shareholding of BEML into BEML Land shall get cancelled pursuant to capital reduction. |
Accounting Treatment | In the books of BEML and BEML Land – Pooling of interest method |
Taxation | Tax neutral transaction; |
Pre and Post shareholding patterns of the group companies, pursuant to effectiveness of the Scheme:
Name of the Company | Pre-Scheme Shareholding | Post-Scheme Shareholding | ||
% Promoter Shareholding | % Public Shareholding | % Promoter Shareholding | % Public Shareholding | |
BEML Limited | 54.03% | 45.97% | 54.03% | 45.97% |
BEML Land Assets Limited | 100% | – | 54.03% | 45.97% |
Resultant structure post approval of the Scheme is as under:
Benefit of the proposed group restructuring:
- The Scheme will enable segregation of core and non-core business such that the proposed disinvestment by the GoI will be executed in the efficient manner.
- Further, demerger and listing would enable monetization of non-core business of the BEML which majorly contains land parcels and value of which must have been recorded in the books at its cost of acquisition. Thus, Demerger would enable valuation of such non-core business at its fair value. This will also increase shareholder’s wealth.
- Demerger would enable prospective buyer of BEML to run the core businesses of BEML in efficient manner, this again has greater prospect to increase shareholders wealth in the long run.
- The management and administration of the core and non-core businesses would be streamlined and would also enable the pursuit of diverse and independent strategic aspirations which will drive future strategic growth under the overall BEML group business.
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