Ruia Pledges Dunlop India Stake to Refinance Loan

It has been revealed that the Ruia Group has pledged 51 per cent of its 74.5 per cent shareholding in Dunlop India with a private bank in order to raise Rs 6 billion (US$125 million) to refinance a hedge fund debt. Although this deal was arranged with the Singapore branch of ICICI bank in October 2008, details of the transaction were only made public in April 2009.

Dunlop India Chairman Pawan K Ruia has arranged for refinancing at nine per cent over a four-year period. He told the Press Trust of India that “we have successfully raised $125 million from an Indian bank’s foreign branch at a time when the global financial market has been hit by the worst crisis…Moreover I have been able to reduce the interest burden by 5 per cent as the debt from the hedge fund was at 14 per cent.” The entire amount raised, he added, has been used to repay the $100 million the company raised from UK-based hedge fund Spinikar in late 2007.

Coupled with this new financing, a five per cent equity stake in the company is being handed over to Spinikar, bringing the Ruia Group’s free holding in Dunlop India down to 18.5 per cent. Had the Ruia Group failed to repay within the specified date, it would have been forced to part with 14 per cent equity. “Spinikar, a UK-based hedge fund, will pick up the 5 per cent stake. By arranging the funds in October, we managed to avert higher equity dilution,” Ruia told the Calcutta based Telegraph newspaper.

A large portion of the $100 million borrowed from hedge funds in 2007 was used to finance the acquisition of Dunlop and Falcon from the Chhabria family in late 2005. Pawan Ruia comments that the company’s Sahagunj facility is undergoing refurbishment and the production of OTR tyres, truck tyres and industrial products such as belts begins in May.