Silverline Technologies to de-merge animation division, reduce capital

Silverline Technologies Ltd has announced that the Board of Directors of the Company at its meeting held on January 10, 2007, inter alia, has considered the following:

1. Decided to de-merge, its Animation Division into a Separate Entity in the name and style of Silverline Animation Ltd and appointed the services of M/s Firstcall India Equity Advisors Pvt Ltd, as an Advisor for the De-merger Transaction after carefully considering the Draft De-merger Proposal presented by them.

The draft proposal for de-merger consists of multiple Animation Films in the pipeline for commercialization at various stages and their associated IPR's. Besides the Animation Software Licenses that the company possesses.

The draft proposal suggested issuance of 4 Shares at Rs 10/- paid up each of de-merged animation entity for every 100 shares, held by shareholders in the Company.

The de-merged entity will have a proposed equity base of Rs 15 crores, consisting 1.5 Crore shares @ paid up value of Rs 10/-. The de-merged animation entity will have expected sales of Rs 25 crores in the first year with an expected profit after tax of Rs 5 crores and EPS of Rs 3.33. The de-merged entity will qualify for listing on stock exchanges with the fulfillment of necessary statutory formalities and required permissions.

Where as the stand alone Company, will continue to focus on Information Technology / ITES including BPO services. The Company, with is focus on IT and ITES including BPO is expected to achieve sales of Rs 69 crores with an expected profit of Rs 11 crores for the current financial year 2006-07 with the ongoing restructuring picking up momentum.

2. With reference to Capital Reduction, M/s Firstcall India Equity have suggested the Board to consider increasing the promoter's equity from the current % Ge stake levels to at least about to the level of 26% in view of the de-merger and proposed capital reduction, as enhanced promoters equity is going to bring confidence, most particularly at the current point of time, where the company is going through a tremendous turnaround phase. Hitherto, between the period of year 2001 and 2004, the promoters lost their stake during their troubled times, when some of the banks / lenders, sold the underlying shares given as collateral. Thus the promoter's stake in the company has come down.

For which the Advisors have suggested to explore various options, which include a preferential placement to the promoters and persons acting in concert / creeping acquisition / open offer / strategic investors, as per prevailing SEBI norms. For which the promoters have consented to consider the option, keeping in mind the means of finance available to them.

Hence the matter of capital reduction has been differed by the company in view of the above, the Board of Directors decided to meet again on January 24, 2007 to review the progress.

Source : Equity Bulls

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