An official spokesperson said that the cabinet on Tuesday approved the proposal of the CMC as its existing equity base was quite low at Rs 15.15 crore and the fresh injection of fund was necessary for augmenting the diversification plans of the public sector unit.

The cabinet also approved the merger of the Bareilly Corporation Bank (BCB) with the Bank of Baroda (BOB) and the revised cost of Rs 85.45 crore for the 16 MW gas based thermal power project at Rokhia (phase-2) in Tripura.

As far as CMC was concerned, it was pointed out that with the infusion of fresh equity the government's stake would come down to 51 per cent from the present level of 83.13 per cent. CMC's diversification plans, the spokesperson said, include software development, besides system integration andsolution. The company also proposes to improve customer service, education and training.

Although CMC had been allowed paid-up capital of upto Rs 35 crore, the company had raised only Rs 15.15 crore, of which the government had been holding 83.13 per cent. The company has been waiting for government sanction for raising its paid-up capital from the present level by way of a public or rights issue.

The cabinet decision would bring down the government equity to 51 per cent considering that the government equity would be retained at the present Rs 12.60 crore. Government has made it clear that it had no intention of subscribing to the proposed rights issue.

The company has been considering a rights issue for about Rs 100 to Rs 120 crore and a proposal was before the government with regard to premium and other details. It was proposed to issue two shares for every three shares held.

CMC is also expected to make a decision on the employees stock option plan (ESOP) along with the rights issue. Establishedin 1976, CMC is a premier information technology solution provider with about 18 offices and over 100 service locations in India and abroad. The company has over 2,800 employees and had reported over Rs 300 crore turnover last year.

CMC has a wholly owned subsidiary in the US, Baton Rouge International (BRI), which has been reporting over $ 10 million turnover for the last few years. The company had recently set up a Java competency centre in Hyderabad in collaboration with Sun Microsystems, department of electronics and Nasscom.

With regard to merger of BCB with the Bank of Baroda, the spokesperson said the merger was approved by the cabinet following Reserve Bank report which pointed out that Bareilly Bank could not continue as a separate viable unit.

The amalgamation was expected to provide BCB continuity in operations and safeguard the interest of the bank's depositors.

BCB's deposits total around Rs. 500 crore. The spokesperson said that no depositors of BCB would suffer any loss on account ofits amalgamation with the BOB. BCB at present is a subsidiary of BOB, with the latter holding 98 per cent of former's equity. The amalgamation would enable BCB to have a wider reach in Uttar Pradesh.