The Hindu Business Line : Ministry to examine Malco's share valuation plan for buyback

TAKING note of the allegations that the valuation of shares for de-listing by the book-building process of Madras Aluminium Company Ltd (Malco) was "misleading, manipulative and non-transparent", the Ministry of Company Affairs (MCA) has decided to examine the issue.

Malco is a primary aluminium producer in South India with operations encompassing mining, refining, smelting and power generation. According to official sources, the company, which is connected with Sterlite Group of Companies, has been trying to buyback the minority shareholding (less than 10 per cent) currently with different shareholders including certain institutional investors, with a view to get de-listed.

It has been alleged that Malco has highly undervalued its holding in Sterlite. As per reports, the company holds 51.22 lakh shares of Sterlite. The market value of these shares is not less than Rs 400 crore at the rate of Rs 780 per share, the then ruling market price of a Sterlite share.

As against this, the management of the company has reportedly taken the value of these shares at the rate of Rs 58 per share, which happens to be the book value of Sterlite shares, the official said. "It is alleged that this artificial, manipulative and non-transparent valuation of Malco will be seriously detrimental to the interest of small and minority shareholders and will unduly benefit the management of the company," he stated.

The buyback process has started as book-building open offer and has commenced from March 14. However, reports have come indicating lack of transparency on the part of the company with reference to valuation of shares for de-listing by book-building process, the official said.

It has also been brought to the MCA's notice that Sterlite Group adopted a similar type of manipulative and anti-small investors methods during 2002-04. Based on these facts, the Ministry has decided to take up the matter in consultation with appropriate authorities, in order to see that the legitimate interests of small and minority shareholders were not adversely affected.

When contacted by Business Line, the Company Affairs Minister, Mr Prem Chand Gupta, said, "there is a need to maintain a complete transparency in the process of buyback.

The Ministry is concerned for the small and minority shareholders and such issues should be looked into most urgently."

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page