The Hindu Business Line : Alembic turns weak on arm's merger plans

Share prices of Alembic Ltd have suffered over the last few weeks after the management's decision to merge its subsidiary Alembic Glass into Shreno Ltd, controlled by the promoters.

Alembic Ltd holds 28 per cent stake in Alembic Glass, which will be delisted from the stock markets after the merger with the unlisted Shreno Ltd.

Though a loss-making entity, Alembic Glass owns real estate at a prime location in Bangalore, analysts said, adding that the promoters should have unlocked the value of the property, before deciding on the merger with Shreno Ltd.

Promoters hold 71.41 per cent stake in Alembic Glass while the parent Alembic Ltd holds another 28 per cent stake.

Recent weeks have seen promoters consolidating their stake in Alembic Glass by transferring as much as 1.124 lakh shares from Alembic Ltd to separate entities they control.

"The minority shareholders of both Alembic Ltd and Alembic Glass will suffer due to the decision by the promoters' merger decision and the proposed de-listing from the stock markets," said a shareholder, on condition of anonymity.

"Shareholders would have benefited if the company had developed the property."

The markets have not taken kindly to the decision. Shares of Alembic Ltd have lost over 20 per cent from the high of Rs 427.95 during mid-January and closed at Rs 355 on Friday. Whereas, the shares of Alembic Glass, a company referred to the Board for Industrial and Financial Restructuring (BIFR), have gained by over 22 per cent in the last four trading sessions to Rs 1,097.65.

"This is because the markets perceive high value for the Alembic Glass," said an analyst.

Alembic Glass has convened an extra-ordinary general meeting on April 17 to get the shareholders approval for the proposed merger of the company with Shreno Ltd.

When contacted, Mr R.K. Beheti, President (Finance) of Alembic Ltd, said the "entrepreneurs had little choice" other than delist Alembic Glass, considering the risk involved in the proposed restructuring of the company.

"Alembic Glass has huge impending liabilities. Through the merger and delisting, we are insulating the shareholders of Alembic Ltd from the risks," he told Business Line. "But, I'm not taking high moral ground," he added.

Mr Beheti said the company owns property in Bangalore, but added that it was lying idle since 1970s after it shut down the manufacturing unit in that city.

After the merger, Alembic Ltd will hold about 20 per cent stake in the unlisted Shreno Ltd, he said.