The Hindu Business Line : DCM Shriram allowed to proceed with postal ballot for allotment

The case
The promoters’ move to allot the warrants could impact the interest of the smaller stakeholders, says the petitioner.
CLB asks DCM Shriram to file replies to petition by December 31.
HB Stockholdings asked to file its rejoinder by January 20, 2008.

Phalguna Jandhyala

New Delhi, Nov. 27 DCM Shriram Industries Ltd has been allowed by the Company Law Board (CLB) to go ahead and complete the process of postal ballot for issuance and allotment of seven lakh warrants to the promoters/promoters group, with the right to apply for three equity shares per warrant.

It also said that if the proposal of preferential allotment is assented to by the requisite majority of voting by the shareholders, the company is at liberty to allot the warrants on full payment.

The CLB Chairman, Mr S. Balasubramanian, in an order passed on Tuesday declined to grant interim relief sought by HB Stockholdings (the petitioner) to restrain DCM Shriram Industries from proceeding with the process of counting the postal ballot and from announcing the results.

The order stated that the petitioner has not prima facie shown that the proposal of preferential allotment is oppressive. “Whether the allotment could be considered to be bad on the grounds raised will be examined later after the pleadings are completed. When a prima facie case has not been made out, grant of any interim reliefs as sought for by the petitioner at this stage, when the matter is before the large body of shareholders to decide, would amount to curtailing their statutory right to decide the proposal placed before them,” the order said.

It added that in case the shareholders approve the proposal, the grant of interim reliefs would affect the company, as it would be deprived of immediate inflow of about Rs 18 crore and the promoters would be affected, if the petitioner succeeds in acquiring 22.88 per cent shares in the open offer, which would take its holding in the company to 35.75 per cent higher than that of the promoters holding (32.54 per cent).

“Therefore, irreparable harm would be caused to the company and the promoters by the grant of interim relief and therefore, the balance of convenience is in their favour and not in favour of HB Stockholdings at it is not going to be affected in any manner,” the Chairman said in the order.

The petition

HB Stockholdings, a Delhi-based investment firm, had filed a petition before the CLB on November 20 stating that the promoters’ move to allot warrants would raise their stake by close to 10 per cent after it is converted, taking the total promoter shareholdings to 42.54 per cent.

“The promoters’ move to allot the warrants could impact the interest of the smaller stakeholders and therefore the petition was filed,” a counsel representing HB Stockholdings had told Business Line after the hearing last Thursday.

The investment firm, promoted by Mr Harish C. Bhasin, currently holds a 12.87 per cent stake in DCM Shriram and recently made a cash offer to buy another 22.8 per cent at Rs 70 per share. Subsequently, the company was ready to increase the offer to Rs 90 per share from the earlier price band of Rs 48-52 per share.

The CLB has also asked the company to file its replies to the petition by December 31, where it is required to enclose a copy of the report of the scrutiniser. “All the records relating to the postal ballot shall be kept in the custody of the company secretary in a sealed cover and be produced for examination of the Board, if need be,” the order said.

Mr Balasubramanian has also asked HB Stockholdings to file its rejoinder by January 20, 2008 and will hear the matter again on February 6.

The shares of the company rose 4.98 per cent to end the day at Rs 97.05 per share on the Bombay Stock Exchange.