Indian Film Co's dissident shareholders may gain concessions at EGM

LONDON: Indian promoters, who rushed to list their companies on London's AIM in the heady days, are now having to live with the aftereffects of activist shareholders. This time, the row between dissident shareholders and the management of Indian Film Company (IFC), promoted by Raghav Bahl and responsible for films like Ghajini, Singh is Kinng and Jab We Met, is heading for an open takeover battle at a contentious EGM to be held in Guernsey next week.

The IFC Requisition Group (IFCRG), the dissident faction, has accused the company of refusing to supply them with a list of shareholders, though they are legally entitled to it.

IFC, in a formal letter by chairman Shyam Benegal to shareholders, has accused the dissidents of wanting to take control of the company. Dissident shareholders moved the EGM with the intent of removing Raghav Bahl and Alok Verma as directors of the company, to be replaced by Aashish Vyas and Atul Setia, both financial professionals.
A spokesman for IFC said the initial request from the dissidents did not comply with regulations, but after a follow-up request, the shareholder list has now been shared. Both sides accuse the other of not talking officially, but it is believed that negotiations are in progress.

The motion acquires significance since IFC's board consists of Shyam Benegal, Lord Meghnad Desai, international chartered accountant Peter Radford, besides Mr Bahl and Mr Verma. Observers say that it is unlikely that the dissidents will be able to change the board in an open EGM vote, but it is likely that they will wrest some concessions like their own representatives on the board, in a negotiated settlement.

At the root of the open battle is IFC's abysmal share performance on AIM, where it listed a year ago to raise about ��55 million for investing in Indian films. IFC shares have been trading at a 75% discount to the listing price and funds in UK are under increasing pressure from their investors to show returns on these investments.

The shareholders group, which comprises Altima India Master Fund, Kelusa Master Fund and additional shareholders, who together control about 31.75% of IFC's shares, claim that the management has failed to deliver returns despite churning out hits. "In the first 18 months, the company produced a net profit of ��3.4 million, of which ��2 million was earned in interest," IFCRG said in a statement. "It is the disconnect between IFC's poor financial performance as opposed to the box office success ... which has led to its poor share performance, rather than just current conditions," say the dissident shareholders. IFC made operating profits of ��1.63 million for six months ended September 2008, on revenues of ��15.43 million.

A spokesperson for IFCRG added that the shareholders have become frustrated as they cannot engage the management in dialogue and while they have no interest in taking over the company, they want a full review and a more active role in running the business.

In response, Mr Benegal's letter states that the company has met all its stated objectives, and in the circumstances, "AIMF's actions may be viewed as an attempt to take control of the company without a detailed strategy, and without making an offer to all shareholders at a fair price. The board is firmly of the view that AIMF is attempting to further its own interests at the expense of other shareholders."

The current board members have also threatened to resign in case the motion is voted through. IFC said that it has invested GBP 58.97 million in projects, over 100% of the money raised, and the carrying value of its projects under production is about GBP 25 million. "As such, the company does not have any excess cash to carry out a share buy-back or any other distribution to shareholders at this stage," Mr Benegal said in his letter. Whether the matter is settled through negotiations or in a battle, this row is unlikely to die down in a hurry.