DCM Shriram promoters raise offer for warrants to Rs 90/share

NEW DELHI: Confronted by a hostile takeover attempt by HB Stockholdings, the promoters of DCM Shriram on Thursday offered to pay a higher price of Rs 90 per share for the allotment of warrants to them and also pay upfront the whole amount.

The offer was made during a hearing by the Company Law Board (CLB), where HB Stockholdings’ plea to stay the issue of warrants to promoters was being argued. The CLB is likely to announce its ruling on Monday.

Earlier, according to the resolution passed by the DSIL board, the warrants were supposed to be issued at Rs 52 per share, a price arrived at by following a formula used by market regulator Sebi. Promoters were supposed to pay only 10% of the cost initially, according to the resolution.

DSIL deputy managing director Alok Shriram told ET, “The price of Rs 90 was fixed keeping in mind the current market conditions. This would mean more capital for the company and increased value for shareholders.” If promoters have their way, their stake would increase from existing 32.54% to over 40%.

HB Stockholdings, which on Monday announced the open offer to acquire 35 lakh shares of DSIL, equivalent to a 22.8% stake, at Rs 70 per share, has challenged the move by the promoters to allot themselves seven lakh warrants. Each warrant would carry a right to subscribe to three equity shares.

If CLB stays allotment of warrants, and HB, which owned 12.8% stake at the time of announcement of open offer, succeeds in making the intended acquisition of 35 lakh shares, it would have a stake in the company bigger than the promoters’.

“A higher price of Rs 90 makes no sense. Our opposition is to the issue of warrants. The company should go for rights issue giving all stakeholders a say in the process,” said Vijay Mehta, chairman, Mefcom Capital Markets, which made the open offer announcement on behalf on HB. In a possible indication that offer price may be revised upwards depending on the market condition when the offer opens January 3, Mr Mehta says, “We have the right to revise the open offer price.”

A lot would depend on the judgement, which CLB chairman S Balasubramaniam said would come in 2-3 days. Most likely, it would be pronounced on Monday, the closing day for receipt of postal ballots from shareholders on allotting warrants to promoters. The result of the postal ballot would be announced on November 30.

Meanwhile, promoters are negotiating with institutional investors, including LIC and IFCI, seeking their support which is critical for their control of the company. Sources said, promoters as well as HB stockholdings are mopping up shares from the open market.

DSIL shares rose 5% to close at Rs 83.90 on the BSE on Thursday. Over 1,80,000 shares have been traded in the past four days, with over 50,000 being traded on Thursday. The HB share prices, however, dropped 3.8% from yesterday’s to close at Rs 60.90 on Thursday at BSE.