CLB refuses stay on DCM warrants

In a major setback to Delhi brokerage HB Stockholdings, the Company Law Board (CLB) has refused to stay the preferential warrants issued by the promoters of DCM Shriram Industries Ltd (DSIL) to themselves.

"The company can go ahead with the warrants issue and nothing should stop it. The petitioner himself made an open offer to acquire 22.88 per cent shares and he should have no problem if the promoters hike their share by 8 per cent by way of warrants," said a CLB official.

HB Stockholdings' argument that the share price of Rs 52, at which promoters sought to issue warrants, was undervalued also did not stand since the price was raised to Rs 90.

Harish Bhasin-promoted HB Stockholdings, the company that currently owns 14.54 per cent in DSIL, had filed a petition with the CLB seeking a stay on the promoters' move to issue warrants, claiming that it could impact minority shareholders' interest.

At the same time, it made an open offer to buy 22.88 per cent from DSIL shareholders at Rs 70 per share.

A HB Stockholdings spokesperson said the company would go ahead with the open offer since, legally, it cannot withdraw.

However, the price of the open offer automatically gets revised to Rs 97.05 per share, a 52-week high, since the company made some open market purchases today at that price.

This is an indication that the battle for DSIL control will intensify even as the date of December 10 (the last date by which DSIL promoters can make a counter offer) approaches.

The promoter's stake in DSIL currently stands at 32.54 per cent.

Meanwhile, the postal ballots seeking shareholder approval on preferential warrants have come and are being scrutinised. DSIL's board, in its meeting on November 30, will take a decision based on the report on postal ballots.

In October, the DSIL Board had passed a resolution allowing promoters to allot 7 lakh warrants to themselves under which each warrant was to be converted into three shares at different points of time over the next 18 months.

The price for these shares were fixed at Rs 52 but with HB's open offer and petition against warrants, the Board decided to hike the price to Rs 90.

It also decided to convert these 7 lakh warrants upfront to bring Rs 18 crore at a time to the company as working capital.