Mallya, Chhabria trade claims

The Chhabria camp said its effective offer price was not Rs 90.50 but Rs 210, as shareholders, who had held the stock since 1995, were also entitled to an annual interest of 15 per cent. "If you add the interest for eight years, the offer price works out to Rs 210, which is higher than what Mallya is offering," sources close to Chhabria said.

The sources also added that over 90 per cent of the existing shareholders of Herbertsons had been there since 1995 and were, therefore, entitled to the interest.

On their part, officials of Mallya's United Breweries (UB) group said Chhabria's open offer price was just Rs 90.50 and the remaining Rs 120 was the interest component.

Their contention was that while the participants would just pay 10 per cent capital gains tax on Rs 90.50, they would have to pay an additional 30 per cent income tax on the interest component of Rs 120, which translated into Rs 36. The final price in Chhabria's offer, therefore, works out to Rs 174, even after excluding the capital gains tax component.

This made Mallya's offer price better than Chhabria's, UB officials said.

They added that in Mallya's counter offer, even if a person had bought the share at Rs 10, the capital gains tax of 10 per cent translated into Rs 19 which meant the participant got a value of Rs 181 on every share.

The officials added that if the participant chose to invest the capital gains income in some rural electricity fund, his income would be exempted from the capital gains tax as well, which was not possible in case of income tax on the interest income. "Mallya's offer, therefore, is most lucrative," they added.

The officials also said about 30 per cent shareholding in the company was not registered with either Mallya or Chhabria. Since Mallya's offer was for 45.2 per cent shareholding, all the shareholders could completely offload their equity, while only 20 per cent could do it in case of Chhabria's offer. "This is also a small advantage with us," they added.