The simmering tiff between the family members of the century-old retail firm Nilgiri’s and its private equity investor, the UK-based Actis, became more complicated on Friday.
The Company Law Board (CLB), which the family members of the South India-focused retail chain had approached earlier to block the Rs 35-crore rights issue, declared at its first hearing on Friday that there should be no allotment of shares with respect to the issue till further orders.
An Actis spokesperson, reacting to the latest development, maintained that the company will bring in its share of the money by Saturday evening (January 2) as the company is in dire need of funds and the rights issue closes today.
Prabhu Ramachandran, director & a family member of the Nilgiris and who is leading the fight against Actis, said: “The CLB order clearly said that no allotment in respect to rights issue be made till further orders. This was exactly our plea to CLB that the shareholding remain unchanged until the petition was disposed. We had no issue with shareholders bringing money without shares being allotted.”
Actis, on its part, maintains that the shareholding is a non-issue at this point of time as “we are more worried on taking the company forward”. According to a spokesperson, the company will see how to resolve the shareholding issue “when we come to that bridge, in case the family members do not bring in their share of money”.
The public spat between Actis and members of the family which runs one of the best-known retail chains in South India is the result of a range of issues on which the two have hardly ever agreed ever since Actis picked up a 65 per cent stake in The Nilgiri Dairy Farm. Actis had invested Rs 300 crore in the backend operations of the retail chain in 2006.
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Sources close to the company say the host of differences on how the company should be managed and expanded is having a severe impact on the operations of the firm, with sales dwindling and net losses set to widen.
A few family members, who have earlier opposed the stake sale to Actis, still maintain that the step is a wrong one and should never have been taken. “The public legal wrangle is the result of this. Key shareholders not being on the same page to run operations will, of course, cause severe damage to the company and this is what we are witnessing,” a senior family source told Business Standard.
In November 2009, the Actis-led management got the board’s approval for a Rs 35-crore rights issue and went ahead with the same despite stiff resistance from the family.
The family members escalated the issue to CLB shortly after the Actis-led management decided to retain and invest close to Rs 100 crore in operations of the firm after it sold three hospitality properties belonging to the Nilgiris. The family members had said that they would want the proceeds to be shared as dividends.