CCIL manufactures pigments, additives, master batches, textile chemicals, paper specialties, emulsions, and provides oil and mining services. Its plants are located at Roha & Kolshet in Maharashtra and Cuddalore & Kanchipuram in Tamil Nadu.
The company had decided to sell the textile chemicals, paper specialties and emulsions businesses, which accounted for 35 per cent of its sales, citing uncertain prospects. However, investors were left wanting with the limited disclosures. They were also concerned about the valuation of the business.
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According to a recent filing by the company, 99.96 per cent of about 1.7 million votes were against the proposal. HDFC Trustee Company and UTI MF are the major institutional shareholders in the company, with 1.1 million and 0.4 million shares, respectively — their combined stake stands at 5.5 per cent.
A total of 27.8 per cent of other public shareholders also voted against the proposal. Though the proposal went through, owing to the promoter group’s dominant shareholding, activists see the voting pattern as a sign of increasing investor awareness and participation on key issues. “We are seeing active participation by institutional shareholders on management proposals that affect valuations. Clearly, companies need to be more transparent in disclosing financials and the method of valuations and assumptions used for businesses. We also believe slump sale transactions need to be approved by a special resolution, rather than by an ordinary resolution, as is done currently,” said R Jayakumar, executive director, Institutional Investor Advisory Services (IiAS).
On 26 March, the CCIL board had approved the proposal for sale. The decision followed Clariant AG’s move to exit these businesses globally.
IiAS recommended voting ‘against’ the proposal, as, based on limited disclosures, the valuation of the textile chemicals, paper specialties and emulsions businesses should have been higher. Considering the valuations based on earnings before interest, tax, depreciation and amortisation multiples, if the margins of these businesses were comparable to those of peers or across CCIL businesses, the valuation would be at least Rs 350 crore, the advisory had said. It, however, said it made limited strategic sense for the company to remain in these businesses, as global support and access to know-how was uncertain.