The six foreign investors in BPL Communications, who together hold 39.6 per cent of "ordinary shares with voting rights", have decided to jointly block the company's proposed merger with Birla-Tata-AT&T (BTAL).
The merger, if it goes through, would lead to the formation of India's largest cellular company, but would give the group of investors less than 20 per cent in the merged entity.
The group of investors told Business Standard they have decided to put their weight behind CDC Financial Services, which has already filed a case in the Bombay High Court against the merger, thus posing a serious threat to the merger process.
The six foreign investors comprise AIG Asian Infrastructure Fund, Asian Infrastructure Development Company, CDC Financial Services, Nomura International, South Asia Regional Fund and TVG Asian Communications Fund.
Apart from controlling almost 40 per cent of the voting rights, the six together have subscribed to 85 per cent of the preference shares (without voting rights) in BPL Communications and have invested $215 million in the company since 1997, they said.
A merger has to be ratified by the general body of shareholders, and requires the consent of 75 per cent of the shareholders present and voting. So, if the foreign equity investors of BPL Communications stick together, they can block the merger with BTAL.
In response to a Business Standard questionnaire, the investors said they "have jointly raised identical objections, both in discussions with BPL Communications and in the court, to the manner in which the merger process has been and is being carried through".
They said they have "objected to serious and continued lapses in corporate governance procedures and practices at BPL Communications".
"The international investors are all concerned about some of the proposed terms of the merger. They are all very clear that, in negotiating and finalising the terms of the proposed consolidation and merger, BPL Communications has deliberately excluded all the international investors from the merger process and has ignored their rights as shareholders of BPL Communications," they added.
BPL Comm vice-chairman BK Syngal declined to comment on the issue "as the matter was sub-judice".
However, a senior Tata official admitted that the BPL-CDC issue had already slowed down the merger process. "We are awaiting the court verdict before taking further initiatives," he said.
"Any decision by the court on the issue will have a binding impact on all shareholders, including BTAL. If the court verdict is against the interests of the main shareholders (including us) in the post-merger scenario, we will take an appropriate decision at that point of time. But we would not like to go back from our consolidation move," a Tata official told Business Standard.
The BPL-BTAL merger, valued at $2 billion, would create India's largest cellular entity with a subscriber base of over 1.1 million across eight circles.
The Tatas, the Birlas and AT&T are to jointly hold around less than 17 per cent each in the merged company, while BPL and its consortium of investors are to hold 49.38 per cent.
