VK Modi wins battle for Modi Rubber

B K Modi's last-ditch bid to wrest ownership control of Modi Rubber by bettering his offer seems to have failed, with financial institutions having a combined 44 per cent stake in the company committing to sell it to his brother V K Modi.

Sources in the financial institutions said they had in principle agreed to the offer of V K Modi, who had already paid 20 per cent of the share price in a non-refundable deposit.

VK Modi's shareholding will go up to 66 per cent following the acquisition of the financial institutions' stake. B K Modi's stake will continue to be at 22 per cent.

The sources said V K Modi deposited the amount after he was declared the highest bidder for the 44 per cent stake, which the institutions had collectively put on the block.

"Now, BK Modi's offer of Rs 95 a share does not make any sense as we are committed to sell our stake to VK Modi. BK Modi's offer came after the closure of the bid," they pointed out.

In addition to acquiring the shares of the institutions, V K Modi agreed to pay 130 per cent of the principal. This means he will clear off the entire principal outstanding of Rs 600 crore.

Also, he will pay 30 per cent of Rs 600 crore towards interest outstanding. On the other hand, B K Modi, in his previous offer which came within the stipulated period, offered to pay only 75 per cent of the outstanding principal.

However, industry sources were not sure how fast V K Modi would be able to take ownership control of the company, with the representative of a workers' union moving court against this deal. The union moved the Delhi High Court asking for settlement of the workers' due.

Reacting to this move, the sources in the financial institutions said: "We are pulling out of our equity investment in the company through this deal. Plus, it is also a part of our effort to get the long-pending dues from the company. It has got nothing to do with the dues of the workers. On the contrary, this can be seen as an attempt by the promoters to revive the company, which has been under the BIFR net since 2001. Workers should not oppose it."

Public shareholding in the company is pegged at over 8 per cent. It has a total equity of 2.5 crore shares.