Sebi to hear plea against DLF today

The Securities and Exchange Board of India will hear a complaint filed by the Association of Minority Shareholders of DLF Universal on Tuesday.

The association wrote to Sebi stating that the minority shareholders had been shortchanged, as the DLF management had facilitated a hike in the promoters' stake without giving an opportunity to the minority shareholders to subscribe to the rights issued earlier this year. The loss to the shareholders is estimated at Rs 1,600 crore.

A Sebi official confirmed the receipt of the complaint and said "the objections and queries have been sent to the lead managers and the Sebi will await their reply before taking a final call on the matter".

According to the complaint letter, 1,307 minority shareholders have not received Rs 1,600 crore as the management hiked its stake from 97.4 per cent to 99.5 per cent earlier this year without the knowledge of the investors.

Denying the charges, a DLF spokesperson said, "DLF on its part took care to send notice to all the shareholders under certificate of posting for which it is maintaining all relevant records. More importantly, the company took care to advertise that in an English and a Hindi newspapers for additional information."

However, the shareholders' association contended this, quoting a senior postal department official that the postal certification was forged.

The association claims that 90 per cent of the minority shareholders were not sent letters of offer to the rights issue of optionally convertible debentures issued earlier this year.

These debentures issued in February at Rs 100 each were converted into 10 equity shares for every one debenture in March.

In April, DLF announced a bonus issue of seven shares for one share held and, subsequently, split the face value of the shares into Rs 2 from Rs 10.

Thus, every share held before the debenture issue, is now equivalent to 440 shares.

The minority shareholders, who did not get the benefit of the debenture issue, have multiplied their holding only 40 times, instead.

Alleging that the decision to issue debentures was done with a malafide intention to raise the promoter stake further, the association questioned the company's wisdom in coming out with a debenture issue of merely Rs 35 crore to finance its new projects, when it had a credit line of Rs 7,000 crore, part from its internal resources, and was anyway planning to come out with its IPO of Rs 10,000 crore.

"The reason for converting the debentures into equity was governed by appropriate business exigencies related to expansion and the requirement of capital infusion," DLF said.

In its earlier avatar, DLF Universal was listed on the Delhi Stock Exchange and was, subsequently, de-listed in 2002-03 because of non-compliance with the listing norms.

Earlier that year, the promoters had increased their stake by 1.5 per cent (from 89 per cent earlier) in violation of the Sebi regulation and the company volunteered to pay a penalty of Rs 5 lakh and got permission to make an open offer to minority shareholders at Rs 320.

The promoters further hiked their stake to 97.46 per cent by 2004-05 through open-market purchases. Still, the company, on Monday, has 1,307 minority shareholders.