ACC drops preferential issue to Tatas

However, other resolutions on the agenda relating to sub-division of the face value of equity shares from Rs 100 to Rs 10, rights issue in the ratio of 1:4 at Rs 55 per share and increase in the share capital from the present Rs 150 crore to Rs 225 crore were passed with the support of FIs at the EGM.

Institutions, led by the Industrial Development Bank of India, also spiked an alternate proposal by the Tata group for extension of scope ofthe preferential allotment of warrants to all shareholders, enabling each member to apply for a minimum of 50 warrants under on the same terms.

quot;Unfortunately, this amended proposal has also not found favour with the financial institutions and in view of our cordial relationship with them, we have no option but to totally withdraw this resolution relating to preferential issue either to the Tatas or to the general body of shareholders,quot; Mistry said.

The ACC chairman came out in full support of the Tatas, stressing that the group was quot;indeed one of the original co-promoters of ACC.quot; The Tatas are even today the single largest shareholders, holding approximately 14 of the equity, apart from FIs, he said. The withdrawal of the preferential allotment leaves ACC with a crucial Rs 100 crore gap for funding its strategic plans. The ACC board will now consider alternatives to bridge the gap, Mistry said.

Justifying the preferential allotment to the Tatas, Mistry said that the Sebi guidelines did not restrictit to the promoters and the board could make such allotment to any identifiable party, subject to approval of the shareholders. The preferential allotment of 90 lakh naked warrants to the Tatas, which was spiked by the FIs, would have hiked the group8217;s holding to around 20 per cent and brought in Rs 100 crore to the company8217;s kitty to fund its acquisition and expansion plans.This leaves the company with the sole option of raising Rs 189 crore through a rights issue, which offers shareholders one ACC share for every four shares held at a premium of Rs 45 a share.

According to Mistry, ACC has drawn up an exhaustive strategy plan involving a fund infusion of Rs 700 crore to improve its competitive edge in the cement business. quot;This would result in an increase in capacity of around two million tonnes per year from the current year8217;s level of 12 million tonnes as also improvement in the operating parameters at some of the existing plants,quot; the ACC chairman said.

At the EGM, monority shareholders, agitated withthe stand taken by the financial institutions on the preferential allotment, charged the FIs for lack of transparency and sought clarifications for taking such a quot;retrogradequot; step. Several of them referred to the misdeeds of FIs in the past and also sarcastically asked why IDBI, Unit Trust of India UTI and other FIs had not opposed ACC8217;s rights issue at a price of Rs 4,000 for each share of Rs 100 in 1995 in the interest of small shareholders, many of whom did not subscribe.

The institutional nominees 8211; JN Godbole of IDBI and Amitabha Ghosh of UTI 8211; declined to speak out the issue. quot;I have taken note of the issues that came up and will inform the appropriate authorities about it,quot; is all Godbole had to say.