Chambers lobbying for Modis

MUMBAI, NOV 4: The squabbling Modis have managed to rope in industry chambers to lobby for Modi Rubber Ltd from slipping out of their han...

MUMBAI, NOV 4: The squabbling Modis have managed to rope in industry chambers to lobby for Modi Rubber Ltd from slipping out of their hands. Two Delhi-based industry chambers 8211; Assocham and FICCI 8211; have come out openly against the move by the financial institutions to sell their stake and hand over management control of Modi Rubber to other parties. The same chambers were keeping a low profile when the company was being mismanaged and company8217;s share price took a beating.

Without naming Modi Rubber, Assocham president K P Singh has sought finance minister8217;s intervention to persuade financial institutions to offload their shareholdings to the existing promoters at a negotiated fair value. This will further cement the foundation laid for mutual relationship between financial institutions and corporate India, feels the Assocham chief.

FICCI, another industry chamber, had also opposed the move of financial institutions. They said the reported move of the financial institutions to dispose of their stake in theopen market to a highest bidder instead of negotiating with the existing promoters will disturb the existing management of the company and will not be in the long term interest and sustainable growth of the Indian industry.

However, one of the investor in Modi Rubber Ltd, R L Kamath said:8220;The FIs should keep the interests of the small investors in mind8230; for the last five years, we have seen our wealth eroding due to these promoters.

Meanwhile, it is learnt that institutions are looking at a price of at least Rs 120 per share for divestment of their 44 per cent equity stake in Modi Rubber Ltd. Top FI sources said this price has been agreed to in an internal note prepared by the FIs though the joint advertisement, released by them in newspapers on September 24 for sale of the stake, did not mention a minimum price. The last date for submitting the bids is Friday.

FIs had earlier turned down the promoters8217; offer to buy out the institutional stake at Rs 70 per share. Subsequently, Continental begannegotiations with Modis for acquisition of a stake in the company. But even as the talks were on, the FIs came out with the offer to sell their 44 per cent shareholding. Modi Rubber8217;s share is currently trading around Rs 98 on the stock markets. The Assocham chief said in the past financial institutions have acquired large stakes in the equity shares of listed Indian companies and over time they have become majority shareholders in many listed companies. They have acquired these large stakes through their rights to convert part of their loans into equity.

Before liberalisation the companies had to borrow from financial institutions, banks as the alternate source of raising money as equity was highly regulated and restrictive. In most of the companies, Singh said where financial institutions are holding shares, the same were acquired as a part of project between financial institutions and the corporate sector, therefore, developed on the principle of mutual trust and confidence. The financial institutionshave a special responsibility, given the weightage of their votes and have a bigger role to play in corporate democracy.

Story continues below this ad

On the top of that, the objective of various reforms is to facilitate healthy growth of the corporate sector under a liberalised, changing and highly competitive environment. The need of the day is to bring out the latest dynamism of Indian companies so that they can consolidate and grow.

This is particularly necessary when the level playing field is a misnomer with strained infrastructure facilities and banking systems. With the tariff rates going down and restrictions being removed, the only factor that can partially offset inqualities in level playing field.