Companies & Sectors
InGovern recommends voting against proposed merger between Piramal Enterprises and PHPL Holding

According to the proxy voting advisory, there are not enough disclosures by the Piramals on promoter group entities and related party transactions and the rationale can also be achieved through inter-se transfer instead of the merger

Bengaluru-based InGovern Research Services has advised shareholders of Piramal Enterprises (PEL) to vote against the proposal to merge PHL Holdings Pvt Ltd (PHPL) with the company citing lack of rationale and business logic.


In an advisory note, InGovern, said, “Rationale given for this amalgamation can also be achieved through an inter-se transfer or a scheme of amalgamation at the promoter group level and does not suggest any specific business logic for PEL shareholders.”


PEL has issued a notice for a court convened meeting on 13 March 2013 for a composite scheme of arrangement and amalgamation under Section 391 to 394 read with Section 78 and Sections 100 to 103 and other applicable provisions of the Companies Act, 1956, between PHPL and the company.


PHPL is a company forming part of the Promoter Group of PEL and as of 31 December 2012, holds 48.73% stake in PEL. Post the merger, Sri Krishna Trust, a family trust of the Piramals, which holds 100% stake in PHPL, would directly get shares in PEL. Institutional investors hold 28.3% stake in PEL. Aberdeen Global Fund and Life Insurance Corporation of India (LIC) are the largest institutional shareholders in PEL with 9.37% and 3.23% stake, respectively.


PEL in the notice to its shareholders has not made sufficient public disclosures on PHPL or its step-down subsidiaries. On the face of it, the transaction seems to be a straight forward merger of a holding company with its listed subsidiary, where shareholders of PHPL will directly get shares in the listed entity PEL.


“However”, InGovern said, “a deeper scrutiny of PHPL reveals that the entity had entered into related party transactions with its step-down subsidiaries, which have now been merged with PHPL in October 2012, in the past three years. This raises concerns with regards to the current scheme of amalgamation between PHPL and PEL.”


InGovern said it looked at the filings made by PHPL and its step-down subsidiaries for the past three years in addition to the public filings and stock exchange filings made by PEL during this period. InGovern said it also approached the company for further details of the transaction but were told to visit the company for inspection of the documents and the same were not made available to the proxy advisory electronically. “The company has clarified that PHL Holdings will not have any debt in the books of PHPL as on the appointed date and that there will be no adverse impact on the financials of PEL due to the merger,” the report said.


“PEL should clarify to its shareholders the rationale for these past transactions and their potential effect due to these related party transactions on PEL shareholders if the current merger goes through. The company should also publicly disclose the financial documents for PHPL ending 30 September 2012 and 31 December 2012 as well as all scheme related documents, for greater public scrutiny,” InGovern said.


According to the proxy advisory, the rationale given (by PEL) for this amalgamation can also be achieved through an inter-se transfer or a scheme of amalgamation at the promoter group level and does not suggest any specific business logic for PEL shareholders.


Recently, PHPL transferred its shareholding in Piramal Life Sciences to Sri Krishna Trust through an inter-se transfer and the same can be used in this case instead of going for merger of PHPL with PEL, InGovern said.


“Given the backdrop of the related party transactions that have happened in the past between PHPL and its step-down subsidiaries, it seems as if the current merger might have been affected to cover up some of these past corporate actions. We urge the company to provide more clarification on the business rationale for such a transaction,” the proxy advisory said.



Ashit Kothi

4 years ago

There has to be clear policy of Mergers & Acquisition. Companies should be asked to provide all the financial details (detailed one)of both the entities and also provide information on financial benefits to be derived out of such action by promoters. Promoters are also required to give rationals for such M&A and spell out their benefit out of these action and not provide standard static reply / answers.

Shree Digvijay Cement recently changed hands and investors were offered a poor deal

Investors of Shree Digvijay Cement Company were offered an extremely low valuation as the ownership was transferred from one company to another in a convoluted deal that made it look like an indirect acquisition. As expected, complaints made to the regulator remain unfruitful

A few weeks back Gujarat-based Shree Digvijay Cement Company (SDCCL), a 1.3 million-tonne (MT) capacity cement manufacturer, made a disclosure on the BSE website that its promoters Cimentos de Portugal (Cimpor), a Portuguese cement company, would be transferring its stake to Votorantim Cimentos (Votorantim), an unlisted cement company based in Brazil.  What transpired in the previous few months makes this look like a simple transfer of shares as the promoters are of the view that this is not a direct acquisition but an indirect acquisition through the acquisition of shares of Cimpor. But in fact on looking deep into the events that transpired over the previous year, Votorantim gave up its ≈21% stake in Cimpor to acquire other assets owned by Cimpor around the world which included SDCCL. The worst part is, as brought to our notice by two investors of SDCCL, that in the open offer, shareholders of SDCCL were offered a valuation of just $22 per tonne (Rs10.94 per share) whereas other cement companies in that period with the same capacity were quoting a valuation around $100 per tonne. All this happened under the Securities and Exchange Board of India’s (SEBI) nose and with its approval despite repeated complaints by the investors. We contacted SDCCL for their response, however, no reply was received at the time of publishing this story.


Discrepancy in valuation


The open offer made by SDCCL was valued by Kotak Mahindra Capital Company. The offer price quoted was Rs10.94 based on some valuation metrics. As per Kotak, the offer price was at a premium of 12.3% to the volume weighted average price for the two weeks prior to the date of the public announcement (PA) and at a premium of 15.2% to the volume weighted average price for 60 days prior to the date of the PA. By the time of the start date of the open offer, the offer price was at a premium of just 2.72%.


In terms of a key valuation indicator for cement companies, the enterprise value per tonne, the valuation done by Kotak worked out to just ≈$22 per tonne against a benchmark of $80-$100 per tonne for smaller cement companies around that time. The valuation done by Kotak was extremely low especially for a profitable company with a low debt. Agreeably, the promoters chose an opportune time when the company was highly undervalued and the shares were poorly traded. We have looked at other acquisitions of this size.


As per a recent research report, by Avendus, Jaypee Group made a deal to acquire Andhra Cements at an enterprise value of around $85 per tonne in December 2011. In September 2012, Dalmia Bharat Enterprises acquired the 1.5 MT Adhunik Cement’s plant in Meghalaya at an enterprise value of $120 per tonne with a capacity utilisation of 50%. In fact, Cimpor, in December 2007, acquired SDCCL at a valuation of $160 per MT!!


A complaint raised to SEBI by one investor in July 2012 on this discrepancy was answered by the banker to the offer who coolly stated that the “Letter of Offer” (LOF) has been approved by SEBI. The LOF also states the transactions that take place which, though convoluted, states that the transaction is an indirect transfer through acquisition. However, on taking a broader view, at the end of the transaction Cimpor transfers its control of SDCCL to Votorantim—seems completely like a direct acquisition.


Indirect acquisition or direct acquisition?


In March last year, Camargo Corrêa SA (Camargo), which holds ≈33% stake in Cimpor, through a company controlled by it—InterCement Austria Holding (InterCement)—made an open offer for acquiring the remaining shares of Cimpor. Later in May, the Portuguese Securities Commission directed that the tender offer be revised to a mandatory tender offer. Through the mandatory tender offer InterCement came to acquire ≈40% of Cimpor. Therefore, Camargo directly and indirectly held nearly 73% stake in Cimpor. (See chart below)

Now comes the interesting part, these companies entered into a restructuring agreement, where certain assets held by Cimpor and InterCement would be swapped. Cimpor transferred some assets (from Morocco, India, Turkey, etc, which included SDCCL) to InterCement and the latter transferred 17 operating plants to Cimpor. This was the first transaction for asset swap. Then, InterCement would then transferred these assets received from Cimpor to Votorantim for Votorantim‘s 21.40% stake in Cimpor. Cimpor’s assets in Spain, Morocco, Tunisia, Turkey, India, China and Peru, as well as a 21.2% stake in Cimpor’s consolidated net debt were valued at 817 million euros by two independent investment banks, Morgan Stanley and Rothschild. A corporate announcement on Cimpor’s website states that the transfer of its assets from InterCement to Votorantim is outside its corporate sphere. Both InterCement and Votorantim are unlisted companies.

Therefore, Votorantim has direct control of SDCCL through this restructuring even though it did not make an initial acquisition offer for Cimpor. Now as the first acquisition offer was made in March, the open offer in SDCCL was triggered as per SEBI’s Substantial Acquisition of Shares & Takeovers (SAST) Regulations, 2011. However, the open offer was announced much later in June and soon after the restructuring agreement. This avoided two open offers being triggered, the first being the acquisition by InterCement and then the transfer to Votorantim. The regulator didn’t seem to mind.




4 years ago

This is purely Unfair trade practice. Considering its consistent track record-SEBI has not protected investors interests in this matter also- should not come as a surprise to those who know. Depending upon the facts in the instant matter (which we have not studied)the only option to fight this, we clearly feel is: An Appeal in SAT and/or a Writ petition in High Court/Supreme Court expeditiously.

Virendra Jain
Midas Touch Investors Association

Mahesh Dua

4 years ago

Full credit to moneylife and the active investors. Hope SEBI wakes up from sleep. Let Justice prevail.

Santhana Krishnan

4 years ago

Good work by Moneylife. At least SEBI should wake up now and annul the farce of an open offer. Kotak needs a rap on its knuckle for being a party to this scam. When that good day would come?


4 years ago

SEBI i m sure will act ..I am enthused with hope after reading a recent article in Business Standard dated 24th Feb
This shows that SEBI is concerned about increasing golmaals of various kinds in "open offers"..We shouldnt give up

Ramesh Poapt

4 years ago

Great ML! Pl continue to expose such matters.



In Reply to Ramesh Poapt 4 years ago

yes indeed!

sudip sheth

4 years ago

recently, Mahamaya Investment Ltd,(BSE code 511187) of Yogindra Mafatlal group(Atulya ); promoter transfered all shares to a Surat Party. No offer is made to public share holders. Shares were transfered at Rs.20 much below market price which was Rs.40 2 months ago, was brought down to rs.28.

Co. shall give offer to shareholders at rs.40 around.


4 years ago

The Truth of unsurping hard earned small investor money by SDCCL (needless to mention the greedy banker) has been graphically unearthed in well researched detail by the research team of Moneylife..I was just about to take up the issue with investment grievance forums and this damning evidence of Shree Digvijay had been exposed timely by would not be out of place if i suggest that not only SEBI but the MCA should also take note of this as a serious compliance issue begs attention..Also since the matter involves two foreign entities , even the tax authorities may have a right to know exact financial details and at least rule out the other possibilities of violations..As for we as small investors there is no doubt that this makes a clear cut case of being taken for a ride using terms like "restructuring agreement" and simply concealing a Direct Acquisition to avoid giving small investors their dues.



In Reply to SANKARAN 4 years ago

very true

anil garg

4 years ago

Sebi is in fact an useless organisation as far as taking care of small investor interest are concerned.This case study clearly tells that Manager to offer is taking protection under SEBI clearance where as SEBI tells Manager to reply.It appears corruption too is there in SEBI.For approval they may be taking money.



In Reply to anil garg 4 years ago

the evidence of wrongdoings is quite clear..SEBI i m sure shall take this case to its logical conclusion


4 years ago

SEBI appears to be not only deaf but also blind ! What this article brought out , should have been discovered by SEBI. I some one suspects some palms being greased in this transaction, the ultimate loser is the Investor, who has been taken for a grand ride..Kotak is also hand in glove with Company.



In Reply to sachchidanand 4 years ago

I fully agree with your observation that KOTAK needs to be investigated immediately

Vaibhav Dhoka

4 years ago

Regulator is generally hand in glove with such unscrupulous entities.Indian investor is always in NO MAN land.


4 years ago

kudos to MONEYLIFE for bringing out this fact of Shree Digvijay Cement Company Limited therby bringing to light the massively unjust offering to minority "INDIAN" shareholders..I am sure this is the first step towards ensuring justice to shareholders..



In Reply to RAJESH IYER 4 years ago

Justice & that too in india ?


In Reply to Rajhans 4 years ago

You may have a point but we shouldn't give up..Recent events involving Sahara group proved that SEBI had to crack the whip after the massive wrongdoings of Sahara Group got exposed..We should persist and I am sure SEBI would have to take cognizance of all facts. That's what a "watchdog" is supposed to do..its a question of our collective restoring of faith in institutions and not allow these scrupulous company officials and the banker go scot this era of technological system of redressal, information access and , deft , nimble footed media like MONEYLIFE, there is a beacon of hope....

RTI Judgement Series: Despite Supreme Court order, Delhi government was busy in passing the responsibility

Despite orders from the apex court, various departments in the Delhi government were found passing the issue of unauthorised industries to one another in order to avoid the responsibility. This is the 49th in a series of important judgements given by former Central Information Commissioner Shailesh Gandhi that can be used or quoted in an RTI application

The Central Information Commission (CIC), while pulling up various officials from the Government of National Capital Territory of Delhi (GNCTD), asked the Public Information Officers (PIOs) of the industries department (policy), chief secretary and sub-divisional magistrate (SDM) to provide proper information to the applicant.


While giving this important judgement on 12 March 2010, Shailesh Gandhi, the then Central Information Commissioner said, “The Commission must mention that the facts emerging during this hearing appear to imply that the Supreme Court’s order has not been implemented. It is evident that various government departments are passing the issue of illegal operation of all kinds from one to another in an eternal game of passing the responsibility.”


Delhi resident MK Kashyap sought information from the Commissioner of Industries, Government of National Capital Territory of Delhi (GNCTD) about unauthorized industries in non-confirming residential area of Gandhi Nagar. Here is the information he sought and the answers provided by the PIO of Industries department...



Information Sought

PIO's Reply


Whether a monitoring committee had been constituted chaired by Chief Secretary, Govt. of Delhi in compliance of order dated 07/05/2004 passed by the Supreme Court.



Whether a survey of unplanned residential/Rehayasi was done by SPIO, Chief Secretary according to advertisement published by Commissioner of Industries on 10/06/2004.



Provide total number & Name, Property No. with full details which was found illegal & in which 75% were unauthorized illegal Production units in Unplanned Residence according to survey done by SPIO, Govt. of Delhi on 10/06/2004.

List of 45 Industrial area marked as unauthorized is enclosed.


The percentage of unauthorized Production Units found in unplanned Residential Colony according to SPIO, Gandhi Nagar constituency.

Survey was done under leadership concerns SDM. Contact SDM, Gandhi Nagar, for further information. A copy of the RTI application is being sent.


Whether the Chief Secretary had taken any action so far, in compliance of the order of Supreme Court. If not taken, then reason thereof. If taken, then what had been taken? Give full details.

A complaint was used to send to concerned O/o Dy. Commissioner till November 2000 for taking action against unauthorized industries running in unplanned areas.


Provide total number of production units category-wise (Class-A, A1, B, C, D, E, F) in Gandhi Nagar Constituency.

There is no information according to the official record.


Whether the Gandhi Nagar Constituency has to be declared Industrial Area. And by which date.

As said above.


Whether the Gandhi Nagar Constituency has to be declared Commercial Area. And by which date this constituency would declared as commercial area.

As said above.


By which date unauthorized production units placed in unplanned residential areas would be shifted or closed.

As said above.


Whether permission had been given for setting up Computer Crafting Machine (weighing 3 to 4 ton) & allowing for 24 hours in the said constituency.

As said above.


Total number of unauthorized industrial units that had been removed or closed so far.

Receive this information from SDM (Gandhi Nagar).


Whether unauthorized production units would be removed before Commonwealth Games. By which date this work would be started?

There is no information according to office record.


Action taken on the appellant’s application dated 03/06/2008, 30/06/208, 28/08/2008, 09/09/2008 & 27/12/2008 by the Chief Secretary, Govt. of Delhi, so far.

The application of the appellant had been inspected by the staff of this department. after then the letter with inspection report had been sent to Dy. Commissioner (East), for further action on 02/06/2009 according to order dated 07/05/2004 of SC.


Whether the said constituency had been made pollution free removing unauthorized units before holding Commonwealth Games. If yes, then by which date.

There is no information according to office record.


Who has responsibility & who is responsible to stopping/closing unauthorized industries in Gandhi Nagar region according to public notice dated 10/06/2004 issued by the Commissioner (Industries)?



 Who will take action against unauthorized industrial units?

As said above.


Kashyap then approached the First Appellate Authority (FAA) citing wrong, unsatisfactory replies and misleading information by the PIO. In his order the FAA stated that, “The PIO/CS Office correctly transferred his application dated 11 July 2009 to the Additional Commissioner of Industries, Industries Department and copy for information was endorsed to him vide letter dated 14 July 2009. Under RTI there is no provision to transfer the appeal, hence it cannot be transferred. Appeal can be filed before the FAA of Industries Department only. Hence the appeal is rejected.”


Kashyap then filed his second appeal before the CIC. During a hearing before Mr Gandhi, the CIC, Kashyap stated that there is a Supreme Court order of 7 May 2004 to conduct a survey within six months and ensure closure of all industries in non-confirming residential zones. He alleged that this is not been done, though a period of over five years is over form the Supreme Court order, and therefore he sought information from the office of chief secretary, one of the four authorities, who have been charged by the apex court order to monitor the implementation.


Kashyap told the CIC that the Chief Secretary’s office has transferred part of his RTI application to the Directorate of Industries and the concerned SDM from whom he was not getting any response.


He also stated that he has approached Municipal Corporation of Delhi (MCD), the concerned SDM at Gandhi Nagar and the Director of Industries and everyone kept saying that they did not have information about the implementation of Supreme Court’s order.


Mr Gandhi noted that the chief secretary has been given the responsibly of monitoring by the Supreme Court and the SDM certainly reports to the Chief Secretary and thus it is not unreasonable for the citizen to expect that the information would be provided by the Chief Secretary’s office.


The PIO, in his submission stated that the Department of Industries is not monitoring the whole activity but is coordinating and does not have enough resources it would require to monitor the activity.


The Commission, while adjourning the hearing decided to call the PIO of chief secretary.


During a hearing on 25 February 2010, both the PIOs and the concerned SDM were present before the Commission.


DP Singh, SDM of Gandhi Nagar stated that there was no record of any survey having been carried out by his office but he was aware that there was large number of garment units in the area. In the absence of any survey or record it is not possible to know whether these can be permitted in the residential area or not, he said.


OP Wadhwa, PIO and officer on special duty (OSD) to Chief Secretary stated that he believed a survey had been carried out but nobody seems to know where this report was and what it stated.


SK Singh, PIO & Deputy Commissioner Industries (Policy) told the CIC that if a survey had been carried out, the report can only be with the SDM of Gandhi Nagar.


Mr Gandhi, the CIC, then directed the PIO of the chief secretary and the PIO of the Industries (Policy) to give categorical information to Kashyap if the possible survey report can only be with SDM of Gandhi Nagar.


The CIC also directed the SDM of Gandhi Nagar to once again check if the survey report is in existence. If it is in existence, this will be provided to Kashyap, the CIC said.


In its order, the Commission also noted that the facts emerging during this hearing appeared to imply that the Supreme Court’s order had not been implemented.


“Appellant (Kashyap) also showed that there was evidence of complaints having been given to the Deputy Commissioner of Industries (Policy) about industries operating in residential areas. He also showed information provided to him by PIO of Factory Licensing MCD (Delhi) asking for 45 industrial connections of water and electricity to be cancelled. He also claimed that 825 notices have been issued vide diary no.2154, 2156 on 26 August 2009 by MCD Factory License Department to SDM of Gandhi Nagar to disconnect water and electricity connections,” the Commission said.


While allowing the appeal, Mr Gandhi then directed the PIOs of Industries Department (policy), chief secretary and sub divisional magistrate (SDM) to provide proper information to Kashyap.




Decision No.CIC/SG/A/2009/003132/6961

Appeal No. CIC/SG/A/2009/003132


Appellant                                            : MK Kashyap                 

                                                            Delhi - 110031.                              


Respondent                                       : SK Singh

                                                            Public Information Officer &

                                                            Dy. Commissioner Industries (Policy)

                                                            O/o Commissioner of Industries

                                                            Govt. of NCT of Delhi

                                                            Udyog Sadan, 419, FIE.

                                                            Patparganj, Delhi-110092


Respondent                                        : OP Wadhwa

                                                            PIO & OSD to Chief Secretary

                                                            Delhi Secretariat, Govt. of NCT of Delhi

                                                            Sachivalaya, I.P, Estate,





4 years ago

Kudos to Mr. Kashyap and the CIC for giving him relief. Apart from financial penalties RTI Act should be amended to include prison terms to officers for not providing information.

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