Companies & Sectors
Small investor requests SEBI to take action in India Foils merger case

 According to the minority shareholder, the orders issued by BIFR for merger of India Foils with Ess Dee are beyond the powers of the reconstruction board

Nagpur-based Laxmi Girish Jalan has requested the Securities & Exchange Board of India (SEBI) to initiate action against orders passed by the Board for Industrial and Financial Reconstruction (BIFR) in the India Foils case as these orders are beyond the powers and authority (ultra vires) of BIFR. Mrs Jalan, in a notice sent through her counsel Sandeep Jalan, also said that she may approach the Bombay High Court, in case SEBI fails to respond.

In what appears to be another case of absolute apathy and discrimination, minority shareholders have been crying foul about the merger deal between India Foils and Ess Dee Aluminium as they feel the acquirer has put a ridiculously low valuation.

Earlier in September 2010, the BIFR sanctioned and approved the merger of India Foils with Ess Dee in terms of the modified rehabilitation scheme. According to the scheme, India Foils’ shareholders were offered a share-swap ratio of 1285:1. This also meant that India Foils’ shareholders would surrender their 1,285 shares to get a single share of Ess Dee. Apparently, Mumbai-based chartered accountant firm, MP Chitale & Co, did this incredible valuation for the merger.

In November 2008, Ess Dee bought a majority stake in India Foils for Rs130 crore from the Anil Agrawal-led Vedanta Group as part of the rehabilitation scheme approved by the BIFR. However, advocate Mr Jalan has objected to the scheme of rehabilitation saying that BIFR cannot change ownership of a company. “According to Section 18 of the Sick Industrial Company (SIC) Act, among other things, the proposed scheme may provide for financial reconstruction, change or appointment of new board of directors, etc. While looking at, all the provisions of section 18 of SIC Act, 1985, it is nowhere provided that the ownership of the sick industrial company can be changed, save, by way of amalgamation,” he said in the notice, a copy of which is with Moneylife.

Mr Jalan said, the amalgamation ordered between India Foils and Ess Dee was ‘absolutely unwarranted’ and there was no ‘cause of action’ for the BIFR to exercise its jurisdiction. “The clause of SIC Act, 1985 does not contemplate the nature of amalgamation effected between sick India Foils and Ess Dee and the said amalgamation, in particularly frustrates the mandate of Section 18(3)(a) of the SIC Act, 1985 and Regulation 30 of BIFR Regulations 1987,” the notice said.

Some years ago, Kumar Mangalam Birla, who controls Hindustan Aluminium, almost bought India Foils, the Kolkata-based aluminium foil-maker. His team took a close look at the books of the company and balked. Then a more intrepid and ambitious businessman jumped in—Anil Agarwal of Sterlite. He is more adept at wading through the mess and fixing it—or so he thought. But even he gave up. Finally, it was left to the local boy who had made it good in Mumbai to come back and invest in his home state. Sudip Datta of Ess Dee Aluminium took over India Foils, a sick company, from Anil Agarwal for Rs130 crore.

After relisting it in June 2009, India Foils’ shares last traded on the Bombay Stock Exchange on 22nd October at Rs5.12 apiece.

 

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RBI asks corporates to park ECB funds in India amidst rupee blues

The RBI has asked corporates to park funds raised through ECBs (external commercial borrowings) for domestic expenditure with local banks. The modification in the norms for ECBs was done after a review of the developments in the global financial markets and current macro-economic conditions

Mumbai: Amid falling value of rupee, the Reserve Bank of India (RBI) today asked corporates to park funds raised through ECBs (external commercial borrowings) for domestic expenditure with local banks, a move which will increase inflow of foreign currency, reports PTI.

“The proceeds of the ECB raised abroad for rupee expenditure in India... should be brought immediately for credit to rupee accounts with AD Category I banks,” the RBI said in a notification.

Such funds could be used for local sourcing of capital goods, on-lending to self-help groups or for micro credit and payment for spectrum allocation, among other purposes.

The modification in the norms for ECBs was done after a review of the developments in the global financial markets and current macro-economic conditions. The directives have been made effective from today, the RBI said.

It, however, said that ECBs meant for foreign currency expenditure can be retained abroad pending utilisation.

The depreciation in rupee, which slumped to an all time low of 52.73 yesterday, has become a cause of concern for policy makers as the slide is affecting capital market and fuelling inflation.

The central bank said “as hitherto, however, the rupee funds will not be permitted to be used for investment in capital markets, real estate or for inter-corporate lending.”

As the cost of credit is significantly less in overseas markets, Indian companies have borrowed close to $29 billion in foreign currencies, through ECBs and FCCBs, so far in 2011, as against $18 billion in 2010.

Meanwhile, the RBI also enhanced the ‘all-in-costs ceiling’, which include rate of interest, fees and expenses, for raising funds through ECBs.

The ceiling with an average maturity period of ECBs between three and five years have been revised upwards to 350 basis points from 300 basis points.

However, the rate remains same for those with average maturity of above five years.

The enhancement in ceiling will be applicable up to 31 March 2012, the RBI said.

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Cyrus P Mistry to succeed Ratan Tata

For the first time in the history of the Tata Group, somebody from outside the Tata family has been selected for the coveted post

Tata Sons, the holding company of the over $80 billion conglomerate Tata Group, on Wednesday announced that Cyrus P Mistry, the 43-year-old managing director of Shapoorji Pallonji Group, will succeed Ratan Tata.

"The Board of Directors of Tata Sons at its meeting today appointed Cyrus P Mistry as the Deputy Chairman. He will work with Ratan N Tata over the next year and take over from him when Tata retires in December 2012," Tata Sons said in a statement.

Commenting on the appointment, Ratan N Tata, chairman of Tata Sons, said: “The appointment of Cyrus P Mistry as deputy chairman of Tata Sons is a good and far-sighted choice.

“He has been on the Board of Tata Sons since August 2006 and I have been impressed with the quality and calibre of his participation, his astute observations and his humility.”

Mr Tata further said: “I will be committed to working with him over the next year to give him the exposure, involvement and operating experience to equip him to undertake the full responsibility of the Group on my retirement.”

Mr Mistry has been a director of Tata Sons since August 2006. A graduate in civil engineering from Imperial College, London, he also holds a masters of science in management degree from the London Business School.

The selection committee unanimously recommended Mr Mistry’s name. Mr Mistry will work with Ratan Tata for one year before he takes over as chairman. His appointment was largely in recognition of his family’s 16.5% stake in Tata Sons.

The five-member panel appointed by the Tata Sons board to find a successor to the chairman has seen its mandate evolve over time. Tata Sons had said while forming the committee to find a successor that the group would require someone with experience and exposure to direct its growth amidst the challenges of the global economy.

In May, the group said the selection committee had interviewed several candidates, both internal and external, but no final decision had been taken. Since then, the consensus within has been that the group is not yet ready for an expatriate leader.

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COMMENTS

Ramesh Kapadia

5 years ago

Cyrus Mistry's choice as the successosr of the outgoing chairman Ratan Tata of the Tata empire is welcome by one and all,more importantly for his very young age and no doubt his very high qualifications from U.K,he has set his feet firmly on the Indian soil and therefore he will be a great asset not only to the Tata empire but also to the nation which only time will prove.We wish him a very bright future and a long life so that he can contribute to the development all round.

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