India Foils’ minority shareholders get a raw merger deal

Ess Dee Aluminium’s proposed merger scheme is stacked heavily against India Foils’ minority shareholders and the recent spurt in trading volumes of India Foils is highly dubious

The minority shareholders of Kolkata-based aluminium foils maker India Foils have been given a raw deal under the proposed merger scheme with packaging solutions provider Ess Dee Aluminium Ltd. In what appears to be another case of absolute apathy and discrimination against minority shareholders, the management of Ess Dee Aluminium has put a ridiculously low valuation on India Foils that will leave these shareholders high and dry.

Apparently, Ess Dee Aluminium is pushing for a share-swap ratio of 1,285:1 that means shareholders of India Foils will have to surrender their 1285 shares to get a single share of Ess Dee. When the same is calculated with Ess Dee’s current share price of Rs400 per share, the value of each India Foils share comes out to be a paltry 31 paise only. That too when during the last eight months, India Foils’ shares have been trading between Rs12-Rs16 per share.

According to an extra-ordinary general meeting (EGM) notice sent to shareholders, Mumbai-based chartered accountant firm MP Chitale and Co did the valuation for the merger.

In November 2008, Ess Dee bought a majority stake in India Foils for Rs130 crore from Anil Agrawal led Vedanta group as part of the rehabilitation scheme approved by the Board for Industrial & Financial Reconstruction (BIFR). Now Ess Dee wants to merge India Foils with itself and has proposed the merger scheme with 1285:1 ratio. Since Ess Dee promoters already hold 89.4% stake in India Folis, they are ‘forcing’ the merger on other minority shareholders, said an investor.

According to Hirjee Nagarwalla, a shareholder, he had held shares of India Foils for a long period. “When Ess Dee took controlling stake in India Foils, no open offer was made to the public. Then in 2009, Ess Dee announced that it would merge India Foils with itself. About a month ago, shareholders were notified that the merger ratio has been fixed at 1285:1. In effect, the value of India Foils has been put at 31 paise, when its average traded price for last one year is Rs14. Minority shareholders like me would be left with nothing,” he said.

An email sent to Ess Dee Aluminium officials remained unanswered till the time of writing the story.

India Foils’ shares last traded on the Bombay Stock Exchange on 19 September 2008 at Rs12.95. Before its last trading, the 52-week average share price of India Foils was Rs10.31 per share at the lowest end and Rs30.05 at the highest end. The shares remained untraded till its relisting on 19 June 2009 and on that day it rose to a high of Rs23.95 and a low of Rs17.41. On Wednesday, India Foils closed at Rs7.50, down 3.97% on the Bombay Stock Exchange (BSE), while the benchmark Sensex closed 1.36% higher at 17,000 points.

The minority shareholders also brought to light the heavy trading being carried out in India Foils’ shares. In middle of January 2010, India Foils’ shares surged to Rs20 on heavy volumes. Soon after that, the share witnessed a freefall. The share volumes have seen a sudden spurt, compared to its average volumes over the last few months. This sudden rise and fall in the share price, supported by higher volumes, suggests foul play.

Indeed, if Ess Dee goes ahead and completes the merger with India Foils at the proposed valuation, it will put minority shareholders at a loss. If it decides not to carry out the merger or the swap ratio is altered, then the trading in India Foils’ shares should raise some eyebrows. People who have been buying at low prices will benefit. Either way, the on-goings in this case demand careful scrutiny by the regulator.
 

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    COMMENTS

    BINOD DALMIA

    10 years ago

    WE HAD BOUGHT SHARES OF INDIA FOIL THINKING IT IS TAKEN BY A GOOD GROUP AND BOGHT AROUNG 30000 SHARS IN DIFRENT FOLIO AT A AVARAGE PRICE OF RS.6 SAY RS.2LACS BUT THE GOOD GROUP HAD CEATED AND SEBI ALSO INGNORED THE MATER AND OUR VULUE VANISHED AND OUR FULL CAPITAL WIPED OUT THE LAST QUOTATION WHEN THE CO WAS DELISTED WAS ABOVE RS.5 HOW CO CAN GIVE A SHAREHOLDER ONLY 30PAISE HOW CO INTENTION ALOW TO CHEAT PUBLIC AS HE IS ALSO GO TO SKY EMPTY HANDED AND HOW SEBI ALOW WITHOUT SEING ANY FACTS & FIGURE

    Bidhan Chandra Maiti

    10 years ago

    I have 250 shares of Indian foil, but till date i did not rtecieved any amount or any share of ESS, please suggest

    govind prasad soni BUNDI

    10 years ago

    I HAVE 7000 SHARE OF INDIA FOIL IT AROUND 52000/- BUT NOW ITS VALUE IS ONLY 2000/- A CHEATING HAS BEEN DONE WITH MINORITY SHARE HOLDERS

    Manoj

    10 years ago

    Dear Sir

    I have 380 india foils share but till date i have no any activity in this share so pls tell me what i do bcz ess dee ratio is 1285:1 and i have only 380.

    PARDEEP

    10 years ago

    I have 1000 shares of Indian foil, but till date i did not rtecieved any amount or any share of ESS, its totaly rediucalsoily done by india foil to shake hands with ESS , like this attempt demoralize the retail investor sentiment.

    REPLY

    Jimit

    In Reply to PARDEEP 10 years ago

    its same here Pardeep .. i think this thing should be pointed out .. Even i have not received any letter or so about the merger ratio or so...

    unknown

    10 years ago

    SEBI playing a dirty role among investor and company to cheat peoples it's really a dirty game of INDIA FOILS and ESS DEE. Fucking SEBI will be fucked by someone very soon

    Viji

    10 years ago

    India Foils is a Fraud company cheated the share holders by joining the hands with Ess Dee Aluminium

    PRAVEEN JAIN

    10 years ago

    I have 800 share of India Foils in a avrege price of Rs.12/- now I have not received any share in ESS DEE and not any payment received
    i'm shocked to know that the merger imect on India foils share holder is 0.32 paise.
    This is completly a big "LOOT" supported by SEBI and Indian Govt.
    At lease they give payment according to last market price.

    BINOD DALMIA

    1 decade ago

    Co like vedant and ess dee all think they will take away all the money with them at heven they forget they are ceating people and ceated money will never be bring peach in your life

    BINOD DALMIA

    1 decade ago

    where is sebi they are with rich person not with minority when small investor looted by major co like RNRL/RPOWER, INDIAFOIL/ESSDEE ALLUMINUM where sebi protect share holder it was better not give any share take all the share of india foil free of cost

    DILIP PATEL

    1 decade ago

    i have 5000 thousnad share purches the indiafoils rs 9 and this share are merge the ess dee and share merge only 3 share adn any other share allote
    ESS DEE COMPYNE ULOO BANA RAHI KYA

    srinivasan

    1 decade ago

    our client having ifl shares. They will allotted ess dee alum ltd. till now we are not received any shares ess dee alum instead of ifl.
    when will be issued this shares
    kindly send me reply.

    Asif

    1 decade ago

    This is another case of RNRL/Rpower but here, look at these EssDee they have broken all the records, swipe ratio 1:1258 what about the people who have invested at all levels in India foils.

    Please some one file a case against the EssDee and India foils and what government and SEBI is doing, these rich people are looting the public money.

    Shoeb Kadri

    1 decade ago

    Excellent indepth analysis,I am simply blessed to recv such articles from Moneylife...A true eye opener (Keep it up!!!)

    Harsh Sharma

    1 decade ago

    in my view what sanket has presented is an inappropriate way of analysing the matter. Whenever a company is in BIFR the SWAP ratio is decided by BIFR itself and no company can influence the valuation part of it.

    At the same time how reasonable its for someone holding shares of India Foils a sick company and assuming that it will become a gold mine overnight and start giving you 14 times value over its face value of Re. 1 when we know a BIFR company is a negative networth company.

    Just for benefit of some greedy shareholders if any responsible corporate stop reviving a sick company how unfortunate it can be for our country in general and the local area where this company has started giving lot of employment generation potential to the locals

    I belive the media in India feeds the citizens in their own way which quite often in not correct

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