Hirco postpones EGM to rethink merger plans

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Mumbai: Hirco Plc, the investment vehicle of leading developer Hiranandani Constructions, which has come under severe criticism from a section of shareholders following its plans to acquire two group investment firms that own projects like township developments at Panvel (near Mumbai) and Chennai, is likely to reconsider it. Hirco has now said it needed more time to decide about its proposed merger with Hirco Developments and the Hiranandani Investment Co, citing ‘a variety of views’ among its shareholders. Hirco said it postponed its extraordinary general meeting (EGM) scheduled for January 16 until further written notice.

As per the proposed restructuring announced on December 18 in London, Hiranandani Group’s holding in Hirco would be increased to over 50% against about 20%, at present.

As per the recent statement issued by Hirco Plc, the board feels it essential that sufficient time is allowed for all views to be considered and discussions to be held with shareholders. The company has also said over the past week it had spoken to a number of shareholders, including hedge fund Laxey Partners Ltd, which holds a 10.1% stake in Hirco.

Laxey, in a letter to Hirco shareholders on January 7 had described the proposed merger as ‘shocking and ill-conceived’ and advised them to vote against the move at the now postponed EGM. Laxey said by agreeing to the merger, Hirco would be handing de-facto control to Hiranandani and its shareholders would incur a substantial dilution to their current net asset value.

“The proposed merger will transform Hirco from an investment company into a fully integrated development company with direct ownership of the underlying investment property assets,” the website said. It would also help in developing in-house expertise to design, develop and market them, with exclusivity and non-compete arrangements with the Hiranandani family, it said.

There are currently many foreign funds that own large stakes in Hirco, including UK’s Standard Life (13.11%), HSBC Holdings (10.13%), Laxey Partners (10.05%), Halbis Capital (7.84%), Fortress Investment (4.57%) and Lazard AM (4.57%). The Hiranandani group, which is unlisted in India, holds less than 20% of the invested entity. The merger proposal, once implemented would take the Hiranandani group holding to over 50%.