Pantaloon Retail India fashion divisions rejig raises concern
Proxy advisory firm InGovern has voted against the resolution for transfer of the fashion divisions of Future Ventures India (FVIL) and Pantaloon Retail India (PRIL) into Future Lifestyle Fashions (FLFL).
It cited dilution of direct voting rights of public shareholders of PRIL and FVIL in FLFL, same-share exchange consideration given to both equity and DVR shareholders of PRIL and disclosure and transparency issues related to material scheme-related documents.
As of December 31, 2012, promoters and promoter group entities hold 44.19% in PRIL (including DVR shares) and 38.25% in FVIL, respectively, whereas public shareholders hold 55.81% and 61.75% in PRIL and FVIL, respectively.
After the scheme of arrangement, promoter group entities and PRIL will together hold 51.33% in FLFL. The scheme has been structured through a partial demerger, resulting in PRIL holding 19.79% in the resulting entity (FLFL) and other promoter group entities holding 31.64%, indirectly giving them majority voting control in FLFL.
The partial demerger will result in public shareholders of PRIL and FVIL losing direct voting interests in the fashion business (FLFL), according to InGovern. “As a governance best practice, the scheme should have been structured as a full demerger with minority shareholders getting proportionate shareholding in FLFL business corresponding to their current shareholding in PRIL and FVIL,” stated an InGovern report.
PRIL DVR shares carry voting rights equal to 3/4th of PRIL equity shares. Further, the DVR share prices trade at a substantial discount (more than 30%) to the equity share price of PRIL.
However as per the scheme of arrangement, both equity and
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