The group is irked by the fact that Sebi is taking its own time to decide on the "controversial" preferential allotment of equity made by the promoters of the target company to themselves. The group feels that the delay has made their acquisition of Saurashtra Cements unviable at the March 19 offer price of Rs 75 per share because the fortunes of the company have eroded in the interim period.

The Autoriders group, which had made an open offer for a 20 per cent stake, has written to Sebi seeking approval for withdrawal of the escrow account deposit of Rs 4.5 crore, deposited as per the terms of the takeover code, till the issue of the preferential allotment is resolved. The securities watchdog, however, is yet to take a view on the proposal and has decided to seek legal opinion on the matter. "In view ofthe uncertainties regarding decisions about the offer, we request you to allow our clients to withdraw the escrow amount, pending resolution of the various issues raised in this regard," says a letter, dated July 10, addressed to Sebi chairman DR Mehta by the merchant bankers of the Autoriders group.

The company says that due to the low interest yield on locked-in escrow funds, and thanks to the delay in sorting out matters at the Sebi end, its own bottomline is being affected "in a very adverse manner".

The politically-influential Patels, promoters of the Autoriders group, are additionally known to be exploring legal options on whether they can take Sebi to court for delays in taking crucial decisions on the open offer.

Autoriders has said in its letter to the Sebi chief that the delay has already made the open offer unviable. "I am sure you will appreciate that an acquisition decision is extremely sensitive to the timing of such decision and the concurrent action. More than three months have elapsedsince our clients had made the announcement for the open offer.

In the interim period the fortunes of the company have declined and owing to increasing acquisition cost, it is hardly viable any more," the letter says. Saurashtra Cements had issued 80 lakh shares to its promoters, the Mehtas, on March 11, a week ahead of the open offer, while two tranches of allotment were made after the open offer. On March 27, the company allotted 40 lakh shares to its promoters, and finally a chunk of 38 lakh shares was allotted to international cement major FL Smidth and Industrialisation Fund on March 31.

Even the details of the allotments made before the open offer were not duly furnished to Sebi and the Bombay Stock Exchange, and the Autoriders group formally requested Sebi to revoke the allotments made.

More importantly, the issue of 120 lakh-odd shares issued to the Saurashtra Cements promoters on a preferential basis were partly-paid, and the Mehtas paid a price of Rs 3 per share, as against an issue price ofRs 30 (with a premium of Rs 20).

Autoriders officials had meetings with the Sebi chairman on April 3 and April 21, and Sebi had then said that it was seeking legal opinion on the matter. "During the meeting you stated that Sebi was seeking legal opinion on its own and assured us that Sebi will take expeditious action on the receipt of the opinion during the first week of May, 1998. However, more than two months later, we still have not received any communication from the board indicating the course of action taken or envisaged by the board in these matters," the letter states.

INSIGHT

The Autoriders group has little option but to withdraw funds from the escrow account. If preferential offers based on enabling resolutions are allowed, the takeover code will serve little purpose. For lack of Sebi's ability to understand its own regulations, the acquirer can't be punished. One fails to understand why Sebi is wary of operating by the "spirit" of the code as it did when Sterlite made a conditionaloffer (permitted by the code) to acquire a 20 per cent stake in Indal.