SEBI re-opens lid on Saurashtra Cement preferential issue

Abhinaba Das

Mumbai, Dec 18: The Securities & Exchange Board of India (SEBI) on Friday took up the controversial preferential allotment of equity by Saurashtra Cement, and met representatives of the target company, Saurashtra Cement, and the raider, the Autoriders group.

At the hearing, the securities watchdog clarified that the injunction that Fawn Trading, a Saurashtra Cement group firm, had obtained from a Porbandar court, does not restrain it from holding hearings on the alleged violation as it is outside a civil court's jurisdiction.

This is in line with Section 50 of the SEBI Act, which states that the regulator will have the final say in matters where the act prevails, and the civil court will have no jurisdiction over such matters. The next hearing will be held on January 7.

It is believed that issues that came up for hearing at yesterday's meeting, which was attended by representatives of both companies, were:

Whether the issue and/or allotment of shares on March 11, March 27 and March 31 this yearwere in accordance with the SEBI takeover code, and if not what action should be taken.

Whether the seven entities to whom the allotments were made by the company -- Fawn Trading, Fern Trading, Pallor Trading, Willow Trading, Tejashree Trading, Denmark-based FL Smidth and Industrialisation Fund for Developing Countries -- were acting in concert with the promoters of the issuing company.

Whether the proceedings are independent of Regulation 38, 39, 40 and 41 of the takeover regulations, and if action can be initiated under Regulation 44 independently.

Whether the acquirer group can attend the hearing in view of the injunction by a Porbander Court.

The meeting centred around controversial allotments made by Saurashtra Cement earlier this year, and did not take up the latest tranche of preferential allotment of equity-linked instruments to foreign partners FL Smidth, and Industrialisation Fund.

Post-conversion, the stakes of the two partners will go up to 21.11 per cent and 7.21 percent, giving them a combined equity holding just less than 29 per cent, while the local promoters' stake, along with associates, will decline from 64.5 per cent to around 29.3 per cent.

At present, the Danish cement machinery major and Industrialisation Fund hold 6.85 per cent each in Saurashtra Cement. Two expatriate additional directors nominated by the foreign partners---Peter Gorn Christiansen and Martin M Kristensen---are already being drafted on as wholetime directors on the board.

The earlier allotment was contested by Autoriders, which had made an open offer for picking up a 20 per cent stake in the company, and is still awaiting SEBI clearance.

Top

Printer-friendly page