The Appellate Authority in the Ministry of Finance has directed Sterlite Industries to pay in cash Rs 221 per share to those Indal shareholders who have lodged their shares with it. The impact of this decision on Sterlite's finances will not be anything severe as approximately 9.9 lakh shares were lodged. Therefore, the company would have to pay out a maximum of Rs 25 crore (including interest).

The judgement, however, raises more queries than it answers. SEBI's contention regarding the resolution for preferential allotment has been rejected. The Board had argued that the enabling resolution passed during Sterlite's EGM held on June 12 is sufficient both under the Guidelines on Preferential Allotment and the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (the Code).

Yet the order rewrites the contract by changing the mode of consideration from cash and OCPS to purely cash payment. If this is strange, stranger is the contention that the Sterlitemanagement should have taken a poll. It is not clear, why in the first place a poll should be demanded for a preferential allotment.

Sterlite was not the first company to propose a preferential allotment. In none of the resolutions on preferential allotment u/s 81(1A) of the Companies Act, is the management barred from voting for the simple reason that it is not required. So the contention that the Sterlite management's vote on the resolution was reason for rejection appears to be incorrect. In any case, neither the Companies Act, 1956, nor the SEBI guidelines on Preferential Allotment nor the Code requires that management should not vote on the resolution or demand a poll.

The point is that had a poll been conducted, the verdict would have been no different because 98 per cent of votes at the EGM were by the management. Had it not voted on the issue, probably the contention would have been that the meeting did not have fair representation of shareholders.

Incidentally, in the Saurashtra Cements -Autoriders affair, SEBI has asked the promoters of Saurashtra Cements to make an open offer at the price at which preferential allotment was made to the promoters. The offer was neither in accordance with the SEBI Guidelines nor the Code. In Sterlite's case, SEBI seems to have not only insisted on exactly the opposite but also changed the mode of payment which was upheld by the Appellate Authority.

Ford Small Car

It is probably the 1.15 lakh bookings received for the Tata Indica that has spurred Ford to cement its small car plans for Indian roads. The success of the Indica heralds the prospects of things to come specially in the lucrative small car segment -- so far Maruti Udyog's uncontested domain.

Interestingly, Ford's foray into the small car world of Maruti and now Telco, does not seem misplaced. Largely because the mid-size car segment in India has been a crowded one way street with more than 13 manufacturers competing for a piece of the pie. Besides, the international stable from Fordalready boasts of variants like the Ford Ka and the Fiesta, which would have to be marginally modified for their tryst with Indian roads.

More importantly, analysts state that the "pricing" of the Hyundai Santro and the Daewoo Matiz, have left both these car makers out of the race - atleast in the small car segment. Thus competition is limited only to the Maruti 800 and the Tata Indica. If with a high indigenisation content, Ford were to meet the price barrier for the small car, the American car maker would be in a position to partake of the spoils.

But in all this melee, it is probably for the first time since the days of the ubiquitous Ambassador and the Fiat, that car manufacturers are baiting their hooks with aggressive pricing, brand positioning, dealer incentives and a strong after service network -- all of which translate to "true value for money" for the consumer. The days of the consumer as king have finally arrived.

EMCEE (with contributions from Urmik Chhaya & PercyDubash)