The demerger scheme involves the transfer of the international software division into Blue Star Infotech (BSIL) and the simultaneous reduction of 25 per cent of Blue Star's paid-up capital through the cancellation of 67.74 lakh shares of Rs 10 each.

The shareholders of Blue Star will be paid in the raio 1:4, that is one equity share of Rs 10 each in BSIL for every four equity shares held. BSIL will be also be permitted to use the Blue Star brand name and avail of the company's clientele without payment of any royalty.

The employee shareholders had pointed out that the market price of Blue Star had risen to about Rs 90 a share, the transfer ratio will lead to a total loss of Rs 54 crore in terms of market capitalisation for the shareholders.

This, the petition has alleged, is highly prejudicial to the interest of Blue Star shareholders.

The petition says that in the process, Blue Star is issuing Rs 10-shares of BSIL at a disguised premium of Rs 80 per share to the shareholders of Blue Star and thereby violating the Sebi guidelines which prohibits new companies without a diviend paying record from issuing shares at a premium.

The petition further alleges that the valuation report prepared by Ratan S Mama & Co to meet the earlier objections raised by the financial insitutions is full of internal inconsistencies. The valuation report while justifying the transfer of the infotech division at book value, the net asset value of division has been mistakenly shown as Rs 7.67 crore whereas the actual value was Rs 7.82.

``Thus even as per Ratan S Mama's own calcualtion, the NAV of the infotech division is Rs 7.67 crore whereas, as per the said scheme, the paid-up capital is to be reduced by 25 per cent as the infotech division has been valued at Rs 6.77 crore,'' says N Vasudevan, general secretary of the All India Blue Star Employees Federation.