Deepak Fertilisers seeks support from MCFL directors on open offer

Written by PTI | New Delhi | Updated: Sep 29 2014, 01:08am hrs
In a bid to take control of the Vijay Mallaya's fertiliser firm MCFL, Deepak Fertilisers has sought support from MCFL's independent directors on its open offer saying that rival bidder Zuari's win will help "wilful defaulter" Mallya continue to head the firm.

Deepak Feriliser in the letter has said if Zuari's open offer succeeds then Mallya a 'wilful defaulter' will continue to be the chairman of the MCFL for five years and therefore it will be difficult for the company to access capital markets and avail loans.

The two-way battle between Deepak Fertilisers and Zuari Group for control of MCFL is further intensified. After both Deepak Fertilisers and Zuari Group have raised their open offers for acquisition of additional 26 per cent stake to Rs 288.41 crore and Rs 251.44 crore respectively.

Meanwhile, beleaguered carrier Kingfisher Airlines yesterday said it has secured a stay from the Calcutta High Court on United Bank of India declaring the airline and its directors, including promoter Vijay Mallya, as wilful defaulters.

As per the SEBI regulations, the Board of Directors of the targeted company (MCFL) need to constitute a committee of independent directors to provide "reasoned recommendations" on the open offers.

The letter added that as per public statement of the Zuari open offer and an agreement entered between Adventz Group and UB Group, both have agreed that Mallya, who has been declared a 'wilful defaulter' by the Union Bank of India, will continue as Chairman of the company at least for five years.

"A 'Wilful Defaulter' will be able to perpetuate control over the company," the letter added.

It also pointed out that under him the company will find it extremely difficult to access capital markets.

Quoting the RBI circular on wilful defaulters, the letter said, "...in order to prevent access to the capital markets by the wilful defaulters, a copy of the wilful defaulters (non-suit) and list of wilful defaulters (suit filed by accounts) are forwarded to SEBI by the RBI and Credit Information Bureau (India) Ltd respectively."

Consequently, the company will find it extremely difficult to access capital markets, the letter added.

The same circular of RBI also provides that no additional facilities should be granted by any bank or financial institution to the listed wilful defaulters, it added.

The letter has been written on behalf of Deepak Fertilisers and Petrochemicals Ltd (DFPCL) by its subsidiary SCM Solifert's Director Somnath Patil, who is also CFO of DFPCL.

It has been addressed to MCFL's Managing Director Deepak Anand, Whole Time Director Prabhakar Rao Kanthavara and to two Independent Directors Pratap Narayan and Srinivasulu Reddy Magunta.

Deepak Fertilisers had launched open offer to buy additional 26 per cent stake in MCFL in April this year at Rs 63 per share following which Zuari and UB group joined hands in May and launched open offer for same number of shares at Rs 68.55 per scrip.

The battle for control of Mangalore Chemicals & Fertilizers heated up again after the Competition Commission of India (CCI) cleared an open offer launched by Zuari Group firms on September 4. The CCI had cleared the open offer of Deepak Fertilisers on August 19.

After this, both parties have announced that the open offer will start on October 1 and close on October 17. The last date for upward revision of the offer size or price was September 25.

At present, Deepak Fertiliser holds 25.31 per cent stake in MCFL, whereas consortium of Zuari group companies have 16.43 per cent stake and Vijay Mallaya's UB group 21.97 per cent stake.

The Zuari group along with Vijay Mallaya's UB group needs about 12 per cent additional stake in MCFL to take control of the company while at the same time Deepak Fertilisers would require another about 25 per cent stake in the MCFL.

Zuari Agro Chemicals had also entered into an agreement this year to use Mangalore Chemicalss facilities for contract production.

The battle for MCFL between Deepak Fertilisers and Zuari Group was triggered in April 2013 when the latter bought about 10 per cent stake in MCFL through open market.

Later, Deepak Fertilisers acquired 24.46 per cent stake in MCFL in one go in July 2013. After this, Zuari group had increased its stake to 16.43 per cent in the same month.