Gujarat NRE Coke Ltd (GNC), a producer of low-ash metallurgical coke, a raw material for steel, is facing threat of takeover from steel companies, said Arun Kumar Jagatramka, vice-chairman & managing director of the company.
Jagatramka was briefing reporters after the 21st annual general meeting (AGM) of the company here on Wednesday.
Jagatramka said the reason behind the threat was the short supply of metallurgical coke for the steel industry at a time when steel production is growing at a fast rate. ?For 300 million tonne of steel production, one will require the same amount of metallurgical coke. In future, the shortage will remain. So, steel companies may look forward to acquire coke companies.?
The promoters of Gujarat NRE Coke, which has a 41% stake, want to increase their voting rights in the company to thwart any takeover bid. Institutions hold another 41% of equity, while the public holds the rest. In the last three to four years, the promoters? stake has come down from 70% to 41%. At present, the promoters? voting rights is also 41%. Jagatramka, during the AGM, announced a differential voting rights (DVR) issue of Rs 120 crore for shareholders. This will provide them more control in the company. Jagatramka hoped that the DVR would raise the voting rights of the promoters from 41% to 51%.
The management has proposed to issue rights in the ratio of 1:300 to be priced at Rs 1,000 per share. The price is more than 15 times higher than Wednesday?s stock price. GNC was quoted Rs 66.50 at the BSE on Wednesday. As a rights issue, DVR provides higher voting rights as against normal equity share. ?Small shareholders are more interested in the equity return, dividend and bonus. They are not interested to have more control in the company. The promoters will subscribe all the unscribed DVRs,? Jagatramka added. GNC reported an income of Rs 919 crore in 2007-08 as against Rs 533 crore in the previous financial year. The net profit was Rs 173 crore compared with Rs 56 crore in the previous year.