SC: Sebi will decide OSIL mgmt issue

Written by Indu Bhan | Indu Bhan | New Delhi | Updated: May 8 2012, 06:35am hrs
In a three-way takeover battle over the management control of loss-making Orissa Sponge Iron & Steel (Osil), the Supreme Court on Monday authorised market regulator Sebi to decide whether conversion of 35 lakh warrants into equity shares could result in transfer of management of the Bhubaneswar-based company to Neeraj Singal-led Bhushan Energy (BEL).

The Bhushan Group, one of the suitors of OSIL, is in tussle with PK Mohanty-led TRFI Investment, Monnet Ispat and Bhusan Power and Steel, promoted by Neeraj's elder brother Sanjay Singal, over the management control of Osil. Promoter Mohanty family, along with Monnet Ispat, hold more than 65% shares in Osil.

A bench headed by chief justice SH Kapadia said: "We are of the view that Sebi will be the authority to decide the said question." This is being done on the basis of the consent of the parties to the dispute.

The BEL counsel also informed the bench that it had given an undertaking in the apex court that in terms of the resolution dated May 1, the company will make an additional open offer of 20% for Osil under the Sebi Takeover Code, irrespective of any decision with regard to conversion of warrants. BEL had earlier acquired 15% in Osil.

Companies raise funds by issuing warrants, usually part of financial instruments like bonds, which can be converted into shares at pre-determined price.

The apex court had last year dismissed BEL's plea seeking a direction to Osil to convert its 35 lakh warrants into equity shares. It said there was no substance in the BEL's claims that there was suppression of minority shareholders by Osil by not converting the Neeraj Singal group firms warrant into equity shares.

The Bhushan group had acquired 35 lakh warrants from Chandra family of Unitech promoters in its bid to acquire Osil. However, warrants were not converted into equity shares as Osil felt that if Bhushan group is allowed to do so, its holding will go up to around 26%, which would result in change of management and control of Osil.

However, BEL said that its shareholding pursuant to conversion would go up to 26.61% of the total shareholding of Osil as against 53.29% of the promoter group, thus conversion of 25 lakh warrants cannot lead to change in management control. BEL said that it had exercised its right of conversion of the warrants earlier and had offered the requisite consideration of R54.13 crore to OSIL.