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| Shareholder rebels against Raghav Bahl in film venture |
| Surajeet Das Gupta & Shuchi Bansal / New Delhi Jan 17, 2009, 00:35 IST |
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A bitter shareholder battle over poor financial performance has broken out over The Indian Film Company (IFC), acquirers and distributors of such blockbusters as Jab We Met, Welcome, Singh is Kinng and Ghajini.
The dispute involves a UK-based hedge fund, Altima Partners, and the company’s principal promoter Raghav Bahl, founder and largest shareholder of Network18, the broadcasting group which runs TV channels such as CNBC-TV18, Colors and Awaaz.
Altima India Master Fund Ltd , which owns 14.39 per cent in the company, has called an Extraordinary General Meeting (EGM) February 5 to oust Bahl, who owns 21.64 per cent in IFC, and Alok Verma from the directorship of the company, alleging poor financial performance and returns.
Altima has moved a resolution to replace the two directors with its own nominees — Atul Setia, a partner in the hedge fund, and Aashish Vyas, who runs his own investment company.
IFC is a specialist film investment company that started trading on UK’s Alternative Investment Market (AIM), a sub-market of the London Stock Exchange that allows smaller companies to float shares, in June 2007.
| WHAT THE FIGHT IS ALL ABOUT |
WHAT THE COMPANY DOES |
* IFC shares, which were listed the Alternative Investment Market at 100 pence in June 2007 have plummeted to 25.5 pence, a discount of 75 per cent on December 22, when the EGM was called
* In the first 18 months of operation (till September 30, 2008), IFC produced a net profit of £3.4 million (of which £2.0 million was earned in interest) on initial equity capital of £52.8 million (net of issue costs) |
* The Indian Film Company was listed on the Alternative Investment Market (AIM) Exchange in the UK in June 2007
* It was set up to make investments in both Indian films and films targeted at Indian audiences
* Raghav Bahl, controlling shareholder in Network 18, is IFC’s largest shareholder
* It has released hugely successful films such as Jab We Met, Welcome, Singh is Kinng, Golmaal Returns and Ghajini in the last one and a half years |
Altima India Master Fund, which is controlled by Altima Partners, has found support in Kelusa Master Fund, which owns 6.36 per cent and has decided to vote for the resolution. The two together control 20.75 per cent of the shareholding.
Both are also in talks with shareholders representing another 11 per cent shareholding to support the resolution.
The other major shareholders are Deutsche Bank with 10.55 per cent, HSBC Investments with 9.10 per cent, Viacom Brand Solution with 4.55 per cent and Blackrock Merrill Lynch with 6.18 per cent.
The crux of the dispute is that Altima has raised concerns about the company’s poor performance despite big box office hits, as a result of which the returns have been disappointing for investors.
IFC shares, said Altima, were listed on AIM at 100 pence and were trading at 25.5 pence, a discount of 75 per cent on December 22, when the EGM was called, and substantially below the company’s stated Net Asset Value (NAV) of 99.4 pence per share on September 30.
In a statement, Altima Partners’ PR agency Bankside Consultants said the shareholders were also concerned about the financial results the company published, which show that in the first 18 months of operation it produced a total net profit of £3.4 million (of which £2.0 million was earned in interest) on an initial equity capital of £52.8 million (net of issue costs).
On the basis of the available information, the statement added, “it is not possible for shareholders to draw any firm conclusions about the reasons for the low returns being achieved”.
The agency said over the last 12 months, the shareholders had had many meetings with senior IFC representatives, questioning them on the apparent disconnect between impressive box office performances and poor financial returns.
The shareholders, however, made it clear that they had no interest in taking control of the company.
Bahl did not respond to Business Standard’s emailed queries. In a text message he said he was not authorised to speak and said the company’s PR agency could be contacted.
Alex Walters, director of IFC’s London-based PR agency Pelham Public Relations, said: “We cannot comment on market speculation and if we have to, we will make an announcement through the London Stock Exchange.”
Asked whether Altima Partners will have support for the resolution, Pelham said: “If they claim they have support, it has to manifest itself in the EGM.”
Meanwhile, in a letter to shareholders dated January 12 on the EGM call by Altima, IFC said Altima has indicated that it would like the company to consider a share buy-back programme or to distribute excess cash that it may have as special dividend. However, it has not given any formal recommendation. A buyback or special dividend, IFC said, would limit the company's growth potential.
IFC’s letter has also told shareholders that the company has been able to meet its commitment to shareholders and invest 100 per cent of the money it had raised within 18 months of listing, and has performed well financially also.
Asking shareholders to reject the resolution the letter said the proposed Altima directors have no specialist knowledge, that the current boad members might all resign if the resolution is pushed through, disrupting the business of the company and IFC might lose credibility in the market.
Altima’s PR agency said the new directors will seek the appointment of an appropriate independent firm to conduct a comprehensive review of the business, including an assessment of past performance and future strategy. They will also ask for a review of the company’s accounting policies including capital adequacy, the potential use of leverage and dividend policy, the agency said.
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