DCM Shriram, Harish Bhasin's firm explore settlement options

The two parties were directed by the Company Law Board in May to explore a settlement

The age-old battle between DCM Shriram Industries Ltd and the late Harish Bhasin’s HB Stockholdings Ltd may soon head towards a resolution. The two parties were in talks for a settlement that would involve an exit by HB Stockholdings, which owns about 25 per cent in DCM. Bhasin’s camp had so far been reluctant to sell out even after its attempt to take over the company failed in 2007.

The two parties were directed by the Company Law Board (CLB) in May to explore a settlement. Talks were on since then, though differences remained on the valuation of an exit by HB Stockholdings. DCM was learnt to be open to purchase the 25 per cent stake at the current market price, which is just one-third of the Rs 125 per share paid by Bhasin in 2007.

CLB had suggested the two sides consider settlement through parting of ways. “Lawyers from both sides are exploring possibilities of a settlement. This will involve some legal technicalities,” said a person familiar with the development, on condition of anonymity.

LEGAL TANGLE

• October 2007: DCM Shriram promoters get board’s nod to issue warrants, aimed at raising their stake
   
• November 2007: HB Stockholdings makes open offer to acquire 22.8% in DCM Shriram. Resorts to market purchase too
   
• November 2007: HB moves to CLB to challenge warrants and related corporate issues
   
• December 2007: DCM Shriram moves Sebi saying open offer violates takeover code
   
• June 2008: Sebi strikes down DCM Shriram claims, allows open offer
   
• July 2008: Open offer is completed but HB gets only 1.87% shares
   
• May 2012: CLB asks both parties to work out a settlement

Tilak Dhar, chairman and managing director of DCM, declined to comment. HB Stockholdings’ Chairman Lalit Bhasin could not be contacted immediately for his response, but one of the company officials, who also did not want to be named, confirmed the talks. Lalit Bhasin is the son of Harish Bhasin.

The top management of both parties had met recently. “DCM promoters expressed desire to buy at current market price, while HB Stockholdings sought a premium to exit,” the person said.

HB Stockholdings argued the current market price was not reflective of the company’s fundamental value since a few hundred shares were being traded daily at the exchange and its price cannot be equated to the price for one-fourth stake. At BSE, DCM’s share price closed at Rs 38.5 on Friday.

Harish Bhasin, who was once a broker for the London-based non-resident Indian Swraj Paul, had made takeover attempts on DCM and Escorts in 1983. While the attempts were foiled due to government intervention, he was left with 12.87 per cent in DCM Shriram, one of the splinter groups formed after the split of DCM in 1990. In 2007, Harish Bhasin raised his stake to 25 per cent through open market purchase and an open offer. Alarmed at this, the promoters upped their stake from 32.54 per cent through an issue of warrants. Harish Bhasin then approached CLB claiming the move was against the interests of the minority shareholders.

While Tilak Dhar and his family have a majority stake of 43.62 per cent, Bhasin’s company with one-fourth stake has often foiled DCM’s special resolutions.

In August, the company could not pass a special resolution meant to double the salary for one of its key directors as it failed to secure a three-fourth majority. Sugar is DCM’s main business with its flagship unit located at Daurala (Meerut) in Uttar Pradesh. It also makes alcohol, chemicals, shipping containers and cotton yarn.