e-Serve minority shareholders protest Citi buyback price

Minority shareholders of e-Serve International, in its extra ordinary general meeting held yesterday, protested the offer price of Rs 800 per share quoted by Citicorp Overseas Investment Ltd (COIC) to buy back the share and delist the company from the National Stock Exchange and the Bombay Stock Exchange.

Most shareholders present in the meeting argued that the offer price of Rs 800 is a raw deal, considering the stock touched a 52 week high of Rs 839 in intra day today and closed at Rs 818 at the BSE. Investors said, they would be comfortable in the price band of Rs 1,000-1,100 as exit option.

"Given their business momentum in the Indian BPO sector (where e-Serve is a largest seat capacity listed company leader), it is imperative that the existing shareholder should be suitably rewarded for the patience they have showed over the last eight years," said investors.

"e-Serve International has the potential to become a benchmark stock in the next couple of years and the present buyback will deprive us to benefit from the future growth which expected in the BPO sector," argued a shareholder.

Ramesh Damani, a leading BSE broker and a shareholder of e-Serve International at the EGM said, "We are disappointed at the dividend pay out of Rs 5 when the company is sitting on considerable cash and the existing shareholdres are not going to benefit from the future growth after the company is delisted."

The company for financial year 2003-04 announced a dividend of Rs 5 per share and had paid dividend of Rs 2.5 in the previous year.

Ganesh Shanbag, an independent financial adviser and a long term investors in e-Serve said, " Citicorp earlier had bought back the shares of i-flex solutions from the shareholder at a price of Rs 400, subsequent to which they have declared two bonus issues both in the ratio of 1:1 and also a split in the last five years."

Now e-Serve is in a position to issue bonus shares and delisting will deprive the investors the benefit of future growth.

Sunil Nayar, director, e-Serve and representative of COIC said, "The buy back offer is voluntary to the existing investors and the floor price of Rs 800 was discovered in consultation with the merchant bankers and as per the Securities and Exchange Board delisting guidelines. The stock provides a 27 per cent premium to the closing price of Rs 620, the day the buy back offer was announced on April 8.

However, the shareholders argued that when the stock is currently trading above Rs 800 at the BSE, the offer price of Rs 800 is not a fair deal to the small investors.

Earlier this month, promoter Citigroup said it would buy out public share holding in e-Serve and raise its ownership to 100 per cent from the current 44.4 per cent, through a share holder-led reverse book building process.

Fund house like Franklin Templeton, Alliance Capital, Kotak Mahindra and Prudential ICICI are current stake holders in the company. Even FIIs hold 3.63 per cent in e-Serve as of March end.