Minority shareholders challenge India Cements merger plan at NCLAT

Delhi-based Aggarwals who own shares in subsidiary Trinetra cements have alleged undervaluation

Minority shareholders of Trinetra Cements, a subsidiary of Chennai-based Cements major India Cements, have moved the National Company Law Appellate Tribunal(NCLAT), challenging the plan to merge the two companies. 

Delhi-based Arvind Aggarwal and Ritu Aggarwal, who own around 2.4 per cent shares in Rajasthan-based Trinetra, have alleged various deficiencies in the merger scheme sanctioned by the  Chennai bench of National Company Law Tribunal(NCLT) in April. 

The petitioners argue that the share exchange ratio of 2:9 was incorrect since it undervalued Trinetra Cements by about Rs 500 crore. 

They have also alleged that the NCLT did not give due consideration to the objections raised by them before the approval of the scheme.

After hearing the parties, the NCLAT has issued notices to the companies and the registrar of companies, Chennai.

Posting the matter to July 7, the body did not pass any interim order  “ If the Appellant provides e-mail addresses of rest of the Respondents, let notices be also issued through e-mail. Post the matter on 7th July, 2017. In the meantime, it will be open to Respondents to file reply by 1St July 2017 and Appellant may file rejoinder within 3 days thereof,” the appellate body said in an order in late May.

Business Standard had written to India Cements spokesperson seeking comments on the development last Thursday.

After seeking time initially, the spokesperson did not offer any comment, but the company acknowledged the suit in a regulatory filing announcing the issue of shares as per merger plan, released on Monday.

The filing said “The said persons have filed an appeal before the National Company Law Appellate Tribunal , New Delhi in which the tribunal after hearing both sides declined to pass any interim order and has posted the matter on July 7. The company is defending the proceedings.” 

According to the shareholders, the valuation and fairness opinion were not carried out independently since both the valuer and Merchant Banker providing the fairness opinion were working in tandem allegedly in complete defiance of Sebi circulars. "The Hon’ble Tribunal did not appreciate that the same is impermissible in law... Both the valuer and the merchant banker are required to work independently," said Aggarwals' plea to NCLAT.

It also raised issues around non-submission latest accounts and non -consideration of Trinetra's surplus land holding. 

 "The Hon’ble Tribunal did not appreciate that it is an admitted position that Capital Advances given by the Trinetra Cements Ltd. have not been considered by the valuer which has resulted in an approximate undervaluation of more than  Rs 500 Crore," the petition further alleged.

In 2015, India Cements floated the plan to merge two its subsidiaries Trinetra Cements and Trishul Concrete products with itself citing better utilisation of resources and enhanced shareholder value. 

Trinetra's minority shareholders have been objecting the move since and have written to the regulators including Sebi. A proxy advisory firm had also criticized India Cements for not offering e-voting during one of court convened meetings.

After going through due processes, the plan was approved by NCLT, Chennai in April.