Court Clears Compromise On Lever Preferential Allotment

The Mumbai high court yesterday cleared the deal between Hindustan Lever, Ponds India Ltd and Reserve Bank of India (RBI) to solve the four-year-old preferential allotment share wrangle. Consequently, the petitions filed by the two on this issue have also been disposed of.

The deal now clears the way for Ponds India to make a fresh application to the Reserve Bank of India to make a preferential allotment of 9.31 lakh shares to Unilever to hike the Anglo-Dutch companys stake from 47.7 per cent to 51 per cent. Unilever will pick up Ponds shares at Rs 620 per share.

A division bench of the Mumbai high court yesterday allowed Unilever Plc to subscribe to Hindustan Levers preferential shares at Rs 357 per share and not at Rs 700 per share as insisted upon by the Reserve Bank of India.

 

On the major bourses yesterday, the Hindustan Lever scrip continued to move up on buying support. The scrip touched a 52-week high of Rs 1,361.75 on the Bombay Stock Exchange, before closing at Rs 1335.75, a gain of Rs 35.50 over the previous close of Rs 1300.25. Nearly 2.86 lakh shares worth Rs 3.79 crore changed hands at the Bombay Stock Exchange yesterday.

On the National Stock Exchange, the scrip touched a 52-week high of Rs 1,365 before ending the day at Rs 1352.05, a gain of Rs 44 over the previous close.

In an interim arrangement in 1994, the court had allowed Unilever to subscribe to Hindustan Lever shares at Rs 105 per share till a final solution to the issue was found. Unilever had raised its stake in Hind Lever from 49.9 per cent to 51 per cent following the interim order.

The final decision sets at rest the controversy over a host of multinationals increasing their stakes in Indian subsidiaries at throwaway prices.

The preferential share allotment in Stepan Chemicals, since renamed to Hind Lever Chemicals, has also been withdrawn as following the restructuring of businesses, Unilever has decided not to pursue it. At present, Hindustan Lever holds 59 per cent in the company. The deal ends a four-year stand-off between the Unilever group in India and the Reserve Bank of India over the pricing of the preferential share issue.

Unilever will need to pay Rs 57 crore to pick up the extra Ponds stake, while in Hindustan Lever, the total deal will be worth Rs 106.52 crore. Unilever already has Rs 177 crore in an escrow account, a part of which will be used to pay Hind Lever. The rest will be repatriated.

Lever sources said the Ponds board will meet separately to consider a fresh issue of preferential shares to its parent.