The issue of whether Indian Aluminium Co Ltd (Indal), currently the target of a takeover attempt by Sterlite Industries, will have to be taken private after the open offer has now come to the forefront with the Calcutta Stock Exchange (CSE) deciding to ask the former to disclose its shareholding pattern to find out whether it conforms to the requirements of the listing agreement.
CSE has decided to ask Indal to disclose its shareholding base under clause 45 of the listing agreement. While the move of the exchange is based on a government guideline on minimum shareholding with the public, later reiterated by the Securities and Exchange Board of India (Sebi), the market regulators takeover regulations also provide the acquirer with the clear option of taking the target company private in case the public shareholding in the target company is less than 10 per cent.
According to the recommendation of the high powered committee on stock exchanges, government circular number F14 (2/SE/85) dated September 23,1985, a decision has been taken that a listed company will be delisted after giving six months notice if the number of public shareholders falls below five for every Rs one lakh of capital offered to the public or if the public shareholding falls below 50 per cent of the public offer. Sebi has also stipulated similar requirements.
The circular also specifies that these requirements are not applicable if the infractions are due to holding of the public financial institutions (FIs).
However, Indal sees no such possibilities. Indal is under no threat of being delisted, asserts Vijaya Sampath, vice president and company secretary, Indal. Companies are required to conform to these norms only when they are coming out with public issues, she added.
However, according to section 21(3) of the Sebi takeover code, following a public offer, the acquirer has the option of taking the target company private if the public shareholding falls under 10 per cent or if the target company already has less than 10 per cent public shareholding (like Indal).
The code adds that the acquirer may also have the option of off-loading a part of his post-offer stake in order that the company conforms to the public shareholding norms.
Indals share capital stands at Rs 71 crore while the number of shareholders is 30,321, according to the annual report of 1996-97. The government stipulation requires Indal to have 35,500 shareholders.
However, the company, which already seems to be failing to fulfil the criteria, can be given the benefit of doubt due to the 36 per cent holding by the FIs.
But against the backdrop of the open offer, first by Sterlite and then a counter offer by Alcan for a 20 per cent equity in Indal, there is a possibility of the FIs offloading their stake. In that case, with the number of public shareholders further coming down along with the holding of the FIs, the stipulation then becomes fully applicable to Indal.
Industry sources said that there are a number of companies which do not conform to this requirement but the stock exchanges are not taking necessary steps in this regard. For example, the Calcutta-based company, Kusum Products Ltd, with a capital base of Rs 4 crore and less than 1000 shareholders, has not yet been delisted from the CSE.
Meanwhile, Geeta Mukherjee, Member of Parliament, has written to finance minister Yashwant Sinha requesting him to recommend to the financial institutions not to offload their stake in Indal to Sterlite Industries (India) Ltd, according to a press release.
Mukherjee pointed out that Indal being a stable and profitable company with high exports, there is no reason to sell its shares. All the employees and the unions of Indal, irrespective of political affiliations, are against the takeover offer. Considering the industrial track record of Sterlite, its presence in the company will affect Indals 8000 employees and 1,00,000 people indirectly dependent on Indal in more than six states.
