Fresh Twist To United Western Bank Tale

The issue of minority shareholders seeking representation on the United Western Bank's (UWB) board has taken a new twist with the Satara-based old private sector bank today filing a winding up petition in the Bombay High Court against Emtex Industries (India) Ltd for defaulting on loan repayment.

Promoters of Emtex, the Makharia group, along with Sicom had staked a claim to four seats on the bank's board. The account turned sticky in September, S T Gadre, managing director and chief executive officer of UWB said today.

In a parallel development, the bank--which had a three year strategic alliance with Sicom that ended on September 3--is willing to concede the demand for board representation made by the state industrial finance agency. "We propose to constitute a task force to go into the details of synergy between UWB and Sicom," he said.

 

UWB has also sought the intervention of the Reserve Bank of India to freeze the voting rights of the Makharia group as it has not received the apex bank's approval for holding more than five per cent share of the bank. Under the Banking Regulation Act, any entity having a stake holding in excess of five per cent has to seek the RBI's approval.

UWB chief Gadre has dubbed the move by the group of 18 minority shareholders, who together hold 24 per cent stake in the bank, to seek board seats as an attempt to takeover the bank and destabilise its smooth running.

As per Emtex's annual report for 1999-2000, it's total exposure to banks and institutions was pegged at Rs 127 crore. The Industrial Development Bank of India has extended a term loan of Rs 28 crore while the balance Rs 99 crore is working capital loan, which has been provided by a consortium of five banks led by UWB, a bank official said.

Shivprakash Makharia, managing director of Emtex, said he was not aware of the winding up petition. "As on October 31, Emtex's account was a standard one. We have an exposure of Rs 33 crore to the consortium. Suddenly UWB has called back the loan. The account was operational until four days ago," Makharai said.

Currently, Makharias and associates hold around 14.5 per cent in UWB, Sicom, the state industrial finance agency, 9.5 per cent, financial Institutions lead by IDBI around five per cent and public 70 per cent.

Meanwhile, the Company Law Board (CLB) will hear UWB on November 13 on the issue of board representation. According to the bank brass it is a professionally-managed profitable bank and its attempts to reward its shareholders with a 5:1 bonus issue and a post bonus rights issue (in the ratio of 3:2) were thwarted by the group of minority shareholders at the extra-ordinary general meeting held on in August.

Gadre pointed out that at the August meeting resolutions relating to increase in authorised capital, issue of bonus shares and capitalisation of profits and reserves were passed with requisite majority while the disgruntled shareholders held a separate meeting and approached the CLB in September to restrain the bank from issuance of rights shares.

On September 21, the CLB passed an ex parte order restraining the UWB up to January 15, 2001, from issue of further shares.

Gadre said the bank announced the bonus issue on May 29. As per the Securities and Exchange Board of India (Sebi) guidelines, bonus issue once announced has to be effected within six months. The deadline expires on November 29.