Ruias Garner 17% Stake In Sterling Computers

The Ruias of the Essar group have mopped up nearly 17 per cent of Sterling Computers (SCL) equity at about Rs 9.04 crore from the public. This was done through an open offer made by Essar Investments last month. Essar Investments is the family-owned holding company of the group.

With the near-successful completion of the open offer, Essar Investments now controls about 97 per cent, against an 80 per cent stake before the offer, in SCL. The latter owns 51 per cent equity of Sterling Cellular (the Delhi cellular licensee), which in turn controls 80 per cent of Aircell Digilink, holding the cellular licensee in Uttar Pradesh (east), Haryana and Rajasthan.

 

The open offer made by Essar Investments for 20 per cent of SCL's stake (amounting to one million shares) held by the public was at Rs 532 per share. The offer price was significantly more than a Securities and Exchange Board of India (Sebi)-prescribed price of about Rs 350 per share. It is not known who owns the remaining three per cent of Sterling Computers' equity.

Sebi cleared the open offer in February after some controversy surrounding the acquisition. As public listing on Indian stock exchanges requires a minimum 20 per cent public holding, the acquisition was hanging fire since the sale of even one SCL share to Essar Investments would lead to the delisting of the scrip from domestic bourses. Sebi felt that this would close all exit routes to investors who don't want to sell to the Ruias-controlled holding company.

Essar Investments, together with other group companies, had earlier acquired 80 per cent of SCL. This was done by taking over three investment companies of the Sivasankaran group. The three companies - Karthik Software, Saravana Exports and Shanmuga Consultants - which held 80 per cent in SCL were fully bought over by the Essar group.

The acquisition was to get control of the cellular licences which were won by two Sivasankaran companies in the cellular bidding process. Both Sterling Cellular Ltd and Aircell Digilink are Siva Sankaran-promoted companies, which were later sold to the Essar group.

Analysts had pointed out that the Essar acquisition of SCL and its present open offer had violated Section 40B of the listing agreement. Under their interpretation of sub-section 2 (b) of Section 40B, Essar Investments should have made a public announcement of the 80 per cent acquisition as soon as the deal was finalised and not in December last when it made its open offer for the remaining 20 per cent. Sebi, however, has ruled out this view because it felt that the existing takeover code did not apply to this particular instance.

The other lacuna pointed out by corporate law experts was that Essar Investments had not publicly disclosed the Rs 532-valuation of the SCL scrip. Investment bankers handling a proposed SCL equity issue abroad have valued the share at over Rs 1,300. This includes projected revenues from Delhi, Haryana, Uttar Pradesh (East) and Rajasthan.