Consolidating its position against the hostile bid made by the Harish Bhasin-owned HB Stock Holdings, the promoters of DCM Shriram Industries have converted the first tranche of 7 lakh warrants into equity shares.
After conversion, the promoters' voting right would immediately increase to around 35.5 per cent. The company had issued 21 lakh warrants to the promoters at Rs 90 per share, which was approved by the Company Law Board and the Bombay Stock Exchange.
After the allotment of the warrants, the promoters decided not to give a counter offer. Sources said that well wishers of promoters have bought around 6-7 per cent stake in block deals from the open market. Although they were not acting in concert with the promoters, sources said that they would support the existing management in case Bhasin manages to increase his stakes.
After the conversion of all the warrants, the promoters’ stake in the company would be around 41 per cent and in case new buyers support the existing management led by Tilak Dhar, the total voting rights of the promoters would be around 48 per cent. Financial institutions, led by Life insurance Corporation of India, together own around 10 per cent equity stake in the company. Sources said that these institutions have given a commitment to the existing promoters to extend support in case of voting requirements.
Given the current price of Rs 126 per share, the offer by HB Stockholdings is unlikely to get an overwhelming response. HB Stockholdings had given an open offer to buy 35 lakh equity shares, aggregating to 22.5 per cent of the existing paid up capital of the company (pre-warrant issue) at Rs 120 per share. Besides, the fact that the offer is below the market price have made experts feel that tendering shares in open offer also have tax implications.
However, Bhasin continues to corner company’s shares from the open market. HB Stockholdings has increased its holding to 15.06 per cent from 12.5 per cent since the time of announcement of the hostile bid. In case the open offer gets fully subscribed, Bhasin’s holding in DCM Shriram Industries would increase to 37.5 per cent. After the conversion, it would come down to around 30 per cent because of the expansion of paid up capital.