The battle for control of DCM Shriram Industries will intensify as the promoters, led by Tilak Dhar, are planning to make a counter-bid to buy a 20 per cent stake in the company from the public to ramp up their holding to above 51 per cent.
According to highly placed sources, the promoters have started talks with the investment bankers on a strategy to defend against the hostile takeover bid by leading broker Harish Bhasin.
"They are working on a two-pronged strategy. First, get a special resolution passed for preferential issue of warrants. Second, make an offer to buy 20 per cent from the open market, which will help them cross the 51 per cent threshold," said sources close to the deal.
The offer is expected to be above Rs 100 a share against Bhasin's Rs 70. The counter-bid is likely on December 10, the last day for submitting such a bid.
After Bhasin's investment company HB Stockholdings made the hostile bid on November 19, the DCM Shriram scrip has been hitting the upper circuit continuously. It closed at Rs 83.90 on Thursday against Rs 69.10 on November 18.
HB Stockholdings has made a public offer to buy 3.5 million DCM Shriram shares, equivalent to a 22.88 per cent stake, to increase its holding to 35.75 per cent from the present 12.87 per cent.
"It is going to be fiercely competitive bidding, where both parties are expected to up the ante as the final date comes close," sources said.
Anticipating the hostile bid, DCM Shriram's promoters decided to issue preferential shares on October 16. The company has sought shareholder approval through postal ballot by November 26. The warrants allow them to get an additional 2.1 million shares on conversion within the next 18 months and helps the promoters scale up their holding to 40.68 per cent from the present 32.54 per cent. Bhasin has approached the company law board to stall the issue of warrants.
To get shareholder approval for the warrants, the DCM Shriram promoters have approached Life Insurance Corporation, which owns 8.7 per cent in the company, and IFCI, which has another 1.23 per cent stake. Sources said they had also approached Reliance Mutual Fund, which holds 8.34 per cent through various equity schemes.
Meanwhile, the Company Law Board on Thursday reserved its order on a petition filed by Harish Bhasin's HB Stockholdings, seeking a stay on a resolution passed by sugar manufacturer DCM Shriram Board's for allotment of preferential warrants to the promoters.
After hearing the arguments of the two sides for almost two hours, CLB chairman Justice S Balasubramanian reserved the order.
Shares of DCM Shriram ended 5 per cent higher at Rs 83.90 on the stock exchange on Thursday.