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CLB reserves orders on HB Stockholdings plea
November, 23rd 2007
Pref warrants issue by DCM Shriram

The Company Law Board (CLB) has reserved its orders on a petition filed by HB Stockholdings seeking a stay on the resolution passed by DCM Shriram board to allot its promoters preferential warrants.

The CLB Chairman, Mr S. Balasubramanian, after hearing the arguments of both the sides on Thursday reserved the orders.

HB Stockholdings, a Delhi-based investment firm, had filed a petition before the CLB on November 20 stating that the promoters move to allot warrants would raise their stake by close to 10 per cent after it is converted, taking the total promoter shareholdings to 42.54 per cent.

Warrants allotment

The promoters move to allot the warrants could impact the interest of the smaller stakeholders and therefore the petition was filed, a counsel representing HB Stockholdings told Business Line.

The investment firm, promoted by Mr Harish C. Bhasin, currently holds a 12.87 per cent stake in DCM Shriram and recently made a cash offer to buy another 22.8 per cent. HB Stockholdings offered to buy the additional stake in the company at Rs 70 per share. Shares of DCM Shriram ended 4.94 per cent higher at Rs 83.90 on the Bombay Stock Exchange on Thursday.

However, the existing promoters passed a resolution through the board in October for allotment of preferential warrants in a price band of Rs 48-52.

SEBI guidelines

Senior counsel Mr C.A. Sundaram, appearing on behalf of HB Stockholdings, argued that even the committee of Directors of DCM suggested that the price offered by the company for preferential allotment was low. This argument, however, was countered by DCM counsel, Mr Abhishek Manu Singhvi, who said that the price band for the preferential allotment was arrived at as per the SEBI guidelines and was required urgently by the company.

Mr Singhvi also said that the company was ready to increase the offer to Rs 90 per share.

If there is a working capital requirement, it can be arranged by means other than the issue of warrants. Also how can the company now say that the offer was being raised without the knowledge of the shareholders, Mr Sundaram said.

Mr Singhvi also said that this was a mischievous petition and was not maintainable at all, and should be thrown out. He added that it cannot dictate the terms as it is a share broker and has doubtful credentials.

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