This story is from November 24, 2007

HB may hike offer price for DCM Shriram

Prabhakar Sinha / TNN / Nov 24, 2007, 00:00 IST

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DCM Shriram has already revised the price to Rs 90 per share. Besides, the entire amount will be paid upfront.

NEW DELHI: HB Portfolio might raise the open offer in DCM Shriram Industries to force the promoters and the existing management to go for rights issue, instead of getting warrants issued on preferential basis, which would entitle them to subscribe 21 lakh shares or 12% of the extended capital.
A company official said HB Portfolio’s action has helped the shareholders.But, it wants to fight the issuance of warrants, which entitles promoters to subscribe shares at a discounted price and that too at staggered payment basis. He clarified that open offer by HB Stockholdings to buy 35 lakh shares from the market is not a takeover attempt.
DCM Shriram had passed a resolution in its board meeting to allot 7 lakh warrants to promoters, which would have entitled them to subscribe to 21 lakh shares, at the six-month average closing share price of the company.
As the resolution was passed on October 16 and the share price was hovering at around Rs 50. The six months average price of the share was around Rs 52. The promoters had to pay only 10% at the beginning and the rest of the amount in three tranches in 18 months.

So, upfront amount to be paid to the company by promoter group was around Rs 1.10 crore. Therefore, the contention of the promoters that the funds raised will be used for augmenting the long-term working capital of the company does not hold water as Rs 1.10 crore is not good enough to meet the purpose.
DCM Shriram has already revised the price to Rs 90 per share. Besides, the entire amount will be paid upfront. A senior official of HB Portfolio said the book value of the DCM Shriram Industries’ share is Rs 115. He said present offer price of Rs 90 per share through subscription of warrants is not justified.

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