Minority shareholders of BGL are crying foul over the move. Next year, the company is planning to go for overseas trading operations in coal and bio-diesel, which could yield huge profits

Karnataka-based Bhuruka Gases Ltd (BGL), a unit of the Bhoruka Group, is planning to buy out the entire stake of its minority shareholders in the company at Rs41 per share and has called for an extra-ordinary general meeting on 24th December for the same.

“The company’s management is not interested in trading. Not more than 50 shares are traded in a day. The company has to pay unnecessary fees,” said R Srinivasan, legal manager and compliance officer, BGL.

While the company says that it wishes to delist to cut costs, minority shareholders are crying foul, looking at what they call the good future business prospects of the company.

“I am of the opinion that the promoters are using their majority shareholding to take away the ‘benefits of proposed prosperity’ of the company from the minority shareholders,” said Shreyansh Sanghani, a minority shareholder in BGL.

According to media reports, BGL is planning to invest in overseas trading operations in coal and bio-diesel by next year, through Bhoruka Overseas Pte Ltd, its investment unit based in Singapore.

BGL said that it is offering Rs41 per share to minority shareholders. Earlier in 2008, BGL’s auditors arrived at a valuation of Rs38.12 per share; however, its directors claimed to have offered Rs41 per share to minority shareholders. BGL’s book value is Rs35.85 per share. “We are paying a good market price of Rs41 today and the method we have adopted is as per SEBI’s delisting guidelines,” added Mr Srinivasan.

However, the final offer price will be decided by the Karnataka High Court once BGL passes a resolution it its EGM next week.

According to a filing by the company to the Bombay Stock Exchange in August 2008, BGL’s board had approved a letter (proposal) received from Bhuruka Gases Holdings Pvt Ltd expressing their desire to acquire the shares from the shareholders, in line with the SEBI (Delisting of Securities) Guidelines 2003.

The company has not paid any dividend since 1995 citing losses due to increased competition and a hike in power costs. According to the director’s report, BGL did not make any dividend payout for the year ended 31 March 2009 due to its long-term growth and huge funds requirement. 

In 1995, BGL was examined by the committee of the Board for Industrial and Financial Reconstruction (BIFR) due to continuing losses in power generation and increased competition.

The BIFR committee suggested that BGL reduce its share capital by reducing its face value per share from Rs10 to Rs2.50. The Government of India has also given the company concessions in power and tax installments. The company also received an interest subsidy of 25%-30% from IDBI Ltd and ICICI Bank Ltd on outstanding amounts due since 1995.

BGL has a track record of non-transparency in terms of disseminating information through stock exchanges. For example, a note (number 4) to the 2007-08 accounts, from the BSE site, said: “Merger proposal of Calibration Gas India Ltd, wholly owned subsidiary with the company, is since approved by the Honourable High Court of Karnataka and completion of other related formalities is under progress.”

But another note (number 3) to the results of the first quarter ending 30 June 2008, said: “Merger application of Calibration Gas India Ltd, wholly owned subsidiary with the company, is pending before (the) Honourable High Court of Karnataka.”

BGL shares were last traded on BSE with a closing price of Rs40 on 24 November 2008. Since then neither the BSE nor the Bangalore Stock Exchange, where the scrip was listed, has any information on BGL and its shares.