Shareholders of EFCIL (I) Limited (EFCIL) have approved a contentious merger with its subsidiary Whitehills Interior Limited (WIL), despite serious red flags identified in an analysis by Stakeholders Empowerment Services (SES), a Corporate Governance Research and Advisory Firm in a report dated 7 September 2025.
The Key Issue
A company incorporated with Rs10 lakh capital in November 2022 has been valued at Rs545.6 crore just eight months later—representing a staggering 5,550-fold return. At current market prices, this valuation has further ballooned to over Rs2,550 crore. SES characterised this as requiring examination under Securities and exchange Board of India (SEBI) fraud prevention regulations, questioning whether the transaction constitutes unfair treatment of minority shareholders despite technical legal compliance.
The Transaction Details
The meeting, held on 15 September 2025, via video conferencing pursuant to an August 11 order from the national company law tribunal's (NCLT) Mumbai bench, saw equity shareholders vote with requisite majority to merge WIL into EFCIL. The resolutions were declared passed according to a scrutinizser's report submitted by Chirag Sachapara of Sachapara & Associates following the conclusion of the meeting.
Under the approved scheme of amalgamation, WIL will be absorbed into EFCIL through merger by absorption, with the subsidiary being dissolved without winding up. The exchange ratio, adjusted for a subsequent bonus issue, provides for issuance of 770 fully paid-up equity shares of EFCIL for every one share of WIL held by eligible shareholders.
This will result in the creation of approximately 37.73mn (million) new EFCIL shares, fundamentally altering the company's ownership structure. Promoter shareholding will increase from 45.46% to 60.45%, while public shareholding will decline proportionately from 54.54% to 39.55%—a dilution of nearly 15 % points for existing public shareholders.
EFCIL, listed on both Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), operates in the managed office space segment, leasing office spaces from landlords, designing and building them into functional workspaces, and sub-leasing them to corporate clients. WIL specialises in commercial interior design and turnkey solutions for the commercial real estate sector.
A Meteoric and Questionable Rise
The transaction's most striking aspect is the valuation ascribed to WIL. The company was incorporated on 20 November 2022, with paid-up capital of merely Rs10 lakh. Within eight months, by July 2023, both companies' boards approved a merger proposal based on a valuation report that priced WIL at approximately Rs545.6 crore.
The valuation, conducted by registered valuer Bhavesh M Rathod and dated 20 July 2023, was based primarily on discounted cash flow projections despite the entity having minimal operational history. According to audited accounts for the financial year ending 31 March 2023—representing less than five months of actual operations—WIL had recorded net worth of Rs96 lakh, revenue of Rs418 lakh, and profit of Rs86 lakh.
The valuation thus represented a multiple of approximately 550 times net worth, 131 times revenue, and 634 times profit—multiples that SES characterised as extraordinary and insufficiently justified by the company's nascent operations.
Based on EFCIL's current market price of approximately Rs332 rupees per share as of late August 2025, the implied current valuation of WIL has further ballooned to over Rs2,550 crore rupees, making the original Rs10 lakh investment worth more than 25,000 times its initial value in less than three years.
Ownership Structure Raises Questions
The ownership structure of WIL adds complexity to the transaction. EFCIL held a 51% stake in the subsidiary, with the remaining 49% held primarily by EFCIL's own promoters—Umesh Kumar Sahay, Abhishek Narbaria, Amit Narbaria and Aditi Umesh Sahai. Two additional shares were held by Akalpita Surendra Bedkihal, identified as a promoter of Whitehills, and Uday Tushar Vora, EFCIL's chief financial officer.
This structure meant that the promoters of EFCIL invested approximately Rs4.9 lakh rupees in WIL at inception. Under the merger valuation dated July 2023, this stake was valued at approximately Rs267 crore. At current market prices, the approximately 3.77 crore shares that promoters will receive are worth over Rs1,250 crore.
The timing is equally noteworthy. The current promoters—Narbaria and Sahay—acquired control of EFCIL in June 2022 through a negotiated share purchase agreement with erstwhile promoters, acquiring 64.28 % stake and subsequently conducting an open offer. WIL was incorporated just five months after this change in control, in November 2022.
Proxy Advisory Firm's Scathing Assessment
SES issued a strongly worded report ahead of the 15 September meeting, recommending shareholders vote against the merger and related-party transaction resolutions. The proxy advisor identified multiple governance concerns that it argued fundamentally undermined the transaction's credibility.
"A company which had net worth of Rs96 lakh, revenue of Rs418 lakh and profit of Rs86 lakh, based on audited account for financial year ending 31 March 2023 was valued at Rs54,556 lakhs, at a multiple of almost 550 to net worth, approximately 131 times the revenue and approximately 634 times its profit," SES stated in its report.
The firm questioned how such extraordinary valuation could be justified based on projections for a company with merely eight months of operational data. "How can one get a crystal ball to look 10 years in future when one has hardly 8 months actual data, that too in a business which is relatively new and no historical data is available?" the report asked.
SES characterised the use of discounted cash-flow methodology for such a nascent entity as fundamentally flawed. The proxy adviser noted that the valuer's projections diverged significantly from actual performance. For FY23-24, the valuation report had projected profit after tax of Rs41.07 crore for WIL, while actual results showed only Rs13.56 crore—a shortfall of Rs27.5 crore, or approximately 67%, in the very first year.
"Given the considerable difference in projections by the valuer and actual performance by the entities, can absolute reliance be placed on valuation report for projections for next 5-6 financial years?" SES questioned.
Financial Position Under Scrutiny
Financial statements revealed additional concerns about WIL’s business quality. As of 31 March 2024, 100% of the company's trade receivables were classified as overdue, raising questions about revenue collectability. The company carried borrowings of Rs46.37 crore and loans from related parties totalling Rs254.59 crore as of March 2025.
While revenue grew substantially from Rs104.24 crore in FY23-24 to Rs254.59 crore rupees in FY24-25, demonstrating rapid scaling, the quality of this growth remained questionable given the receivables position. The company reported profit after tax of Rs59.77 crore for FY24-25, significantly below the valuer's original projections for that period.
SES also highlighted that the merger was being decided based on a valuation report dated 20 July 2023—more than two years old at the time of the September 2025 shareholder meeting. "Is it fair for the valuer to consider projections of an entity for next 6-7 years based on data of approximately 8 months?" the advisory firm asked.
Strategic Rationale Questioned
The proxy adviser fundamentally questioned the strategic logic of the transaction. "Given the short gap between incorporation of WIL and proposed merger with the company, SES is unable to understand as to what was the objective of creating a subsidiary in first place, that too why not as 100 % subsidiary given that paid up capital was only ten lakhs and promoters contributed only Rs4.9 lakhs?" the report stated.
SES argued that if the objective was vertical integration and in-house capability development for interior design services—as management claimed—this could have been achieved more efficiently by building the business within EFCIL itself from the outset, particularly given that the same promoters controlled both entities.
"Why incorporate a new entity, only to merge it later?" SES asked, suggesting the sequence of events—takeover of EFCIL, creation of minimally capitalised subsidiary with mixed ownership, aggressive projections supporting extraordinary valuation, and subsequent merger increasing promoter stake—warranted regulatory examination under SEBI's Prohibition of Fraudulent and Unfair Trade Practices Regulations.
Management's Defence
Company management defended the merger on strategic and operational grounds. In documents filed with stock exchanges and submitted to NCLT, EFCIL argued that the amalgamation would enable vertical integration by bringing WIL’s design and build expertise entirely in-house.
Management projected benefits including enhanced cost efficiencies, improved execution timelines, greater quality control, and reduced reliance on third-party vendors. The merged entity would retain margins previously shared with external contractors, improving overall profitability. Additionally, EFCIL would gain access to WIL’s revenue stream from design and build services to external clients beyond EFCIL's own projects.
The company emphasised that WIL had established itself as a leading contractor with pan-India operations serving multiple commercial space sectors, and that its revenue demonstrated strong growth trajectory. Post-merger, this revenue and profit would be fully consolidated into EFCIL's financial statements, management noted.
"The merger is expected to not only enhance operating leverage but also deliver strategic advantages in scaling the business across India. By combining their complementary capabilities, the merged entity will be better equipped to capture larger market opportunities, optimise resource utilisation, strengthen the asset base, and improve overall net worth," company documents stated.
The merged entity would also benefit from improved credit profile and financial standing with lenders, unlocking sustainable long-term value for shareholders, according to the management.
Regulatory Process and Approvals
The scheme received approval from the SEBI and BSE Limited, where EFCIL shares have traded since 1984. A no-objection letter was obtained from BSE on 13 May 2025. The company had only recently listed on the NSE on 20 August 2025, less than a month before the shareholder meeting.
The NCLT’s Mumbai Bench passed its order on 11 August 2025, directing that the shareholder meeting be convened within 90 days. The order dispensed with the requirement to hold separate meetings for WIL shareholders (given consent affidavits from all seven shareholders) and for unsecured creditors of both companies.
The tribunal noted that total unsecured creditor liabilities of both companies amounted to Rs78.22 crore, representing only 16.34% of the combined net worth, and that the merged entity would have sufficient assets and positive net worth to meet all obligations without adversely affecting creditor rights.
The fairness opinion supporting the transaction was provided by Navigant Corporate Advisors Limited, a SEBI-registered Category I merchant banker, dated 20 July 2023—the same date as the valuation report, audit committee recommendations, independent director opinions and board approvals of both companies.
SES observed this synchronicity skeptically, noting "great harmony and team work" in the timing but questioning whether it reflected genuine independent scrutiny at each governance layer.
Limited Shareholder Engagement
The 15 September meeting, conducted at 12:30 PM through video conferencing without physical attendance, saw participation from three promoter group members and 74 public shareholders out of a total shareholder base of 23,312 as of the 8 September record date—representing participation of less than 0.35% of the shareholder base.
Remote e-voting was facilitated through MUFG Intime India Private Limited, with the facility open both before and during the meeting. According to the summary of proceedings filed with stock exchanges, no questions were asked or clarifications sought by equity shareholders during the meeting. The chairperson, independent director Gayathri Srinivasan Iyer appointed by NCLT, confirmed there were no registered speakers.
The meeting concluded at 12:58PM after the e-voting window remained open for 15 minutes following formal proceedings. The scrutiniser's report, received after conclusion, confirmed both resolutions were passed with requisite majority.
The first resolution, requiring three-fourths majority under Sections 230-232 of the Companies Act, 2013, and the second ordinary resolution for related party transaction approval, both received shareholder approval despite SES's recommendation against.
Broader Implications
The transaction represents a significant test case for merger regulations and valuation practices in India's capital markets. While technically compliant with legal requirements—having obtained approvals from SEBI, stock exchange and NCLT—the concerns raised by the proxy advisory firm highlight ongoing debates about adequacy of safeguards protecting minority shareholders.
The case illustrates challenges inherent in valuing early-stage entities with limited operational history. The heavy reliance on discounted cash flow projections for a company less than one year old, with actual performance significantly missing initial projections, raises questions about whether existing valuation methodologies adequately protect public shareholders when applied to such circumstances.
The substantial increase in promoter stake—from 45.46% to 60.45%—achieved through merger of an entity they substantially owned raises questions about whether the transaction primarily served to consolidate promoter control at public shareholder expense, despite claims of operational synergies.
SES's suggestion that the matter warranted examination under SEBI's fraud prevention regulations reflects broader concerns about whether technically legal corporate restructuring can nonetheless constitute unfair treatment of minority shareholders when valuations appear disconnected from operational reality.
What Lies Ahead
With shareholder approval secured, the scheme now awaits final sanction from NCLT. The appointed date under the scheme is 1 April 2023, meaning the merger's accounting effects will be retrospectively applied from that date. The effective date will be determined within 15 days of NCLT registering its final order with the Registrar of Companies, unless extended by mutual agreement.
Upon effectiveness, WIL will be dissolved without winding up, and eligible shareholders will receive their allotted EFCIL shares. The company will absorb approximately Rs69.74 crore of unsecured creditors from WIL, in addition to its own unsecured creditors of approximately Rs8.48 crore.
As EFCIL moves forward with integration of WIL’s operations, market participants will closely watch whether the ambitious revenue and profit projections that justified the extraordinary merger valuation materialise in coming years. The outcome will likely influence future debates about appropriate valuation methodologies for early-stage entities in merger transactions and the effectiveness of existing regulatory safeguards for minority shareholders.
For now, the transaction stands as a striking example of how rapid valuation escalation based primarily on projections rather than established track records can be achieved within India's regulatory framework, raising questions about whether current safeguards adequately protect public shareholders in related-party transactions involving newly established subsidiaries.
