Vote against Shriram Transport's share-swap, says advisory firm
Moneylife Digital Team 01 June 2012

According to a proxy advisory firm, the proposed share-swap between Shriram Transport Finance and Shriram Holdings is tilted in favour of shareholders of the latter and would lead in increasing promoter shareholding

Shriram Transport Finance Company (STFC) is proposing to approve a scheme of arrangement with Shriram Holdings (Madras) Pvt Ltd (SHMPL) with itself through a court-convened meeting of shareholders on 14 June 2012. However, a Bengaluru-based proxy advisory firm has recommended institutional investors to vote against the scheme, as it feels the share-swap is tilted in favour of SHMPL shareholders and would lead to an increase in promoter shareholding.

“As SHMPL’s sole business is its holding of STFC’s equity shares, the rationale of allotting over five lakh shares (STFC will allot 9.39 crore shares in place of 9.34 crore shares held by it SHMPL in STFC) is not disclosed by the company. At a closing price of Rs490.10 per share of STFC on 23rd May, the shares allotted in excess, have a market value of Rs24.54 crore,” the advisory firm said.

Genesis Indian Investment Company, ICICI Prudential Life Insurance Company, Ontario Teachers’ Pension Plan Board, Stichting Pensioenfonds ABP, Merrill Lynch Capital Markets Espana SASV, Equinox Partners LP and Fidelity Investment Trust are leading institutional investors in Shriram Transport Finance.

“Without any stated reason, the proposed share-swap is titled in favour of the shareholders of SHMPL.

We recommend shareholders vote against the amalgamation, as there is no rationale for allotting additional shares to the shareholders of SHMPL. While the amount itself may seem insignificant, it is the principle that is incorrectly applied and consequently leads to an increase in promoter holding without any basis,” the proxy advisory firm said.

On 27 April 2012, the Madras High Court had directed the company to call a meeting of its shareholders and creditors for considering and approving the scheme of arrangement between SHMPL and Shriram Transport Finance.

At 12.26pm on Friday, Shriram Transport shares were trading 3.5% down at Rs509 on the BSE, while the benchmark Sensex was marginally down at 16,082.

Nagesh Kini
1 decade ago
The shareholding pattern being so skewed in favour of the promoters no shareholders esp. the minority can put up any opposition.
Even postal ballot won't do.
Strong shareholder awareness and stiff well oiled organized voting is the remedy.
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