Tightening its grip

Embroiled in a battle for control with veteran Delhi-based stock broker Harish Bhasin, Tilak Dhar and his family, promoters of DCM Shriram, are desperately trying to consolidate their control over the diversified conglomerate. While the Company Law Board (CLB) has given them relief by refusing to stay the preferential allotment of warrants convertible into equity shares to the promoters—that will raise their stake by 10 per cent from 32.54 per cent to 42.54 per cent—the Dhars are digging in for a long battle with Bhasin in the days to come.

But they are not alone. Promoters with relatively low holdings can no longer take their control over their empires for granted. Many of them are raising their stakes in their companies, sometimes even when they are not at risk. Mukesh Ambani, Anil Ambani, the Dhars, K.M. Birla and the Tatas have all raised their stakes in their companies or are in the process of doing so. The preferred method: convertible warrants and preferential allotment of equity shares.

What’s surprising is the timing of the moves. The stock market is trading near its peak, so the exercise is an expensive one, but that is not discouraging them. “The entry of promoters at these (price) levels is a reflection of their confidence in the future business prospects,” explains S. Swaminathan, Vice President, IDBI Capital Markets (see Preferential Pill).

For some, preferential offers are also a route to delist their company as regulations permit delisting if the public shareholding falls below 10 per cent. Essar Oil, in which the Ruia family holds 88 per cent, is considering a preferential offer that will pave the way for delisting the company from the bourses.