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Birla Corp ownership dispute erupts at AGM again

Friday, 22 August 2014 - 7:25am IST | Place: Kolkata | Agency: dna
Priyamvada Birla estate administrators say co silent in its disclosure over ownership tussle

Does a company need to disclose to shareholders existence of legal disputes over its ownership?

The question, which concerns governance issue, largely subjective and still evolving, was raised by a court appointed administrator of estate of Priyamvada Birla, which has a minor equity stake in cement maker Birla Corp, belonging to the MP Birla group.

"In a letter that we had written to the chairman and the directors on July 8, it was mentioned that the balance sheet should have indicated that there is a dispute regarding control of the company. But this has not been given recognition. For the sake of transparency and good corporate governance that there is a dispute over an important matter should have been disclosed," said AC Chakrabortti, who is part of the three-member committee of administrators of the estate of late Priyamvada Birla.

Appointed by Calcutta High Court in 2012, the administrators have power of general administrator and can also represents the estate. It is headed by justice (retd) C K Thakkar, with M K Sharma as its other member.

Chakrabortti also pointed out to chairman Harsh Lodha that nowhere in the balance sheet for 2013-14 it has been mentioned that a committee of administrators have been appointed to look after the affairs of the estate.

After death of late MP Birla's wife Priyamvada in 2004, Harsh's father Rajendra Lodha was appointed as the chairperson of Birla Corp, and was engaged in a legal dispute with the BK Birla family over the ownership of MP Birla's assets including companies like Birla Corp and Universal Cables, among others.

Rajendra Lodha died in 2008 leaving unresolved the fierce legal fight.

"The matter of control of the group is still pending. The promoter's group hold 62.9% as per the balance sheet. But the question is who are the promoters," Chakrabortti commented at the annual general meeting of the company.

The administrator also raised issue over disclosure regarding appointment of independent directors.

"If the court order regarding the control comes and if the administrators are allowed to control the affairs then the appointment of independent directors would come under the review of committee. It should have been disclosed," Chakrabortti said.

"Whatever disclosures were required under law has been done. Don't think we have violated any law," Lodha said in reply.

So, even as Birla Corp has just surprised the market with an 116% surge in net profit to Rs 99.52 crore on net sales of Rs 875 crore during the quarter, the shareholders showed little interest, instead engaging in verbal duels.

"There was a significant reduction on power consumption, increased share of blended cement to the extent of 86.92% against low share in previous years. Re-strategising our marketing efforts by focusing on our natural market resulted in higher realisation. The company has now focused on expansion and modernisation, and with this in mind it has sanctioned investment in three grinding and blending units particularly in areas close to fly ash generation. The work on 5 lakh tonne blending unit at Rae Bareli is progressing smoothly and work is expected to completed by fiscal 2016," Lodha said at the AGM amid the din.

"We plan to invest about Rs 4,000-5,000 crore over the next five years in greenfield as well as blending and grinding units. As cement is mostly a logistics play, we are now going closer to the market and closer to the fly ash availability. To that extent, we were previously late in doing this because of historical reasons, but we are now trying to make up," Lodha later told dna.




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